OPPENHEIMER VARIABLE ACCOUNT FUNDS
Supplement Dated October 28, 1996
to the Prospectus dated May 1, 1996, revised October 28, 1996
This Prospectus may be used to offer or sell shares of only the following
Funds:
Oppenheimer Bond Fund
Oppenheimer Growth Fund
October 28, 1996
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Prospectus dated May 1, 1996
Revised, October 28, 1996
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is a diversified open-end
investment company consisting of nine separate funds (collectively, the
"Funds"):
OPPENHEIMER MONEY FUND ("Money Fund") seeks the maximum current income
from investments in "money market" securities consistent with low capital
risk and the maintenance of liquidity. Its shares are neither insured nor
guaranteed by the U.S. Government, and there is no assurance that this
Fund will be able to maintain a stable net asset value of $1.00 per share.
OPPENHEIMER HIGH INCOME FUND ("High Income Fund") seeks a high level of
current income from investment in high yield fixed-income securities.
High Income Fund's investments include unrated securities or high risk
securities in the lower rating categories, commonly known as "junk bonds,"
which are subject to a greater risk of loss of principal and nonpayment
of interest than higher-rated securities. These securities may be
considered to be speculative.
OPPENHEIMER BOND FUND ("Bond Fund") primarily seeks a high level of
current income from investment in high yield fixed-income securities rated
"Baa" or better by Moody's or "BBB" or better by Standard & Poor's.
Secondarily, this Fund seeks capital growth when consistent with its
primary objective.
OPPENHEIMER CAPITAL APPRECIATION FUND ("Capital Appreciation Fund") seeks
to achieve capital appreciation by investing in "growth-type" companies.
OPPENHEIMER GROWTH FUND ("Growth Fund") seeks to achieve capital
appreciation by investing in securities of well-known established
companies.
OPPENHEIMER MULTIPLE STRATEGIES FUND ("Multiple Strategies Fund") seeks
a total investment return (which includes current income and capital
appreciation in the value of its shares) from investments in common stocks
and other equity securities, bonds and other debt securities, and "money
market" securities.
OPPENHEIMER GROWTH & INCOME FUND ("Growth & Income Fund") seeks a high
total return (which includes growth in the value of its shares as well as
current income) from equity and debt securities. From time to time this
Fund may focus on small to medium capitalization common stocks, bonds and
convertible securities.
OPPENHEIMER GLOBAL SECURITIES FUND ("Global Securities Fund") seeks long-
term capital appreciation by investing a substantial portion of its assets
in securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations which are considered to have
appreciation possibilities. Current income is not an objective. These
securities may be considered to be speculative.
OPPENHEIMER STRATEGIC BOND FUND ("Strategic Bond Fund") seeks a high level
of current income principally derived from interest on debt securities and
seeks to enhance such income by writing covered call options on debt
securities. The Fund intends to invest principally in: (i) foreign
government and corporate debt securities, (ii) U.S. Government securities,
and (iii) lower-rated high yield domestic debt securities, commonly known
as "junk bonds", which are subject to a greater risk of loss of principal
and nonpayment of interest than higher-rated securities. These securities
may be considered to be speculative.
Shares of the Funds are sold only to provide benefits under variable
life insurance policies and variable annuity contracts (collectively, the
"Accounts"). The Accounts invest in shares of one or more of the Funds
in accordance with allocation instructions received from Account owners.
Such allocation rights are further described in the accompanying Account
Prospectus. Shares are redeemed to the extent necessary to provide
benefits under an Account.
This Prospectus explains concisely what you should know before
investing in the Trust and the Funds. Please read this Prospectus
carefully and keep it for future reference. You can find more detailed
information about the Funds in the May 1, 1996 Statement of Additional
Information. For a free copy, call OppenheimerFunds Services, the Funds'
Transfer Agent, at 1-800-525-7048, or write to the Transfer Agent at the
address on the back cover. The Statement of Additional Information has
been filed with the Securities and Exchange Commission and is incorporated
into this Prospectus by reference (which means that it is legally part of
this Prospectus).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
About the Funds
Overview of the Funds
Financial Highlights
Investment Objectives and Policies
How the Funds are Managed
Performance of the Funds
About Your Account
How to Buy Shares
How to Sell Shares
Dividends, Capital Gains and Taxes
Appendix A: Description of Terms
Appendix B: Description of Securities Ratings
<PAGE>
ABOUT THE FUNDS
Overview of the Funds
Some of the important facts about the Funds are summarized below,
with references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing. Keep the Prospectus for
reference after you invest.
- What Are the Funds' Investment Objectives? Money Fund's
investment objective is to seek maximum current income from investments
in "money market" securities consistent with low capital risk and the
maintenance of liquidity. High Income Fund's investment objective is to
seek a high level of current income from investment in high yield fixed-
income securities. Bond Fund's investment objective is to seek a high
level of current income from investment in high yield fixed-income
securities rated "baa" or better by Moody's or "BBB" or better by Standard
& Poor's. As a secondary investment objective, Bond Fund seeks capital
growth when consistent with its primary objective. Capital Appreciation
Fund's investment objective is to achieve capital appreciation by
investing in "growth-type" companies. Growth Fund's investment objective
is to seek to achieve capital appreciation by investing in securities of
well-known established companies. Multiple Strategies Fund's investment
objective is to seek a total investment return (which includes current
income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities. Growth & Income Fund's
investment objective is to seek a total return (which includes growth in
the value of its shares as well as current income) from equity and debt
securities. Global Securities 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 situations which are considered to have
appreciation possibilities. Strategic Bond Fund's investment objective
is to seek a high level of current income principally derived from
interest on debt securities and seeks to enhance such income by writing
covered call options on debt securities.
- What Do the Funds Invest In? To seek their respective investment
objectives, the Funds invest as follows. Money Fund primarily invests in
money market securities. High Income Fund primarily invests in high yield
fixed-income securities, including unrated securities or high risk
securities in the lower rating categories, commonly known as "junk bonds."
Bond Fund primarily invests in high yield fixed-income securities rated
"Baa" or better by Moody's or "BBB" or better by Standard & Poor's.
Capital Appreciation Fund primarily invests in "growth-type" companies.
Growth Fund primarily invests in securities of well-known established
companies. Multiple Strategies Fund primarily invests in common stocks
and other equity securities, bonds and other debt securities, and money
market securities. Growth & Income Fund invests primarily in equity and
debt securities and focuses from time to time on small to medium
capitalization companies. Global Securities Fund primarily invests in
securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations. Strategic Bond Fund primarily invests
in foreign government and corporate debt securities, U.S. Government
securities, and lower-rated high yield domestic and foreign debt
securities, commonly know as "junk bonds." These investments are more
fully explained for each Fund in "Investment Objectives and Policies,"
starting on page ___.
- Who Manages the Funds? The Funds' investment adviser is
OppenheimerFunds, Inc. (the "Manager"), which (including a subsidiary)
advises investment company portfolios having over $50 billion in assets.
Each Fund's portfolio manager is primarily responsible for the selection
of securities of that Fund. The portfolio managers are as follows: for
Money Fund, Dorothy Warmack; for High Income Fund, Bond Fund, Multiple
Strategies Fund and Strategic Bond Fund, David Negri (joined by Richard
Rubinstein for Multiple Strategies Fund and by Arthur Steinmetz for
Strategic Bond Fund); for Capital Appreciation Fund, Paul LaRocco; for
Growth Fund, Jane Putnam; for Global Securities Fund, William Wilby; and
for Growth & Income Fund, Robert J. Milnamow and Michael S. Levine. The
Manager is paid an advisory fee by each Fund, based on its assets. The
Trust's Board of Trustees, elected by shareholders, oversees the
investment adviser and the portfolio manager. Please refer to "How The
Funds Are Managed," starting on page ____ for more information about the
Manager and its fees.
- How Risky Are The Funds? While different types of investments
have risks that differ in type and magnitude, all investments carry risk
to some degree. Changes in overall market movements or interest rates,
or factors affecting a particular industry or issuer, can affect the value
of the Funds' investments and their price per share. Equity investments
are generally subject to a number of risks including the risk that values
will fluctuate as a result of changing expectations for the economy and
individual issuers, and stocks which are small to medium size in
capitalization may fluctuate more than large capitalization stocks. For
both equity and income investments, foreign investments are subject to the
risk of adverse currency fluctuation and additional risks and expenses in
comparison to domestic investments. In comparing levels of risk among the
equity and equity- income funds, Growth Fund is most conservative,
followed by Multiple Strategies Fund, Growth & Income Fund, Capital
Appreciation Fund and Global Securities Fund. Fixed-income investments
are generally subject to the risk that values will fluctuate with
inflation, with lower-rated fixed-income investments being subject to a
greater risk that the issuer will default in its interest or principal
payment obligations. In comparing levels of risk among the fixed-income
funds, Bond Fund is most conservative, followed by Strategic Bond Fund and
High Income Fund. Money Fund is the most conservative of all nine Funds
in that Money Fund intends to maintain a stable net asset value, although
there is no assurance that it will be able to do so.
- How Can I Buy or Sell Shares? Shares of each Fund are offered
only for purchase by Accounts as an investment medium for variable life
insurance policies and variable annuity contracts. Account owners should
refer to the accompanying Account Prospectus on how to buy or sell shares
of the Funds.
- How Have the Funds Performed? Money Fund, High Income Fund, Bond
Fund and Strategic Bond Fund measure their performance by quoting their
yields. All of the Funds with the exception of Money Fund may measure
their performance by quoting average annual total return and cumulative
total return, which measure historical performance. Those returns can be
compared to the returns (over similar periods) of other funds. Of course,
other funds may have different objectives, investments, and levels of
risk. The performance of all the Funds except Money Fund can also be
compared to broad market indices, which we have done starting on page ___.
Please remember that past performance does not guarantee future results.
<PAGE>
Financial Highlights
The tables on the following pages present selected financial
information, including per share data and expense ratios and other data
about the Funds, and are based on each Fund's average net assets. This
information has been audited by Deloitte & Touche LLP, the Funds'
independent auditors, whose report on the Funds' financial statements for
the fiscal year ended December 31, 1995, is included in the Statement of
Additional Information.
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Oppenheimer
Money
Fund
-------------------------------------------------------------------------------
Year Ended
December 31, 1994 1993 1992 1991
1995
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations - net
investment income and net realized gain
on investments .06 .04 .03 .04 .06
Dividends and distributions to shareholders (.06) (.04) (.03) (.04) (.06)
-------------------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================
=====================
TOTAL RETURN, AT NET ASSET VALUE (1) 5.62% 4.25% 3.09% 3.93%
6.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) $65,386 $89,671 $61,221 $58,266 $58,709
Average net assets (in thousands) $75,136 $90,264 $57,654 $61,317 $75,747
Ratios to average net assets:
Net investment income 5.52% 4.18% 3.12% 3.76% 5.97%
Expenses .51% .43% .43% .50% .49%
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
1990 1989 1988 1987 1986
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations - net
investment income and net realized gain
on investments .08 .09 .07 .06 .06
Dividends and distributions to shareholders (.08) (.09) (.07) (.06) (.06)
-----------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
==========================================================
=============
TOTAL RETURN, AT NET ASSET VALUE (1) 7.84% 9.56% 6.96% 6.74% 6.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) $89,143 $68,440 $69,468 $42,538 $28,218
Average net assets (in thousands) $82,966 $67,586 $60,241 $35,138 $12,914
Ratios to average net assets:
Net investment income 7.80% 8.82% 7.31% 6.33% 5.68%
Expenses .51% .53% .55% .59% .75%
</TABLE>
1. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends 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 returns reflect changes in net investment income only. 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.
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
High Income
Fund
-------------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $9.79 $11.02 $9.74 $9.40 $7.90
Income (loss) from investment operations:
Net investment income .98 .94 .82 1.19 1.28
Net realized and unrealized gain (loss) on
investments and foreign currency .94 (1.27) 1.65 .43 1.30
transactions
------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.92 (.33) 2.47 1.62 2.58
-------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.08) (.66) (1.19) (1.28) (1.08)
Distributions from net realized gain on
investments and foreign currency
transactions -- (.24) -- -- --
-------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (1.08) (.90) (1.19) (1.28) (1.08)
-------------------------------------------------------------------------------
Net asset value, end of period $10.63 $ 9.79 $11.02 $9.74 $9.40
==========================================================
=====================
TOTAL RETURN, AT NET ASSET VALUE(2) 20.37% (3.18)% 26.34% 17.92%
33.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $133,451 $ 95,698 $93,011 $40,817 $27,308
Average net assets (in thousands) $115,600 $101,096 $67,000 $36,861 $23,663
Ratios to average net assets:
Net investment income 9.81% 9.15% 10.50% 12.08% 14.26%
Expenses .81% .67% .68% .73% .75%
Portfolio turnover rate(4) 107.1% 110.1% 135.7% 144.2% 108.0%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
1990 1989 1988 1987 1986(1)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $8.59 $9.30 $9.14 $10.04 $10.00
Income (loss) from investment operations:
Net investment income 1.21 1.09 1.12 1.30 .72
Net realized and unrealized gain (loss) on
investments and foreign currency (.82) (.65) .23 (.51) (.24)
transactions
-------------------------------------------------------------------------
Total income (loss) from investment
operations .39 .44 1.35 .79 .48
-------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.08) (1.08) (1.07) (1.55) (.44)
Distributions from net realized gain on
investments and foreign currency
transactions -- (.07) (.12) (.14) --
-------------------------------------------------------------------------
Total dividends and distributions to
shareholders (1.08) (1.15) (1.19) (1.69) (.44)
-------------------------------------------------------------------------
Net asset value, end of period $7.90 $8.59 $9.30 $9.14 $10.04
==========================================================
===============
TOTAL RETURN, AT NET ASSET VALUE(2) 4.65% 4.84% 15.58% 8.07%
4.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $19,172 $23,698 $25,551 $21,768 $14,833
Average net assets (in thousands) $21,493 $26,040 $24,530 $20,637 $ 8,036
Ratios to average net assets:
Net investment income 14.32% 11.52% 11.94% 13.13% 11.18%(3)
Expenses .75% .75% .75% .75% .75%(3)
Portfolio turnover rate(4) 95.1% 78.7% 57.9% 42.1% 18.3%
</TABLE>
1. For the period from April 30, 1986 (commencement of operations) to
December 31, 1986.
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.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Bond
Fund
-----------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.78 $11.65 $10.99 $11.15 $10.33
Income (loss) from investment operations:
Net investment income .72 .76 .65 .87 .95
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 1.07 (.98) .76 (.17) .80
-----------------------------------------------------------------------------
Total income (loss) from investment
operations 1.79 (.22) 1.41 .70 1.75
-----------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.73) (.62) (.75) (.86) (.93)
Distributions from net realized gain on
investments and foreign currency
transactions -- (.03) -- -- --
-----------------------------------------------------------------------------
Total dividends and distributions to
shareholders (.73) (.65) (.75) (.86) (.93)
-----------------------------------------------------------------------------
Net asset value, end of period $11.84 $10.78 $11.65 $10.99 $11.15
==========================================================
===================
TOTAL RETURN, AT NET ASSET VALUE(1) 17.00% (1.94)% 13.04% 6.50%
17.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $211,232 $135,067 $111,846 $63,354 $32,762
Average net assets (in thousands) $170,929 $121,884 $ 87,215 $45,687 $22,169
Ratios to average net assets:
Net investment income 6.91% 7.30% 7.20% 7.81% 8.73%
Expenses .80% .57% .46% .56% .64%
Portfolio turnover rate(2) 79.4% 35.1% 36.3% 41.3% 7.6%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
1990 1989 1988 1987 1986
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.49 $10.15 $10.19 $11.15 $11.27
Income (loss) from investment operations:
Net investment income .97 .98 .94 .97 .97
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (.18) .32 (.05) (.71) .09
----------------------------------------------------------------------------
Total income (loss) from investment
operations .79 1.30 .89 .26 1.06
----------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.95) (.96) (.93) (1.17) (1.03)
Distributions from net realized gain on
investments and foreign currency
transactions -- -- -- (.05) (.15)
----------------------------------------------------------------------------
Total dividends and distributions to
shareholders (.95) (.96) (.93) (1.22) (1.18)
----------------------------------------------------------------------------
Net asset value, end of period $10.33 $10.49 $10.15 $10.19 $11.15
==========================================================
==================
TOTAL RETURN, AT NET ASSET VALUE(1) 7.92% 13.32% 8.97% 2.53%
10.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $16,576 $13,422 $ 9,989 $10,415 $7,377
Average net assets (in thousands) $15,088 $11,167 $11,028 $ 8,748 $4,647
Ratios to average net assets:
Net investment income 9.30% 9.34% 9.08% 9.17% 8.71%
Expenses .61% .64% .70% .75% .75%
Portfolio turnover rate(2) 7.4% 5.4% 36.3% 5.9% 27.7%
</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. 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.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Capital Appreciation
Fund
------------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $25.95 $31.64 $26.04 $23.24 $15.24
Income (loss) from investment operations:
Net investment income .11 .10 .05 .06 .08
Net realized and unrealized gain (loss) on
investments 8.29 (2.22) 6.71 3.43 8.18
------------------------------------------------------------------------------
Total income (loss) from investment operations 8.40 (2.12) 6.76 3.49 8.26
------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.09) (.04) (.06) (.14) (.26)
Distributions from net realized gain on
investments (.05) (3.53) (1.10) (.55) --
------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (.14) (3.57) (1.16) (.69) (.26)
------------------------------------------------------------------------------
Net asset value, end of period $34.21 $25.95 $31.64 $26.04 $23.24
==========================================================
====================
TOTAL RETURN, AT NET ASSET VALUE(2) 32.52% (7.59)% 27.32% 15.42%
54.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $325,404 $185,774 $136,885 $83,335 $49,371
Average net assets (in thousands) $240,730 $153,832 $98,228 $56,371 $34,887
Ratios to average net assets:
Net investment income .47% .50% .23% .30% .81%
Expenses .78% .57% .47% .54% .63%
Portfolio turnover rate(4) 125.5% 96.5% 122.8% 78.9% 122.3%
Average brokerage commission rate(5) $0.18 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
1990 1989 1988 1987 1986(1)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $20.40 $16.31 $14.39 $13.12 $16.21
Income (loss) from investment operations:
Net investment income .32 .50 .33 .21 .12
Net realized and unrealized gain (loss) on
investments (3.54) 3.93 1.60 1.67 (1.24)
-------------------------------------------------------------------------
Total income (loss) from investment operations (3.22) 4.43 1.93 1.88 (1.12)
-------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.53) (.34) -- (.34) (.21)
Distributions from net realized gain on
investments (1.41) -- (.01) (.27) (1.76)
-------------------------------------------------------------------------
Total dividends and distributions to
shareholders (1.94) (.34) (.01) (.61) (1.97)
-------------------------------------------------------------------------
Net asset value, end of period $15.24 $20.40 $16.31 $14.39 $13.12
==========================================================
===============
TOTAL RETURN, AT NET ASSET VALUE(2) (16.82)% 27.57% 13.41% 14.34%
(1.65)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $23,295 $27,523 $13,667 $9,692 $4,549
Average net assets (in thousands) $24,774 $21,307 $13,239 $8,598 $3,099
Ratios to average net assets:
Net investment income 1.93% 3.27% 2.13% 1.68% 2.36%(3)
Expenses .71% .68% .73% .75% 1.01%(3)
Portfolio turnover rate(4) 222.0% 130.5% 128.7% 138.7% 100.1%
Average brokerage commission rate(5) -- -- -- -- --
</TABLE>
1. For the six months ended December 31, 1986. Operating results prior
to August 15, 1986 were achieved by Centennial Capital Appreciation Fund,
a separate investment company acquired by OCAP on August 14, 1986.
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.
5. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Growth
Fund
-----------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $17.68 $17.70 $16.96 $15.17 $12.54
Income (loss) from investment operations:
Net investment income .25 .22 .46 .16 .30
Net realized and unrealized gain (loss) on
investments 6.10 (.05) .74 1.99 2.82
-----------------------------------------------------------------------------
Total income (loss) from investment
operations 6.35 .17 1.20 2.15 3.12
-----------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.22) (.15) (.14) (.36) (.49)
Distributions from net realized gain on
investments and foreign currency
transactions (.26) (.04) (.32) -- --
-----------------------------------------------------------------------------
Total dividends and distributions to
shareholders (.48) (.19) (.46) (.36) (.49)
-----------------------------------------------------------------------------
Net asset value, end of period $23.55 $17.68 $17.70 $16.96 $15.17
==========================================================
===================
TOTAL RETURN, AT NET ASSET VALUE(1) 36.65% .97% 7.25% 14.53%
25.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $117,710 $63,283 $56,701 $36,494 $22,032
Average net assets (in thousands) $88,803 $59,953 $46,389 $25,750 $18,810
Ratios to average net assets:
Net investment income 1.46% 1.38% 1.13% 1.36% 2.82%
Expenses .79% .58% .50% .61% .70%
Portfolio turnover rate(2) 58.2% 53.8% 12.6% 48.7% 133.9%
Average brokerage commission rate(3) $0.07 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1990 1989 1988 1987 1986
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $16.38 $13.64 $11.21 $12.53 $10.95
Income (loss) from investment operations:
Net investment income .56 .66 .29 .20 .13
Net realized and unrealized gain (loss) on
investments (1.79) 2.50 2.19 .24 1.76
---------------------------------------------------------------------------
Total income (loss) from investment
operations (1.23) 3.16 2.48 .44 1.89
---------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.62) (.35) -- (.34) (.15)
Distributions from net realized gain on
investments and foreign currency
transactions (1.99) (.07) (.05) (1.42) (.16)
---------------------------------------------------------------------------
Total dividends and distributions to
shareholders (2.61) (.42) (.05) (1.76) (.31)
---------------------------------------------------------------------------
Net asset value, end of period $12.54 $16.38 $13.64 $11.21 $12.53
==========================================================
=================
TOTAL RETURN, AT NET ASSET VALUE(1) (8.21)% 23.59% 22.09% 3.32%
17.76%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $15,895 $19,301 $17,746 $14,692 $8,287
Average net assets (in thousands) $17,235 $18,596 $15,585 $15,121 $3,744
Ratios to average net assets:
Net investment income 4.09% 3.72% 2.39% 1.56% 2.62%
Expenses .71% .70% .70% .75% .75%
Portfolio turnover rate(2) 267.9% 148.0% 132.5% 191.0% 100.9%
Average brokerage commission rate(3) -- -- -- -- --
</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. 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.
3. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Multiple Strategies
Fund
------------------------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993 1992 1991
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.91 $13.88 $12.47 $11.96 $10.90
Income (loss) from investment operations:
Net investment income .66 .63 .55 .55 .69
Net realized and unrealized gain (loss) on
investments, options written and foreign
currency transactions 2.00 (.90) 1.41 .50 1.15
------------------------------------------------------------------------------
Total income (loss) from investment operations 2.66 (.27) 1.96 1.05 1.84
------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.65) (.60) (.55) (.54) (.78)
Distributions from net realized gain on
investments, options written and foreign
currency transactions (.37) (.10) -- -- --
------------------------------------------------------------------------------
Total dividends and distributions to
shareholders (1.02) (.70) (.55) (.54) (.78)
------------------------------------------------------------------------------
Net asset value, end of period $14.55 $12.91 $13.88 $12.47 $11.96
==========================================================
====================
TOTAL RETURN, AT NET ASSET VALUE(2) 21.36% (1.95)% 15.95% 8.99%
17.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $381,263 $292,067 $250,290 $159,464 $124,634
Average net assets (in thousands) $344,745 $279,949 $199,954 $139,011 $117,000
Ratios to average net assets:
Net investment income 4.81% 4.90% 4.44% 4.63% 5.95%
Expenses .77% .56% .48% .55% .54%
Portfolio turnover rate(4) 39.0% 31.4% 32.4% 57.8% 80.3%
Average brokerage commission rate(5) $0.04 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
1990 1989 1988 1987(1)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.30 $11.58 $10.04 $10.00
Income (loss) from investment operations:
Net investment income .73 .73 .66 .44
Net realized and unrealized gain (loss) on
investments, options written and foreign
currency transactions (.97) 1.04 1.53 .07
-----------------------------------------------------------------
Total income (loss) from investment operations (.24) 1.77 2.19 .51
-----------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.70) (.68) (.65) (.43)
Distributions from net realized gain on
investments, options written and foreign
currency transactions (.46) (.37) -- (.04)
-----------------------------------------------------------------
Total dividends and distributions to
shareholders (1.16) (1.05) (.65) (.47)
-----------------------------------------------------------------
Net asset value, end of period $10.90 $12.30 $11.58 $10.04
==========================================================
=======
TOTAL RETURN, AT NET ASSET VALUE(2) (1.91)% 15.76% 22.15% 3.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $118,888 $121,286 $78,386 $53,291
Average net assets (in thousands) $123,231 $101,057 $64,298 $34,256
Ratios to average net assets:
Net investment income 6.53% 6.36% 6.18% 6.12%(3)
Expenses .55% .57% .58 .65%(3)
Portfolio turnover rate(4) 99.2% 66.9% 110.0% 46.9%
Average brokerage commission rate(5) -- -- -- --
</TABLE>
1. For the period from February 9, 1987 (commencement of Operations) to
December 31, 1987.
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.
5. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Global Securities
Fund
----------------------------------------------------------------
Year Ended
December 31,
1995 1994 1993
-----------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.09 $16.30 $9.57
Income (loss) from investment operations:
Net investment income .12 .04 (.02)
Net realized and unrealized gain (loss) on investments
and foreign currency transactions .19 (.96) 6.75
-----------------------------------------------------------------
Total income (loss) from investment operations .31 (.92) 6.73
-----------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- (.04) --
Distributions from net realized gain on investments and
foreign currency transactions (.40) (.25) --
-----------------------------------------------------------------
Total dividends and distributions to shareholders (.40) (.29) --
-----------------------------------------------------------------
Net asset value, end of period $15.00 $15.09 $16.30
==========================================================
=======
TOTAL RETURN, AT NET ASSET VALUE(2) 2.24% (5.72)%
70.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $360,979 $297,842 $96,425
Average net assets (in thousands) $332,336 $214,545 $31,696
Ratios to average net assets:
Net investment income .86% .54% .72%
Expenses .89% .91% .92%
Portfolio turnover rate(4) 131.3% 70.4% 65.1%
Average brokerage commission rate(5) $0.01 -- --
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
1992 1991 1990(1)
-----------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.38 $10.04 $10.00
Income (loss) from investment operations:
Net investment income .07 .04 --
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (.80) .30 .04
---------------------------------------------------------------
Total income (loss) from investment operations (.73) .34 .04
---------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.04) -- --
Distributions from net realized gain on investments and
foreign currency transactions (.04) -- --
---------------------------------------------------------------
Total dividends and distributions to shareholders (.08) -- --
---------------------------------------------------------------
Net asset value, end of period $9.57 $10.38 $10.04
==========================================================
=====
TOTAL RETURN, AT NET ASSET VALUE(2) (7.11)% 3.39% .40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $13,537 $7,339 $ 432
Average net assets (in thousands) $11,181 $3,990 $ 263
Ratios to average net assets:
Net investment income 1.04% .75% .08%(3)
Expenses 1.06% 1.32% 6.84%(3)
Portfolio turnover rate(4) 34.1% 29.5% 0.0%
Average brokerage commission rate(5) -- -- --
</TABLE>
1. For the period from November 12, 1990 (commencement of operations) to
December 31, 1990.
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.
5. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Strategic Bond
Fund
--------------------------------------------------------
Year Ended
December 31,
1995 1994 1993(1)
--------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $4.60 $5.12 $5.00
Income (loss) from investment operations:
Net investment income .38 .35 .10
Net realized and unrealized gain (loss) on investments,
options written and foreign currency transactions .30 (.54) .11
--------------------------------------------------------
Total income (loss) from investment operations .68 (.19) .21
--------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.37) (.32) (.09)
Distributions from net realized gain on investments -- -- --
Distributions in excess of net realized gain on investments,
options written and foreign currency transactions -- (.01) --
--------------------------------------------------------
Total dividends and distributions to shareholders (.37) (.33) (.09)
--------------------------------------------------------
Net asset value, end of period $4.91 $4.60 $5.12
========================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 15.33% (3.78)% 4.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $60,098 $20,320 $9,887
Average net assets (in thousands) $37,698 $15,389 $4,259
Ratios to average net assets:
Net investment income 9.32% 8.36% 5.67%(3)
Expenses .85% .87% .96%(3)
Portfolio turnover rate(4) 87.0% 136.6% 10.9%
</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.
<PAGE>
Oppenheimer Variable Account Funds
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
Oppenheimer
Growth & Income
Fund
---------------
Year Ended
December 31,
1995(1)
---------
<S> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.00
Income (loss) from investment operations:
Net investment income .01
Net realized and unrealized gain (loss) on investments,
options written and foreign currency transactions 2.52
---------
Total income (loss) from investment operations 2.53
---------
Dividends and distributions to shareholders:
Dividends from net investment income (.02)
Distributions from net realized gain on investments --
Distributions in excess of net realized gain on investments,
options written and foreign currency transactions --
---------
Total dividends and distributions to shareholders (.02)
---------
Net asset value, end of period $12.51
=========
TOTAL RETURN, AT NET ASSET VALUE(2) 25.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $4,288
Average net assets (in thousands) $1,809
Ratios to average net assets:
Net investment income 0.50%(3)
Expenses 2.07%(3)
Portfolio turnover rate(4) 23.7%
Average brokerage commission rate(5) $0.34
</TABLE>
1. For the period from July 5, 1995 (commencement of operations) to
December 31, 1995
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.
5. Total brokerage commissions paid on purchases and sales of portfolio
securities for the period divided by the total number of related shares
purchased and sold.
<PAGE>
Investment Objectives and Policies
Investment Objective and Policies - Money Fund. The objective of Money
Fund is to seek the maximum current income from investments in "money
market" securities consistent with low capital risk and the maintenance
of liquidity. The Securities and Exchange Commission Rule 2a-7 ("Rule 2a-
7") under the Investment Company Act of 1940 (the "Investment Company
Act") places restrictions on a money market fund's investments. Under
Rule 2a-7, Money Fund may purchase only "Eligible Securities," as defined
below, that the Trust's Board of Trustees has determined have minimal
credit risk. An "Eligible Security" is (a) a security that has received
a rating in one of the two highest short-term rating categories by any two
"nationally-recognized statistical rating organizations" as defined in
Rule 2a-7 ("Rating Organizations"), or, if only one Rating Organization
has rated that security, by that Rating Organization, or (b) an unrated
security that is judged by the Manager to be of comparable quality to
investments that are "Eligible Securities" rated by Rating Organizations.
Rule 2a-7 permits Money Fund to purchase "First Tier Securities," which
are Eligible Securities rated in the highest category for short-term debt
obligations by at least two Rating Organizations, or, if only one Rating
Organization has rated a particular security, by that Rating Organization,
or comparable unrated securities. Under Rule 2a-7, Money Fund may invest
only up to 5% of its assets in "Second Tier Securities," which are
Eligible Securities that are not "First Tier Securities."
In addition to the overall 5% limit on Second Tier Securities, Money
Fund may not invest (i) more than 5% of its total assets in the securities
of any one issuer (other than the U.S. Government, its agencies or
instrumentalities) or (ii) more than 1% of its total assets or $1 million
(whichever is greater) in Second Tier Securities of any one issuer. The
Trust's Board must approve or ratify the purchase of Eligible Securities
that are unrated or are rated by only one Rating Organization.
Additionally, under Rule 2a-7, Money Fund must maintain a dollar-weighted
average portfolio maturity of no more than 90 days, and the maturity of
any single portfolio investment may not exceed 397 days. The Trust's
Board has adopted procedures under Rule 2a-7 pursuant to which the Board
has delegated to the Manager the responsibility of conforming Money Fund's
investments with the requirements of Rule 2a-7 and those Procedures.
Ratings at the time of purchase will determine whether securities may
be acquired under the above restrictions. The rating restrictions
described in this Prospectus do not apply to banks in which the Trust's
cash is kept. Subsequent downgrades in ratings may require reassessment
of the credit risk presented by a security and may require its sale. See
"Investment Objectives and Policies -- Money Fund" in the Statement of
Additional Information for further details.
The Trust intends to exercise due care in the selection of portfolio
securities. However, a risk may exist that the issuers of Money Fund's
portfolio securities may not be able to meet their duties and obligations
on interest or principal payments at the time called for by the
instrument. There is also the risk that because of a redemption demand
greater than anticipated by the Manager, some of Money Fund's portfolio
may have to be liquidated prior to maturity at prices less than the
original cost or maturity value. Any of these risks, if encountered,
could cause a reduction in the net asset value of Money Fund's shares.
The types of instruments that will form the major part of Money
Fund's investments are certificates of deposit, bankers' acceptances,
commercial paper, U.S. Treasury bills, securities of U.S. Government
agencies or instrumentalities and other debt instruments (including bonds)
issued by corporations, including variable and floating rate instruments,
and variable rate master demand notes. Some of such instruments may be
supported by letters of credit or may be subject to repurchase
transactions (described below). Except as described below, Money Fund
will purchase certificates of deposit or bankers' acceptances only if
issued or guaranteed by a domestic bank subject to regulation by the U.S.
Government or by a foreign bank having total assets at least equal to U.S.
$1 billion. Money Fund may invest in certificates of deposit of up to
$100,000 of a domestic bank if such certificates of deposit are fully
insured as to principal by the Federal Deposit Insurance Corporation. For
purposes of this section, the term "bank" includes commercial banks,
savings banks, and savings and loan associations and the term "foreign
bank" includes foreign branches of U.S. banks (issuers of "Eurodollar"
instruments), U.S. branches and agencies of foreign banks (issuers of
"Yankee dollar" instruments) and foreign branches of foreign banks. Money
Fund also may purchase obligations issued by other entities if they are:
(i) guaranteed as to principal and interest by a bank or corporation whose
certificates of deposit or commercial paper may otherwise be purchased by
Money Fund, or (ii) subject to repurchase agreements (explained below),
if the collateral for the agreement complies with Rule 2a-7. In addition,
the Fund may also invest in other types of securities described above in
accordance with the requirements of Rule 2a-7. For further information,
see "Foreign Securities" and "Other Investment Restrictions" below. See
Appendix A below and "Investment Objectives and Policies" in the Statement
of Additional Information for further information on the investments which
Money Fund may make. See Appendix B below for a description of the rating
categories of the Rating Organizations.
Investment Objectives and Policies - High Income Fund, Bond Fund and
Strategic Bond Fund.
High Income Fund. The objective of High Income Fund is to earn a high
level of current income by investing primarily in a diversified portfolio
of high yield, fixed-income securities (including long-term debt and
preferred stock issues, including convertible securities) believed by the
Manager not to involve undue risk. The Fund may also acquire
participation interests in loans that are made to corporations (see
"Participation Interests," below). High Income Fund's investment policy
is to assume certain risks (discussed below) in seeking high yield, which
is ordinarily associated with high risk securities, commonly known as
"junk bonds," in the lower rating categories of the established securities
ratings services (i.e., securities rated "Baa" or lower by Moody's
Investors Service, Inc. ("Moody's") or "BBB" or lower by Standard & Poor's
Corporation ("Standard & Poor's")), and unrated securities. The
investments in which High Income Fund will invest principally will be in
the lower rating categories; it may invest in securities rated as low as
"C" by Moody's or "D" by Standard & Poor's. Such ratings indicate that
the obligations are speculative in a high degree and may be in default.
Appendix B of this Prospectus describes these rating categories.
High Income Fund is not obligated to dispose of securities whose
issuers subsequently are in default or if the rating is subsequently
downgraded. High Income Fund may invest, without limit, in unrated
securities if such securities offer, in the opinion of the Manager, yields
and risks comparable to rated securities. Risks of high yield securities
are discussed under "Risk Factors" below. High Income Fund's portfolio
at December 31, 1995 contained domestic and foreign corporate bonds in the
following rating categories as rated by Standard & Poor's (the percentages
relate to the weighted average value of the bonds in each rating category
as a percentage of that Fund's total assets): AAA, 0.34%; AA, 0.22%; BBB,
1.85%; BB, 9.14%; B, 39.45%; CCC, 13.37%; C, 0.93%; and D, 0.53%. If a
bond was not rated by Standard & Poor's but was rated by Moody's, it is
included in the comparable category. The Manager will not rely
principally on the ratings assigned by rating services. The Manager's
analysis may include consideration of the financial strength of the
issuer, including its historic and current financial condition, the
trading activity in its securities, present and anticipated cash flow,
estimated current value of assets in relation to historical cost, the
issuer's experience and managerial expertise, responsiveness to changes
in interest rates and business conditions, debt maturity schedules,
current and future borrowing requirements, and any change in the financial
condition of the issuer and the issuer's continuing ability to meet its
future obligations. The Manager also may consider anticipated changes in
business conditions, levels of interest rates of bonds as contrasted with
levels of cash dividends, industry and regional prospects, the
availability of new investment opportunities and the general economic,
legislative and monetary outlook for specific industries, the nation and
the world.
Bond Fund. Bond Fund's primary objective is to earn a high level of
current income by investing primarily in a diversified portfolio of high
yield fixed-income securities. As a secondary objective, Bond Fund seeks
capital growth when consistent with its primary objective. As a matter
of non-fundamental policy, Bond Fund will, under normal market conditions,
invest at least 65% of its total assets in bonds. Bond Fund will invest
only in securities rated "Baa" or better by Moody's or "BBB" or better by
Standard & Poor's. However, Bond Fund is not obligated to dispose of
securities if the rating is reduced, and therefore will from time to time
hold securities rated lower than "Baa" by Moody's or "BBB" by Standard &
Poor's.
Strategic Bond Fund. The investment objective of Strategic Bond Fund is
to seek a high level of current income principally derived from interest
on debt securities and to enhance such income by writing covered call
options on debt securities. Although the premiums received by Strategic
Bond Fund from writing covered calls are a form of capital gain, the Fund
generally will not make investments in securities with the objective of
seeking capital appreciation.
The Fund intends to invest principally in: (i) lower-rated high yield
domestic debt securities; (ii) U.S. Government securities, and (iii)
foreign government and corporate debt securities. Under normal
circumstances, the Fund's assets will be invested in each of these three
sectors. However, Strategic Bond Fund may from time to time invest up to
100% of its total assets in any one sector if, in the judgment of the
Manager, the Fund has the opportunity of seeking a high level of current
income without undue risk to principal. Accordingly, the Fund's
investments should be considered speculative. Distributable income will
fluctuate as the Fund assets are shifted among the three sectors.
- High Yield Securities. The higher yields and high income sought
by Strategic Bond Fund are generally obtainable from securities in the
lower rating categories of the established rating services, commonly known
as "junk bonds." Such securities are rated "Baa" or lower by Moody's or
"BBB" or lower by Standard & Poor's. Strategic Bond Fund may invest in
securities rated as low as "C" by Moody's or "D" by Standard & Poor's.
Such ratings indicate that the obligations are speculative in a high
degree and may be in default. Risks of high yield, high risk securities
are discussed under "Risk Factors" below. Strategic Bond Fund's portfolio
at December 31, 1995, contained domestic and foreign corporate bonds in
the following rating categories as rated by Standard & Poor's (the
percentages relate to the weighted average of the bonds in each rating
category as a percentage of that Fund's total assets): AAA, 0.30%; AA,
0.07%; BBB, 0.69%; BB, 5.45%; B, 14.18%; CCC, 4.63%; C, 0.42%; and D,
0.11%. If a bond was not rated by Standard & Poor's but was rated by
Moody's, it is included in the comparable category. The Manager will not
rely principally on the ratings assigned by rating services. Strategic
Bond Fund is not obligated to dispose of securities whose issuers
subsequently are in default or if the rating of such securities is
reduced. Appendix B of this Prospectus describes these rating categories.
Strategic Bond Fund may also invest in unrated securities which, in the
opinion of the Manager, offer yields and risks comparable to those of
securities which are rated.
Other Fixed-Income Strategies and Techniques. High Income Fund, Bond
Fund and Strategic Bond Fund (collectively, the "Income Funds") can also
use the investment techniques and strategies described below. The
Statement of Additional Information contains more information about these
practices.
- International Securities. The Income Funds may invest in foreign
government and foreign corporate debt securities (which may be denominated
in U.S. dollars or in non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (such as the World Bank) and
foreign governments (including political subdivisions having taxing
authority) or their agencies or instrumentalities. These investments may
include (i) U.S. dollar-denominated debt obligations known as "Brady
Bonds," which are issued for the exchange of existing commercial bank
loans to foreign entities for new obligations that are generally
collateralized by zero coupon Treasury securities having the same
maturity, (ii) debt obligations such as bonds (including sinking fund and
callable bonds), (iii) debentures and notes (including variable rate and
floating rate instruments), and (iv) preferred stocks and zero coupon
securities. Further information about investments in foreign securities
and special risks of "emerging markets" is set forth below under "Other
Investment Techniques and Strategies - Foreign Securities."
- U.S. Government Securities. U.S. Government Securities are debt
obligations issued by or guaranteed by the United States Government or one
of its agencies or instrumentalities. Although U.S. Government Securities
are considered among the most creditworthy of fixed-income investments and
their yields are generally lower than the yields available from corporate
debt securities, the values of U.S. Government Securities (and of fixed-
income securities generally) will vary inversely to changes in prevailing
interest rates. To compensate for the lower yields available on U.S.
Government securities, the Income Funds will attempt to augment these
yields by writing covered call options against them. See "Hedging,"
below. Certain of these obligations, including U.S. Treasury notes and
bonds, and mortgage-backed securities guaranteed by the Government
National Mortgage Association ("Ginnie Maes"), are supported by the full
faith and credit of the United States. Certain other U.S. Government
Securities, issued or guaranteed by Federal agencies or government-
sponsored enterprises, are not supported by the full faith and credit of
the United States. These latter securities may include obligations
supported by the right of the issuer to borrow from the U.S. Treasury,
such as obligations of Federal Home Loan Mortgage Corporation ("Freddie
Macs"), and obligations supported by the credit of the instrumentality,
such as Federal National Mortgage Association bonds ("Fannie Maes"). U.S.
Government Securities in which the Funds may invest include zero coupon
U.S. Treasury securities, mortgage-backed securities and money market
instruments.
Zero coupon Treasury securities are: (i) U.S. Treasury notes and
bonds which have been stripped of their unmatured interest coupons and
receipts; or (ii) certificates representing interests in such stripped
debt obligations or coupons. Because a zero coupon security pays no
interest to its holder during its life or for a substantial period of
time, it usually trades at a deep discount from its face or par value and
will be subject to greater fluctuations of market value in response to
changing interest rates than debt obligations of comparable maturities
which make current distributions of interest. Because the Fund accrues
taxable income from these securities without receiving cash, the Fund may
be required to sell portfolio securities in order to pay cash dividends
or to meet redemptions. The Income Funds may invest up to 50% of their
total assets at the time of purchase in zero coupon securities issued by
either corporations or the U.S. Treasury.
- Domestic Securities. The Income Funds' investments in domestic
securities may include preferred stocks, participation interests and zero
coupon securities. Domestic investments include fixed-income securities
and dividend-paying common stocks issued by domestic corporations in any
industry which may be denominated in U.S. dollars or non-U.S. currencies.
The Income Funds' investments may include securities which represent
participation interests in loans made to corporations (see "Participation
Interests," below) and in pools of residential mortgage loans which may
be guaranteed by agencies or instrumentalities of the U.S. Government
(e.g. Ginnie Maes, Freddie Macs and Fannie Maes), including collateralized
mortgage-backed obligations ("CMOs"), or which may not be guaranteed.
Such securities differ from conventional debt securities which provide for
periodic payment of interest in fixed amounts (usually semi-annually) with
principal payments at maturity or specified call dates. Mortgage-backed
securities provide monthly payments which are, in effect, a "pass-through"
of the monthly interest and principal payments (including any prepayments)
made by the individual borrowers on the pooled mortgage loans. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments
it receives may occur at lower rates than the original investment, thus
reducing the yield of the Fund. CMOs in which the Fund may invest are
securities issued by a U.S. Government instrumentality or private
corporation that are collateralized by a portfolio of mortgages or
mortgage-backed securities which may or may not be guaranteed by the U.S.
Government. The issuer's obligation to make interest and principal
payments is secured by the underlying portfolio of mortgages or mortgage-
backed securities. Mortgage-backed securities may be less effective than
debt obligations of similar maturity at maintaining yields during periods
of declining interest rates.
The Income Funds may also invest in CMOs that are "stripped." That
means that the security is divided into two parts, one of which receives
some or all of the principal payments (and is known as a "P/O") and the
other which receives some or all of the interest (and is known as an
"I/O"). P/Os and I/Os are generally referred to as "derivative
investments," discussed further below.
The yield to maturity on the class that receives only interest is
extremely sensitive to the rate of payment of the principal on the
underlying mortgages. Principal prepayments increase that sensitivity.
Stripped securities that pay "interest only" are therefore subject to
greater price volatility when interest rates change, and they have the
additional risk that if the underlying mortgages are prepaid, the Fund
will lose the anticipated cash flow from the interest on the prepaid
mortgages. That risk is increased when general interest rates fall, and
in times of rapidly falling interest rates, the Fund might receive back
less than its investment.
The value of "principal only" securities generally increases as
interest rates decline and prepayment rates rise. The price of these
securities is typically more volatile than that of coupon-bearing bonds
of the same maturity.
Stripped securities are generally purchased and sold by institutional
investors through investment banking firms. At present, established
trading markets have not yet developed for these securities. Therefore,
some stripped securities may be deemed "illiquid." If any Fund holds
illiquid stripped securities, the amount it can hold will be subject to
its investment policy limiting investments in illiquid securities to 15%
of that Fund's assets.
The Income Funds may also enter into "forward roll" transactions with
banks or other buyers that provide for future delivery of the mortgage-
backed securities in which the Funds may invest. The Funds are required
to identify cash, U.S. Government securities or other high-grade debt
securities to its custodian bank in an amount equal to its obligation
under the forward roll. The main risk of this investment strategy is risk
of default by the counterparty.
The Income Funds may also invest in asset-backed securities, which
are securities that represent fractional undivided interests in pools of
consumer loans and trade receivables, similar in structure to the
mortgage-backed securities in which the Fund may invest, described above.
Payments of principal and interest are passed through to holders of asset-
backed securities and are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guarantee
by another entity or having a priority to certain of the borrower's other
securities. The degree of credit enhancement varies, and generally
applies to only a fraction of the asset-backed security's par value until
exhausted.
Risk Factors. The securities in which High Income Fund and Strategic Bond
Fund principally invest are considered speculative and involve greater
risk than lower yielding, higher rated fixed-income securities, while
providing higher yields than such securities. Lower rated securities may
be less liquid, and significant losses could be experienced if a
substantial number of other holders of such securities decide to sell at
the same time. Other risks may involve the default of the issuer or price
changes in the issuer's securities due to changes in the issuer's
financial strength or economic conditions. Issuers of lower rated or
unrated securities are generally not as financially secure or creditworthy
as issuers of higher-rated securities. These Funds are not obligated to
dispose of securities when issuers are in default or if the rating of the
security is reduced. These risks are discussed in more detail in the
Statement of Additional Information.
Investment Objectives and Policies - Capital Appreciation Fund, Growth
Fund, Multiple Strategies Fund, Growth & Income Fund and Global Securities
Fund.
Capital Appreciation Fund. In seeking its objective of capital
appreciation, Capital Appreciation Fund will emphasize investments in
securities of "growth-type" companies. Such companies are believed to
have relatively favorable long-term prospects for increasing demand for
their goods or services, or to be developing new products, services or
markets, and normally retain a relatively larger portion of their earnings
for research, development and investment in capital assets. "Growth-type"
companies may also include companies developing applications for recent
scientific advances. Capital Appreciation Fund may also invest in
cyclical industries and in "special situations" that the Manager believes
present opportunities for capital growth. "Special situations" are
anticipated acquisitions, mergers or other unusual developments which, in
the opinion of the Manager, will increase the value of an issuer's
securities, regardless of general business conditions or market movements.
An additional risk is present in this type of investment since the price
of the security may be expected to decline if the anticipated development
fails to occur.
Growth Fund. In seeking its objective of capital appreciation, Growth
Fund will emphasize investments in securities of well-known and
established companies. Such securities generally have a history of
earnings and dividends and are issued by seasoned companies (having an
operating history of at least five years, including predecessors).
Current income is a secondary consideration in the selection of Growth
Fund's portfolio securities.
Multiple Strategies Fund. The objective of Multiple Strategies Fund is
to seek a high total investment return, which includes current income as
well as capital appreciation in the value of its shares. In seeking that
objective, Multiple Strategies Fund may invest in equity securities
(including common stocks, preferred stocks, convertible securities and
warrants), debt securities (including bonds, high yield securities,
participation interests, asset-backed securities, private-label mortgage-
backed securities and CMOs, zero coupon securities and U.S. Government
obligations, described above under "Investment Objectives and Policies -
High Income Fund, Bond Fund and Strategic Bond Fund" and under
"Participation Interests" below) and cash and cash equivalents (described
above as the types of instruments in which the Money Fund may invest).
The composition of Multiple Strategies Fund's portfolio among the
different types of permitted investments will vary from time to time based
upon the Manager's evaluation of economic and market trends and perceived
relative total anticipated return from such types of securities.
Accordingly, there is neither a minimum nor a maximum percentage of
Multiple Strategies Fund's assets that may, at any given time, be invested
in any of the types of investments identified above. In the event future
economic or financial conditions adversely affect equity securities, it
is expected that Multiple Strategies Fund would assume a defensive
position by investing in debt securities (with an emphasis on securities
maturing in one year or less from the date of purchase), or cash and cash
equivalents.
Growth & Income Fund. The objective of Growth & Income Fund is to seek
a high total return, which includes growth in the value of its shares as
well as current income from equity and debt securities. In seeking that
objective, Growth & Income Fund may invest in equity and debt securities.
Its equity investments will include common stocks, preferred stocks,
convertible securities and warrants. Its debt securities will include
bonds, participation interests, asset-backed securities, private-label
mortgage-backed securities and CMOs, zero coupon securities and U.S.
government obligations. From time to time Growth & Income Fund may focus
on small to medium capitalization issuers, the securities of which may be
subject to greater price volatility than those of larger capitalized
issuers.
The composition of Growth & Income Fund's portfolio among equity and
fixed-income investments will vary from time to time based upon the
Manager's evaluation of economic and market trends and perceived relative
total anticipated return from such types of investments. Accordingly,
there is neither a minimum nor a maximum percentage of Growth & Income
Fund's assets that may, at any given time, be invested in either type of
investment. In the event future economic or financial conditions
adversely affect equity securities, it is expected that Growth & Income
Fund would assume a defensive position by investing in debt securities
(with an emphasis on securities maturing in one year or less from the date
of purchase).
Global Securities Fund. The objective of Global Securities Fund is to
seek long-term capital appreciation. Current income is not an objective.
In seeking its objective, the Fund will invest a substantial portion of
its assets in securities of foreign issuers, "growth-type" companies
(those which, in the opinion of the Manager, have relatively favorable
long-term prospects for increasing demand or which develop new products
and retain a significant part of earnings for research and development),
cyclical industries (e.g. base metals, paper and chemicals) and special
investment situations which are considered to have appreciation
possibilities (e.g., private placements of start-up companies). The Fund
may invest without limit in "foreign securities" (as defined below in
"Other Investment Techniques and Strategies - Foreign Securities") and
thus the relative amount of such investments will change from time to
time. It is currently anticipated that Global Securities Fund may invest
as much as 80% or more of its total assets in foreign securities. See
"Investment Policies and Strategies - Foreign Securities," below, for
further discussion as to the possible rewards and risks of investing in
foreign securities and as to additional diversification requirements for
the Fund's foreign investments.
- Can the Funds' Investment Objectives and Policies Change? The
Funds have investment objectives, described above, as well as investment
policies each follows to try to achieve its objectives. Additionally, the
Funds use certain investment techniques and strategies in carrying out
those investment policies. The Funds' investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
Each Fund's investment objectives are fundamental policies.
The Trust's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus. Fundamental policies are those
that cannot be changed without the approval of a "majority" of the Fund's
outstanding voting shares. The term "majority" is defined in the
Investment Company Act to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information).
Other Investment Techniques and Strategies. Some of the Funds can also use
the investment techniques and strategies described below. These
techniques involve certain risks. The Statement of Additional Information
contains more information about these practices, including limitations on
their use that are designed to reduce some of the risks.
- Special Risks - Borrowing for Leverage. From time to time, Capital
Appreciation Fund, Strategic Bond Fund, Growth Fund, Multiple Strategies
Fund, Growth & Income Fund and Global Securities Fund may borrow money
from banks to buy securities. These Funds will borrow only if they can
do so without putting up assets as security for a loan. This is a
speculative investment method known as "leverage." This investing
technique may subject the Fund to greater risks and costs than funds that
do not borrow. These risks may include the possibility that a Fund's net
asset value per share will fluctuate more than funds that don't borrow,
since a Fund pays interest on borrowings and interest expense affects a
Fund's share price and yield. Growth Fund may borrow only up to 5% of the
value of its total assets and Global Securities Fund may borrow up to 10%
of the value of its total assets. Global Securities Fund will not borrow,
if as a result of such borrowing more than 25% of its total assets would
consist of investments in when-issued or delayed delivery securities or
borrowed funds. Borrowing for Leverage is subject to regulatory limits
described in more detail in "Borrowing" in the Statement of Additional
Information.
Each of the above Funds has undertaken to limit borrowing by that
Fund to 25% of the value of its net assets, which is further limited to
10% if the borrowing is for a purpose other than to facilitate
redemptions. Neither percentage limitation is a fundamental policy.
- Investments In Small, Unseasoned Companies. Money Fund, Capital
Appreciation Fund, Multiple Strategies Fund, Growth & Income Fund, Growth
Fund, Global Securities Fund and Strategic Bond Fund may each invest in
securities of small, unseasoned companies. These are companies that have
been in operation for less than three years, counting the operations of
any predecessors. Securities of these companies may have limited
liquidity (which means that the Fund may have difficulty selling them at
an acceptable price when it wants to) and the prices of these securities
may be volatile. It is not currently intended that investments in
securities of companies (including predecessors) that have operated less
than three years will exceed 5% of the net assets of either Growth Fund
or Multiple Strategies Fund. Money Fund, Capital Appreciation Fund,
Growth & Income Fund, Global Securities Fund and Strategic Bond Fund are
not subject to this restriction.
- Participation Interests. Strategic Bond Fund, Global Securities
Fund, High Income Fund and Multiple Strategies Fund and Growth & Income
Fund may acquire participation interests in U.S. dollar-denominated loans
that are made to U.S. or foreign companies (the "borrower"). They may be
interests in, or assignments of, the loan, and are acquired from the banks
or brokers that have made the loan or are members of the lending
syndicate. No more than 5% of a Fund's net assets can be invested in
participation interests of the same borrower. The Manager has set certain
creditworthiness standards for issuers of loan participations, and
monitors their creditworthiness. The value of loan participation
interests primarily depends upon the creditworthiness of the borrower, and
its ability to pay interest and principal. Borrowers may have difficulty
making payments. If a borrower fails to make scheduled interest or
principal payments, the Fund could experience a decline in the net asset
value of its shares. Some borrowers may have senior securities rated as
low as "C" by Moody's or "D" by Standard & Poor's, but may be deemed
acceptable credit risks. Participation interests are subject to each
Fund's limitations on investments in illiquid securities. See "Illiquid
and Restricted Securities" below.
- Foreign Securities. Each Fund may purchase "foreign securities"
that is, securities of companies organized under the laws of countries
other than the United States that are traded on foreign securities
exchanges or in the foreign over-the-counter markets, and each Fund other
than Money Fund may purchase securities issued by U.S. corporations
denominated in non-U.S. currencies. Money Fund may invest in certain
dollar-denominated foreign securities which are "Eligible Securities" as
described above. Securities of foreign issuers that are represented by
American Depository Receipts ("ADRs"), or that are listed on a U.S.
securities exchange or are traded in the United States over-the-counter
markets are not considered "foreign securities" for this purpose because
they are not subject to many of the special considerations and risks
(discussed below and in the Statement of Additional Information) that
apply to foreign securities traded and held abroad. Each Fund may also
invest in debt obligations issued or guaranteed by foreign corporations,
certain supranational entities (such as the World Bank) and foreign
governments (including political subdivisions having taxing authority) or
their agencies or instrumentalities, subject to the investment policies
described above. Foreign securities which the Funds may purchase may be
denominated in U.S. dollars or in non-U.S. currencies. The Funds may
convert U.S. dollars into foreign currency, but only to effect securities
transactions and not to hold such currency as an investment, other than
in hedging transactions (see "Hedging" below).
It is currently intended that each Fund (other than Global Securities
Fund, Multiple Strategies Fund, Growth & Income Fund or Strategic Bond
Fund) will invest no more than 25% of its total assets in foreign
securities or in government securities of any foreign country or in
obligations of foreign banks. Multiple Strategies Fund will invest no
more than 35% of its total assets in foreign securities or in government
securities of any foreign country or in obligations of foreign banks.
Global Securities Fund, Growth & Income Fund and Strategic Bond Fund have
no restrictions on the amount of their assets that may be invested in
foreign securities. Investments in securities of issuers in non-
industrialized countries generally involve more risk and may be considered
highly speculative.
The Funds have undertaken to comply with the foreign country
diversification guidelines of Section 10506 of the California Insurance
Code, as follows: Whenever a Fund's investment in foreign securities
exceeds 25% of its net assets, it will invest its assets in securities of
issuers located in a minimum of two different foreign countries; this
minimum is increased to three foreign countries if foreign investments
comprise 40% or more of a Fund's net assets, to four if 60% or more and
to five if 80% or more. In addition, no such Fund will have more than 20%
of its net assets invested in securities of issuers located in any one
foreign country; that limit is increased to 35% for Australia, Canada,
France, Japan, the United Kingdom or Germany.
The percentage of each Fund's assets that will be allocated to
foreign securities will vary depending on the relative yields of foreign
and U.S. securities, the economies of foreign countries, the condition of
their financial markets, the interest rate climate of such countries, and
the relationship of such countries' currencies to the U.S. dollar. These
factors are judged on the basis of fundamental economic criteria (e.g.,
relative inflation levels and trends, growth rate forecasts, balance of
payments status, and economic policies) as well as technical and political
data. Subsequent foreign currency losses may result in a Fund having
previously distributed more income in a particular period than was
available from investment income, which could result in a return of
capital to shareholders. Each such Fund's portfolio of foreign securities
may include those of a number of foreign countries or, depending upon
market conditions and subject to the above diversification requirements
those of a single country. In summary, foreign securities markets may be
less liquid and more volatile than the markets in the U.S. Risks of
foreign securities investing may include foreign withholding taxation,
changes in currency rates or currency blockage, currency exchange costs,
difficulty in obtaining and enforcing judgments against foreign issuers,
relatively greater brokerage and custodial costs, risk of expropriation
or nationalization of assets, less publicly available information, and
differences between domestic and foreign legal, auditing, brokerage and
economic standards. See "Investment Objectives and Policies - Foreign
Securities" in the Statement of Additional Information for further
details.
- Special Risks of "Emerging Markets". Investments in securities
traded in "emerging markets" (which are trading markets that are
relatively new in countries with developing economies) involve more risks
than other foreign securities. Emerging markets may have extended
settlement periods for securities transactions so that a Fund might not
receive the repayment of principal or income on its investments on a
timely basis, which could affect its net asset value. There may be a lack
of liquidity for emerging market securities. Interest rates and foreign
currency exchange rates may be more volatile. Government limitations on
foreign investments may be more likely to be imposed than in more
developed countries. Emerging markets may respond in a more volatile
manner to economic changes than those of more developed countries.
- Warrants and Rights. Warrants basically are options to purchase
stock at set prices that are valid for a limited period of time. Rights
are options to purchase securities, normally granted to current holders
by the issuer. Each of the Funds (except Money Fund) may invest up to 5%
of its total assets in warrants and rights. That 5% does not apply to
warrants and rights that have been acquired as part of units with other
securities or that were attached to other securities. No more than 2% of
each such Fund's total assets may be invested in warrants that are not
listed on either the New York or American Stock Exchanges. For further
details about these investments, see "Warrants and Rights" in the
Statement of Additional Information.
- Repurchase Agreements. Each Fund may acquire securities that are
subject to repurchase agreements to generate income while providing
liquidity. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the vendor
fails to pay the resale price on the delivery date, the Fund may incur
costs in disposing of the collateral and may experience losses if there
is any delay in its ability to do so. No Fund will enter into a
repurchase agreement that causes more than 15% of its net assets (10% of
net assets for Money Fund) to be subject to repurchase agreements having
a maturity beyond seven days. There is no limit on the amount of a Fund's
net assets that may be subject to repurchase agreements of seven days or
less.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Board of Trustees, the Manager determines
the liquidity of certain of a Fund's investments. Investments may be
illiquid because of the absence of a trading market, making it difficult
to value them or dispose of them promptly at an acceptable price. A
restricted security is one that has a contractual restriction on resale
or cannot be sold publicly until it is registered under the Securities Act
of 1933. No Fund will invest more than 15% of its net assets in illiquid
or restricted securities; no Fund presently intends to invest more than
10% of its net assets in illiquid or restricted securities. This policy
applies to participation interests, bank time deposits, master demand
notes and repurchase transactions maturing in more than seven days, over-
the-counter ("OTC") options held by any Fund and that portion of assets
used to cover such OTC options; it does not apply to certain restricted
securities that are eligible for resale to qualified institutional
purchasers.
- Loans of Portfolio Securities. To attempt to increase its income,
each Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. Each Fund must receive collateral for such loans.
These loans are limited to 25% of the Fund's net assets and are subject
to other conditions described in the Statement of Additional Information.
The Funds presently do not intend to lend portfolio securities, but if any
Fund does, the value of securities loaned is not expected to exceed 5% of
the value of that Fund's total assets.
- "When-Issued" or Delayed Delivery Transactions. Each Fund may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery. There may be a risk of loss to a Fund
if the value of the security changes prior to the settlement date.
- Hedging. As described below, the Funds (other than Money Fund)
may purchase and sell certain kinds of futures contracts, put and call
options, forward contracts, and options on futures and broadly-based stock
or bond indices, or enter into interest rate swap agreements. These are
all referred to as "hedging instruments." The Funds do not use hedging
instruments for speculative purposes, and have limits on the use of them,
described below. The hedging instruments the Funds may use are described
below and in greater detail in "Other Investment Techniques and
Strategies" in the Statement of Additional Information.
The Funds may buy and sell options, futures and forward contracts for
a number of purposes. They may do so to try to manage their exposure to
the possibility that the prices of their portfolio securities may decline,
or to establish a position in the securities market as a temporary
substitute for purchasing individual securities. High Income Fund, Bond
Fund, Multiple Strategies Fund, Growth & Income Fund and Strategic Bond
Fund may do so to try to manage their exposure to changing interest rates.
Some of these strategies, such as selling futures, buying puts and writing
covered calls, hedge the Funds' portfolios against price fluctuations.
Other hedging strategies, such as buying futures and call options,
tend to increase the Funds' exposure to the securities market. Forward
contracts are used to try to manage foreign currency risks on Funds'
foreign investments. Foreign currency options are used to try to protect
against declines in the dollar value of foreign securities the Funds own,
or to protect against an increase in the dollar cost of buying foreign
securities. Writing covered call options may also provide income to the
Funds for liquidity purposes or to raise cash to distribute to
shareholders.
- Futures. Global Securities Fund, Capital Appreciation Fund,
Growth Fund, Multiple Strategies Fund, Growth & Income Fund and Strategic
Bond Fund may buy and sell futures contracts that relate to broadly-based
stock indices (these are referred to as Stock Index Futures). The latter
three Funds and Global Securities Fund, Bond Fund and High Income Fund may
buy and sell futures contracts that relate to broadly-based securities
indices (these are referred to as Stock Index Futures and Bond Index
Futures) or to interest rates (these are referred to as Interest Rate
Futures). These types of Futures are described in "Hedging" in the
Statement of Additional Information.
- Put and Call Options. The Funds may buy and sell certain kinds
of put options (puts) and call options (calls).
The Funds may buy calls only on securities, broadly-based stock and
bond indices, foreign currencies and Futures that the Fund is permitted
to buy and sell (as explained above) or to terminate their obligation on
a call that the Fund previously wrote. Each Fund may write (that is,
sell) covered call options on up to 100% of its assets. When a Fund
writes a call, it receives cash (called a premium). The call gives the
buyer the ability to buy the investment on which the call was written from
that Fund at the call price during the period in which the call may be
exercised. If the value of the investment does not rise above the call
price, it is likely that the call will lapse without being exercised,
while the Fund keeps the cash premium (and the investment).
The Funds may purchase put options. Buying a put on an investment
gives that Fund the right to sell the investment at a set price to a
seller of a put on that investment. The Funds can buy only those puts
that relate to (1) securities (whether or not that Fund owns such
securities), (2) Futures that the Fund is permitted to buy and sell (as
explained above), (3) broadly-based stock or bond indices or (4) foreign
currencies. A Fund can buy a put on a Future whether or not that Fund
owns the particular Future in its portfolio. A Fund may not sell a put
other than a put that it previously purchased.
The Funds may buy and sell puts and calls only if certain conditions
are met: (1) calls the Funds buy or sell must be listed on a securities
or commodities exchange, or quoted on the Automated Quotation System
("NASDAQ") of The Nasdaq Stock Market, Inc.; (2) in the case of puts and
calls on foreign currency, they must be traded on a securities or
commodities exchange, or in the over-the-counter market, or quoted by
recognized dealers in those options; (3) none of the Funds will write puts
if, as a result, more than 50% of its net assets would be required to be
segregated liquid assets; (4) each call the Funds write must be "covered"
while it is outstanding: that means a Fund must own the security on which
the call was written; calls (including calls on Futures) must be covered
by securities or other liquid assets a Fund owns and segregates to enable
it to satisfy its obligations if the call is exercised; (5) a Fund may
write calls on Futures contracts it owns, but these calls must be covered
by securities or other liquid assets the Fund owns and segregates to
enable it to satisfy its obligations if the call is exercised; (6) a call
or put option may not be purchased if the value of all of a Fund's put and
call options would exceed 5% of that Fund's total assets. No trading or
listing requirement applies to calls written by a Fund.
If a call written by a Fund is exercised, the Fund forgoes any
possible profit from an increase in the market price of the underlying
security over the exercise price less the commissions paid on the sale.
In addition, the Fund could experience capital losses which might cause
previously distributed short-term capital gains to be recharacterized as
non-taxable return of capital to shareholders.
- Forward Contracts. Forward contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency for
future delivery at a fixed price. The Funds (other than Money Fund) use
them to "lock-in" the U.S. dollar price of a security denominated in a
foreign currency that a Fund has bought or sold, or to protect against
losses from changes in the relative values of the U.S. dollar and a
foreign currency. Such Funds may also use "cross hedging," where a Fund
hedges against changes in currencies other than the currency in which a
security it holds is denominated.
- Interest Rate Swaps. Strategic Bond Fund, High Income Fund, Bond
Fund and Growth & Income Fund can also enter into interest rate swap
transactions. In an interest rate swap, a Fund and another party exchange
their right to receive or their obligation to pay interest on a security.
For example, they may swap a right to receive floating rate payments for
fixed rate payments. A Fund enters into swaps only on securities it owns.
Each of these Funds may not enter into swaps with respect to more than 50%
of its total assets. Also, each Fund will segregate liquid assets (such
as cash or U.S. Government securities) to cover any amounts it could owe
under swaps that exceed the amounts it is entitled to receive, and it will
adjust that amount daily, as needed.
Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce that Fund's return. A Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Funds. There are also special risks in particular hedging
strategies. If a covered call written by a Fund is exercised on a
security that has increased in value, that Fund will be required to sell
the security at the call price and will not be able to realize any profit
if the security has increased in value above the call price. The use of
forward contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign currency.
To limit its exposure in foreign currency exchange contracts, each Fund
limits its exposure to the amount of its assets denominated in the foreign
currency. Interest rate swaps are subject to credit risks (if the other
party fails to meet its obligations) and also to interest rate risks. The
Funds could be obligated to pay more under their swap agreements than
they receive under them, as a result of interest rate changes. These
risks are described in greater detail in the Statement of Additional
Information.
- Derivative Investments. Each Fund (other than Money Fund) can
invest in a number of different kinds of "derivative investments." Such
Funds may use some types of derivatives for hedging purposes, and may
invest in others because they offer the potential for increased income and
principal value. In general, a "derivative investment" is a specially-
designed investment whose performance is linked to the performance of
another investment or security, such as an option, future, index or
currency. In the broadest sense, derivative investments include exchange-
traded options and futures contracts (please refer to "Hedging").
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of the
instrument. There is also the risk that the underlying investment or
security might not perform the way the Manager expected it to perform.
The performance of derivative investments may also be influenced by
interest rate changes in the U.S. and abroad. All of these risks can mean
that a Fund will realize less income than expected from its investments,
or that it can lose part of the value of its investments, which will
affect that Fund's share price. Certain derivative investments held by
the Funds may trade in the over-the-counter markets and may be illiquid.
If that is the case, the Funds' investment in them will be limited, as
discussed in "Illiquid and Restricted Securities."
One type of derivative the Funds (other than Money Fund) may invest
in is an "index-linked" note. On the maturity of this type of debt
security, payment is made based on the performance of an underlying index,
rather than based on a set principal amount for a typical note. Another
derivative investment such Funds may invest in are currency-indexed
securities. These are typically short-term or intermediate-term debt
securities. Their value at maturity or the interest rates at which they
pay income are determined by the change in value of the U.S. dollar
against one or more foreign currencies or an index. In some cases, these
securities may pay an amount at maturity based on a multiple of the amount
of the relative currency movements. This variety of index security offers
the potential for greater income but at a greater risk of loss.
Other derivative investments the Funds (other than Money Fund) may
invest in include "debt exchangeable for common stock" of an issuer or
"equity-linked debt securities" of an issuer. At maturity, the debt
security is exchanged for common stock of the issuer or is payable in an
amount based on the price of the issuer's common stock at the time of
maturity. In either case there is a risk that the amount payable at
maturity will be less than the principal amount of the debt (because the
price of the issuer's common stock is not as high as was expected).
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Funds may engage frequently in
short-term trading to try to achieve their objectives. High turnover and
short-term trading involve correspondingly greater commission expenses and
transaction costs for Capital Appreciation Fund, Growth Fund, Multiple
Strategies Fund, Growth & Income Fund and Global Securities Fund and to
a lesser extent, higher transaction costs for Money Fund, Bond Fund,
Strategic Bond Fund and High Income Fund. The "Financial Highlights,"
above show the portfolio turnover for the past fiscal years for each Fund.
If any Fund derives 30% or more of its gross income from the sale of
securities held less than three months, it may fail to qualify under the
tax laws as a regulated investment company (see "Dividends, Capital Gains
and Taxes," below).
- Short Sales Against-the-Box. In a short sale, the seller does not
own the security that is sold, but normally borrows the security to
fulfill its delivery obligation. The seller later buys the security to
repay the loan, in the expectation that the price of the security will be
lower when the purchase is made, resulting in a gain. The Funds may not
sell securities short except that each Fund (except Money Fund) may sell
securities short in collateralized transactions referred to as "short
sales against-the-box", where the Funds own an equivalent amount of the
securities sold short. No more than 15% of any Fund's net assets will be
held as collateral for such short sales at any one time.
Other Investment Restrictions
Each of the Funds has certain investment restrictions which, together
with its investment objective, are fundamental policies. Under some of
those restrictions, each Fund cannot: (1) with respect to 75% of its total
assets, invest in securities (except those of the U.S. Government or its
agencies or instrumentalities) of any issuer if immediately thereafter,
either (a) more than 5% of that Fund's total assets would be invested in
securities of that issuer, or (b) that Fund would then own more than 10%
of that issuer's voting securities or 10% in principal amount of the
outstanding debt securities of that issuer (the latter limitation on debt
securities does not apply to Strategic Bond Fund); (2) lend money except
in connection with the acquisition of debt securities which a Fund's
investment policies and restrictions permit it to purchase; the Funds may
also make loans of portfolio securities (see "Loans of Portfolio
Securities"); (3) pledge, mortgage or hypothecate any assets to secure a
debt; the escrow arrangements which are involved in options trading are
not considered to involve such a mortgage, hypothecation or pledge; (4)
concentrate investments in any particular industry, other than securities
of the U.S. Government or its agencies or instrumentalities (Money Fund,
Bond Fund and High Income Fund, only); therefore these Funds will not
purchase the securities of issuers primarily engaged in the same industry
if more than 25% of the total value of that Fund's assets would (in the
absence of special circumstances) consist of securities of companies in
a single industry; however, there is no limitation as to concentration of
investments by Money Fund in obligations issued by domestic banks, foreign
branches of domestic banks (if guaranteed by the domestic parent), savings
and loan associations or in obligations issued by the federal government
and its agencies and instrumentalities; and (5) deviate from the
percentage requirements and other restrictions listed under "Warrants and
Rights," and the first paragraph under "Special Risks-Borrowing for
Leverage." None of the percentage limitations and restrictions described
above and in the Statement of Additional Information for the Funds with
respect to writing covered calls, hedging, short sales and derivatives is
a fundamental policy.
All of the percentage restrictions described above and elsewhere in
this Prospectus, other than those described under "Other Investment
Techniques and Strategies--Special Risks-Borrowing for Leverage," apply
only at the time a Fund purchases a security. A Fund need not dispose of
a security merely because the size of the Fund's assets has changed or the
security has increased in value relative to the size of the Fund. Money
Fund has separately undertaken to exclude savings and loan associations
from the exception to the concentration limitation set forth under
investment restriction (4), above. There are other fundamental policies
discussed in the Statement of Additional Information.
The Trustees of the Trust are required to monitor events to identify
any irreconcilable conflicts which may arise between the variable life
insurance policies and variable annuity contracts that invest in the
Funds. Should any conflict arise which ultimately requires that any
substantial amount of assets be withdrawn from any Fund, its operating
expenses could increase.
How the Funds are Managed
Organization and History. The Trust was organized in 1984 as a
Massachusetts business trust. The Trust is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest. It consists of nine separate Funds - Money
Fund, Bond Fund and Growth Fund, all organized in 1984, High Income Fund,
Capital Appreciation Fund and Multiple Strategies Fund, all organized in
1986, Global Securities Fund, organized in 1990, Strategic Bond Fund,
organized in 1993 and Growth & Income Fund, organized in 1995.
The Trust is governed by a Board of Trustees, which is responsible
for protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Funds'
activities, review performance, and review the actions of the Manager.
"Trustees and Officers of the Trust" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Trust. Although the Trust will normally not hold
annual meetings of its shareholders, it may hold shareholder meetings from
time to time on important matters, and shareholders have the right to call
a meeting to remove a Trustee or to take other action described in the
Trust's Declaration of Trust.
The Manager and Its Affiliates. The Funds are managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Funds'
investments and handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the Board of Trustees,
under Investment Advisory Agreements for each Fund which state the
Manager's responsibilities. The Agreements set forth the fees paid by
each Fund to the Manager and describe the expenses that each Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $50 billion
as of March 31, 1996, held in more than 2.8 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company.
- Portfolio Managers. The Portfolio Manager of High Income Fund,
Bond Fund, Multiple Strategies Fund and Strategic Bond Fund is David P.
Negri, joined by Richard H. Rubinstein for Multiple Strategies Fund and
by Arthur P. Steinmetz for Strategic Bond Fund. They are the persons
principally responsible for the day-to-day management of those Funds since
July 1989, January 1990, July 1989 (April 1991 for Mr. Rubinstein) and May
1993, respectively. During the past five years, Messrs. Steinmetz and
Negri have also served as officers of other Oppenheimer funds. During the
past five years, Mr. Rubinstein has served as an officer of other
Oppenheimer funds and was formerly Vice President and Portfolio
Manager/Security Analyst for Oppenheimer Capital Corp., an investment
adviser. The Portfolio Manager of Global Securities Fund is William
Wilby. He has been the person principally responsible for the day-to-day
management of that Fund's portfolio since December, 1995. During the past
five years, Mr. Wilby has also served as an officer and portfolio manager
for other Oppenheimer funds, prior to which he was an international
investment strategist at Brown Brothers Harriman & Co., and a Managing
Director and Portfolio Manager at AIG Global Investors. The Portfolio
Manager of the Money Fund is Dorothy G. Warmack. On May 1, 1996, she
became the person principally responsible for the day-to-day management
of that Fund's portfolio. During the past five years, she has served as
an officer of other Oppenheimer funds. The Portfolio Manager of Growth
Fund is Jane Putnam. She has been the person principally responsible for
the day-to-day management of that Fund's portfolio since May 1994. During
the past five years, Ms. Putnam has also served as an Associate Portfolio
Manager for other Oppenheimer funds and formerly served as a portfolio
manager and equity research analyst for Chemical Bank. The Portfolio
Manager of Capital Appreciation Fund is Paul LaRocco. He has been the
person principally responsible for the day-to-day management of that
Fund's portfolio since January 1994. During the past five years, he has
also served as an Associate Portfolio Manager for other Oppenheimer funds
and formerly served as a securities analyst with Columbus Circle
Investors, prior to which he was an investment analyst for Chicago Title
& Trust Co. The Portfolio Manager of Growth & Income Fund is Robert J.
Milnamow and the Associate Portfolio Manager of that Fund is Michael S.
Levine. Mr. Milnamow has been the person principally responsible for the
day-to-day management of that Fund since November 1995. He is an officer
of other Oppenheimer funds. During the past five years, Mr. Milnamow was
a portfolio manager with Phoenix Securities Group, and Mr. Levine was a
portfolio manager and research associate for Amos Securities, Inc., before
which he was an analyst for Shearson Lehman Hutton, Inc. Messrs. Negri,
Evans, Milnamow and Rubinstein and Ms. Warmack are Vice Presidents of the
Manager, Mr. Levine is an Assistant Vice President of the Manager, Messrs.
Steinmetz and Wilby are Senior Vice Presidents of the Manager, and Ms.
Putnam and Mr. LaRocco are Assistant Vice Presidents of the Manager. Each
of the Portfolio Managers named above is also a Vice President of the
Trust.
- Fees and Expenses. The monthly management fee payable to the
Manager is computed separately on the net assets of each Fund as of the
close of business each day. The management fee rates are as follows: (i)
for Money Fund: 0.450% of the first $500 million of net assets, 0.425%
of the next $500 million, 0.400% of the next $500 million, and 0.375% of
net assets over $1.5 billion; (ii) for Capital Appreciation Fund, Growth
Fund, Multiple Strategies Fund, Growth & Income Fund and Global Securities
Fund: 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 over $800 million; and (iii) for High
Income Fund, Bond Fund and Strategic Bond Fund: 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 over $1 billion.
During the fiscal year ended December 31, 1995, the management fee
(computed on an annualized basis as a percentage of the net assets of all
the Funds as of the close of business each day) and the total operating
expenses as a percentage of average net assets of each Fund were as
follows:
Total
Management Operating
Fees Expenses(1)
Money Fund .45% .51%
High Income Fund .75% .81%
Bond Fund .75% .80%
Capital Appreciation Fund .74% .78%
Growth Fund .75% .79%
Multiple Strategies Fund .74% .77%
Global Securities Fund .74% .89%
Strategic Bond Fund .75% .85%
Growth & Income Fund(2) .75% .93%
____________________
(1) This table does not reflect expenses that apply at the separate
account level or to related insurance products.
(2) Because Growth & Income Fund is a new fund and has not completed a
full fiscal year, the expenses shown above are based on amounts estimated
to be payable in the current fiscal year. Growth & Income Fund's total
operating expenses for the period from commencement of operations (July
5, 1995) to December 31, 1995 were 2.07% (on an annualized basis) as a
percentage of net assets.
The Funds pay expenses related to their daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Funds' assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement is contained in the Statement of Additional Information.
There is also information about the Funds' brokerage policies and
practices in "Brokerage Policies of the Funds" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Funds' portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreements to consider whether brokers have sold shares of the Funds or
any other funds for which the Manager serves as investment adviser.
- Shareholder Inquiries. Inquiries by policyowners for Account
information are to be directed to the insurance company issuing the
Account at the address or telephone number shown in the accompanying
Account Prospectus.
Performance of the Funds
Explanation of Performance Terminology. Money Fund uses the term "yield"
to illustrate its performance. High Income Fund, Bond Fund and Strategic
Bond Fund use the terms "yield," "total return," and "average annual total
return" to illustrate performance. All the Funds, except Money Fund, use
the terms "average annual total return" and "total return" to illustrate
their performance. This performance information may be useful to help you
see how well your investment has done and to compare it to other funds or
market indices, as we have done below.
It is important to understand that the Funds' total returns and yields
represent past performance and should not be considered to be predictions
of future returns or performance. This performance data is described
below, but more detailed information about how total returns and yields
are calculated is contained in the Statement of Additional Information,
which also contains information about other ways to measure and compare
the Funds' performance. Each Fund's investment performance will vary over
time, depending on market conditions, the composition of the portfolio and
expenses.
- Yields. Money Fund's "yield" is the income generated by an
investment in that Fund over a seven-day period, which is then
"annualized." In annualizing, the amount of income generated by the
investment during that seven days is assumed to be generated each week
over a 52-week period, and is shown as a percentage of the investment.
The compounded "effective yield" is calculated similarly, but the
annualized income earned by an investment in Money Fund is assumed to be
reinvested. The compounded effective yield will therefore be slightly
higher than the yield because of the effect of the assumed reinvestment.
Yield for High Income Fund, Strategic Bond Fund or Bond Fund will be
computed in a standardized manner for mutual funds, by dividing that
Fund's net investment income per share earned during a 30-day base period
by the maximum offering price (equal to the net asset value) per share on
the last day of the period. This yield calculation is compounded on a
semi-annual basis, and multiplied by 2 to provide an annualized yield. The
Statement of Additional Information describes a dividend yield and a
distribution return that may also be quoted for these Funds.
- Total Returns. There are different types of total returns used to
measure each Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Funds' actual year-by-year
performance.
How Have the Funds Performed? Below is a discussion by the Manager of the
Funds' performance during their last fiscal year ended December 31, 1995,
followed by a graphical comparison of each Fund's performance, except
Money Fund, to an appropriate broad-based market index.
Management's Discussion of Performance. During the Funds' fiscal year
ended December 31, 1995, the bond markets and the equity markets
experienced overall price increases in response to declines in interest
rates and favorable corporate profits in the face of slower economic
growth. During that period, the Manager emphasized the following
investment strategies and techniques. High Income Fund focused on the
higher quality tiers of below-investment grade bonds and sought value in
the housing, gaming and energy sectors, and invested in bonds of growth
companies such as foreign cable companies. Bond Fund reacted to a strong
rally in treasury securities by reducing its treasury allocation in favor
of increased allocations in different categories of U.S. Government and
corporate bonds. It reduced its holdings in utilities and cyclical
companies such as mining and metals companies in favor of companies
expected to experience earnings growth, such as cable, communications,
broadcasting and media firms. Capital Appreciation Fund experienced
increased investor interest in small-cap stocks beginning in the third
quarter of 1995, prior to which small-cap stocks were not participating
fully in the stock market rally. Its focus throughout the fiscal year was
on individual companies that appear to have carved out a unique market
niche rather than on broad industry sectors. Growth Fund's strategy of
looking for growth at reasonable price lead it to invest substantially in
the technology and financial services sectors. Multiple Strategies Fund's
equity investments reflected large positions in technology and health care
stocks while its fixed-income positions were strategically positioned at
year-end fairly equally across U.S. treasuries, foreign bonds and
corporate high yield bonds, in part in reaction to higher yields available
outside of the U.S. Growth & Income Fund had significant holdings in
technology stocks (including semiconductor makers) healthcare and
financial services. Global Securities Fund's investments reflected
perceived worldwide trends such as telecommunications expansion, emerging
consumer markets, infrastructure development and global integration, with
increased exposure to Japanese and European export-oriented companies and
high-quality technology stocks. Strategic Bond Fund added to its position
in bonds of selected East Asian markets and private label mortgage-backed
securities, in an effort to diversify among typically uncorrelated sectors
of the fixed-income market.
- Comparing each Fund's Performance to the Market. The charts below
show the performance of hypothetical $10,000 investments in each Fund
(except for Money Fund) held until December 31, 1995. Performance
information does not reflect charges that apply to separate accounts
investing in the Funds and is not restated to reflect the increased
management fee rates that took effect September 1, 1994. If these charges
and expenses were taken into account, performance would be lower.
High Income Fund's performance is compared to the performance of the
Salomon Brothers High Yield Market Index which is an unmanaged index of
below-investment grade (but rated at least BB+/Ba1 by Standard & Poor's
or Moody's) U.S. corporate debt obligations, widely-recognized as a
measure of the performance of the high-yield corporate bond market. Bond
Fund's performance is compared to the performance of the Lehman Brothers
Corporate Bond Index, which is an unmanaged index of publicly-issued non-
convertible investment grade corporate debt of U.S. issuers, widely
recognized as a measure of the U.S. fixed-rate corporate bond market. The
performance of Capital Appreciation Fund, Growth Fund and Growth & Income
Fund is compared to the performance of the S&P 500 Index, a broad-based
index of equity securities widely regarded as a general measurement of the
performance of the U.S. equity securities market. Multiple Strategies
Fund's performance is compared to the S&P 500 Index and the Lehman
Brothers Aggregate Bond Index, a broad-based, unmanaged index of U.S.
corporate bond issues, U.S. government securities and mortgage-backed
securities, widely recognized as a measure of the performance of the
domestic debt securities market. Global Securities Fund's performance is
compared to the Morgan Stanley World Index, an unmanaged index of issuers
listed on the stock exchanges of 20 foreign countries and the U.S., and
is widely recognized as a measure of global stock market performance.
Strategic Bond Fund's performance is compared to the Lehman Brothers
Aggregate Bond Index and the Salomon Brothers World Government Bond Index.
The Salomon Brothers World Government Bond Index is an unmanaged index of
fixed-rate bonds having a maturity of one year or more, and is widely
recognized as a benchmark of fixed income performance on a world-wide
basis. Index performance reflects the reinvestment of dividends but does
not consider the effect of capital gains or transaction costs, and none
of the data below shows the effect of taxes. Also, a Fund's performance
reflects the effect of that Fund's business and operating expenses. While
index comparisons may be useful to provide a benchmark for a Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in the one index. Moreover, the index performance data
does not reflect any assessment of the risk of the investments included
in the index.
Comparison of Change in Value of $10,000 Hypothetical Investments in High
Income Fund Versus Salomon Brothers High Yield Market Index
(Graph comparing total return of High Income Fund shares to performance
of Salomon Brothers High Yield Market Index)
Average Annual Total Return at 12/31/95 (1)
1 year 5 years Life of Fund
20.37% 18.38% 13.27%
(1) The inception date of the Fund was 4/30/86. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in Bond
Fund Versus Lehman Brothers Corporate Bond Index
(Graph comparing total return of Bond Fund shares to performance of Lehman
Brothers Corporate Bond Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
17% 10.19% 9.35%
(1) The inception date of the Fund was 4/3/85. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Capital Appreciation Fund Versus S&P 500 Index
(Graph comparing total return of Capital Appreciation Fund shares to
performance of S&P 500 Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
32.52% 22.73% 15.20%
(1) The inception date of the Fund was 8/15/86. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Growth Fund Versus S&P 500 Index
(Graph comparing total return of Growth Fund shares to performance of S&P
500 Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
36.65% 16.30% 13.57%
(1) The inception date of the Fund was 4/3/85. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Multiple Strategies Fund Versus S&P 500 Index and Lehman Brothers
Aggregate Bond Index
(Graph comparing total return of Multiple Strategies Fund shares to
performance of S&P 500 Index and Lehman Brothers Aggregate Bond Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
21.36% 12.05% 11.09%
(1) The inception date of the Fund was 2/9/87. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Global Securities Fund Versus Morgan Stanley World Index
(Graph comparing total return of Global Securities Fund shares to
performance of Morgan Stanley World Index)
Average Annual Total Returns at 12/31/95 (1)
1 year 5 years Life of Fund
2.24% 9.53% 9.36%
(1) The inception date of the Fund was 11/12/90. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Strategic Bond Fund Versus Lehman Brothers Aggregate Bond Index and
Salomon Brothers World Government Bond Index
(Graph comparing total return of Strategic Bond Fund to performance of
Lehman Brothers Aggregate Bond Index and Salomon Brothers World Government
Bond Index)
Average Annual Total Returns at 12/31/95 (1)
1 year Life of Fund
15.33% 5.63%
______________
(1) The inception date of the Fund was 5/3/93. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Comparison of Change in Value of $10,000 Hypothetical Investments in
Growth & Income Fund Versus S&P 500 Index
(Graph comparing total return of Growth & Income Fund to performance of
S&P 500)
Cumulative Total Return at 12/31/95 (1)
Life of Fund
25.25%
_________________________
(1) The inception date of the Fund was 7/5/95. The average annual total
returns and the ending account value in the graph reflect reinvestment of
all dividends and capital gains distributions.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Shares of each Fund are offered only for purchase by Accounts as an
investment medium for variable life insurance policies and variable
annuity contracts, as described in the accompanying Account Prospectus.
The sale of shares will be suspended during any period when the
determination of net asset value is suspended and may be suspended by the
Board of Trustees whenever the Board judges it in that Fund's best
interest to do so. Shares of each Fund are offered at their respective
offering price, which (as used in this Prospectus and the Statement of
Additional Information) is net asset value (without sales charge).
All purchase orders are processed at the offering price next
determined after receipt by the Trust of a purchase order in proper form.
The offering price (and net asset value) is determined as of the close of
The New York Stock Exchange, which is normally 4:00 P.M., New York time,
but may be earlier on some days. Net asset value per share of each Fund
is determined by dividing the value of that Fund's net assets by the
number of its shares outstanding. The Board of Trustees has established
procedures for valuing each Fund's securities. In general, those
valuations are based on market value. Under Rule 2a-7, the amortized cost
method is used to value Money Fund's net asset value per share, which is
expected to remain fixed at $1.00 per share except under extraordinary
circumstances; there can be no assurance that Money Fund's net asset value
will not vary. Further details are in "About Your Account- How to Buy
Shares - Money Fund Net Asset Valuation" in the Statement of Additional
Information.
How to Sell Shares
Payment for shares tendered by an Account for redemption is made
ordinarily in cash and forwarded within seven days after receipt by the
Trust's transfer agent, OppenheimerFunds Services (the "Transfer Agent"),
of redemption instructions in proper form, except under unusual
circumstances as determined by the Securities and Exchange Commission.
The Trust understands that payment to the Account owner will be made in
accordance with the terms of the accompanying Account Prospectus. The
redemption price will be the net asset value next determined after the
receipt by the Transfer Agent of a request in proper form. The market
value of the securities in the portfolios of the Funds is subject to daily
fluctuations and the net asset value of the Funds' shares (other than
shares of the Money Fund) will fluctuate accordingly. Therefore, the
redemption value may be more or less than the investor's cost.
Dividends, Capital Gains And Taxes
Dividends of Money Fund. The Trust intends to declare Money Fund's
dividends from its net investment income on each day the New York Stock
Exchange is open for business. Such dividends will be payable on shares
held of record at the time of the previous determination of net asset
value. Daily dividends accrued since the prior dividend payment will be
paid to shareholders monthly as of a date selected by the Board of
Trustees. Money Fund's net income for dividend purposes consists of all
interest income accrued on portfolio assets, less all expenses of that
Fund for such period. Accrued market discount is included in interest
income; amortized market premium is treated as an expense. Although
distributions from net realized gains on securities, if any, will be paid
at least once each year, and may be made more frequently, Money Fund does
not expect to realize long-term capital gains, and therefore does not
contemplate payment of any capital gains distribution. Distributions from
net realized gains will not be distributed unless Money Fund's capital
loss carry forwards, if any, have been used or have expired. Money Fund
seeks to maintain a net asset value of $1.00 per share for purchases and
redemptions. To effect this policy, under certain circumstances the Money
Fund may withhold dividends or make distributions from capital or capital
gains (see "Money Fund Net Asset Valuation" in the Statement of Additional
Information).
Dividends and Distributions of High Income Fund, Bond Fund, Strategic Bond
Fund, Growth & Income Fund and Multiple Strategies Fund. The Trust
intends to declare High Income Fund, Bond Fund, Strategic Bond Fund,
Growth & Income Fund and Multiple Strategies Fund dividends quarterly,
payable in March, June, September and December.
Dividends and Distributions of Capital Appreciation Fund, Growth Fund and
Global Securities Fund. The Trust intends to declare Capital Appreciation
Fund, Growth Fund and Global Securities Fund dividends on an annual basis.
Capital Gains. Any Fund (other than Money Fund) may make a supplemental
distribution annually in December out of any net short-term or long-term
capital gains derived from the sale of securities, premiums from expired
calls written by the Fund, and net profits from hedging transactions.
Each such Fund may also make a supplemental distribution of capital gains
and ordinary income following the end of its fiscal year. All dividends
and capital gains distributions paid on shares of any of the Funds are
automatically reinvested in additional shares of that Fund at net asset
value determined on the distribution date. There are no fixed dividend
rates and there can be no assurance as to payment of any dividends or the
realization of any capital gains.
Tax Treatment to the Account As Shareholder. Dividends paid by each Fund
from its ordinary income and distributions of each Fund's net realized
short-term or long-term capital gains are includable in gross income of
the Accounts holding such shares. The tax treatment of such dividends and
distributions depends on the tax status of that Account.
Tax Status of the Funds. If the Funds qualify as "regulated investment
companies" under the Internal Revenue Code, the Trust will not be liable
for Federal income taxes on amounts paid as dividends and distributions
from any of the Funds. The Funds did qualify during their last fiscal
year and the Trust intends that they will qualify in current and future
years. However, the Code contains a number of complex tests relating to
qualification which any Fund might not meet in any particular year (see,
e.g., "Other Investment Techniques and Strategies - Portfolio Turnover").
If any Fund does not so qualify, it would be treated for tax purposes as
an ordinary corporation and would receive no tax deduction for payments
made to shareholders of that Fund. The above discussion relates solely to
Federal tax laws. This discussion is not exhaustive and a qualified tax
adviser should be consulted.
<PAGE>
APPENDIX A - DESCRIPTION OF TERMS
Some of the terms used in the Prospectus and the Statement of Additional
Information are described below:
Bank obligations include certificates of deposit which are negotiable
certificates evidencing the indebtedness of a commercial bank to repay
funds deposited with it for a definite period of time (usually 14 days to
one year) at a stated interest rate. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft which has
been drawn on it by a customer; these instruments reflect the obligation
both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a
stated interest rate. Bank notes are short-term direct credit obligations
of the issuing bank or bank holding company.
Commercial paper consists of short-term (usually 1 to 270 days) unsecured
promissory notes issued by corporations in order to finance their current
operations. Variable rate master demand notes are obligations that permit
the investment of fluctuating amounts at varying rates of interest
pursuant to direct arrangement between the holder and the borrower. The
holder has the right to increase the amount under the note at any time up
to the face amount, or to decrease the amount borrowed, and the borrower
may repay up to the face amount of the note without penalty.
Corporate obligations are bonds and notes issued by corporations and other
business organizations, including business trusts, in order to finance
their long-term credit needs.
Letters of credit are obligations by the issuer (a bank or other person)
to honor drafts or other demands for payment upon compliance with
specified conditions.
Securities issued or guaranteed by the United States Government or its
agencies or instrumentalities include issues of the United States
Treasury, such as bills, certificates of indebtedness, notes and bonds,
and issues of agencies and instrumentalities established under the
authority of an act of Congress. Such agencies and instrumentalities
include, but are not limited to, Bank for Cooperatives, Federal Financing
Bank, Federal Home Loan Bank, Federal Intermediate Credit Banks, Federal
Land Banks, Federal National Mortgage Association and Tennessee Valley
Authority. Issues of the United States Treasury are direct obligations
of the United States Government. Issues of agencies or instrumentalities
are (i) guaranteed by the United States Treasury, or (ii) supported by the
issuing agency's or instrumentality's right to borrow from the United
States Treasury, or (iii) supported by the issuing agency's or
instrumentality's own credit.
<PAGE>
APPENDIX B - DESCRIPTION OF SECURITIES RATINGS
This is a description of (i) the two highest rating categories for Short
Term Debt and Long Term Debt by the Rating Organizations referred to under
"Investment Objectives and Policies -- Money Fund", and (ii) additional
rating categories that apply principally to investments by High Income
Fund, Strategic Bond Fund and Bond Fund. The rating descriptions are
based on information supplied by the Rating Organizations to subscribers.
Short Term Debt Ratings.
Moody's Investors Service, Inc. ("Moody's"): The following rating
designations for commercial paper (defined by Moody's as promissory
obligations not having original maturity in excess of nine months), are
judged by Moody's to be investment grade, and indicate the relative
repayment capacity of rated issuers:
Prime-1: Superior capacity for repayment. Capacity will normally be
evidenced by the following characteristics: (a) leveling market positions
in well-established industries; (b) high rates of return on funds
employed; (c) conservative capitalization structures with moderate
reliance on debt and ample asset protection; (d) broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
(e) well established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2: Strong capacity for repayment. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained.
Standard & Poor's Corporation ("S&P"): The following ratings by S&P for
commercial paper (defined by S&P as debt having an original maturity of
no more than 365 days) assess the likelihood of payment:
A-1: Strong capacity for timely payment. Those issues determined to
possess extremely strong safety characteristics are denoted with a plus
sign (+) designation.
A-2: Satisfactory capacity for timely payment. However, the relative
degree of safety is not as high as for issues designated "A-1".
Fitch Investors Service, Inc. ("Fitch"): Fitch assigns the following
short-term ratings to debt obligations that are payable on demand or have
original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes:
F-1+: Exceptionally strong credit quality; the strongest degree of
assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment is only
slightly less in degree than issues rated "F-1+".
F-2: Good credit quality; satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues assigned
"F-1+" or "F-1" ratings.
Duff & Phelps, Inc. ("Duff & Phelps"): The following ratings are for
commercial paper (defined by Duff & Phelps as obligations with maturities,
when issued, of under one year), asset-backed commercial paper, and
certificates of deposit (the ratings cover all obligations of the
institution with maturities, when issued, of under one year, including
bankers' acceptance and letters of credit):
Duff 1+: Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources
of funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1-: High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are
very small.
Duff 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors
are small.
IBCA Limited or its affiliate IBCA Inc. ("IBCA"): Short-term ratings,
including commercial paper (with maturities up to 12 months), are as
follows:
A1+: Obligations supported by the highest capacity for timely repayment.
A1: Obligations supported by a very strong capacity for timely repayment.
A2: Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic, or financial conditions.
Thomson BankWatch, Inc. ("TBW"): The following short-term ratings apply
to commercial paper, certificates of deposit, unsecured notes, and other
securities having a maturity of one year or less.
TBW-1: The highest category; indicates the degree of safety regarding
timely repayment of principal and interest is very strong.
TBW-2: The second highest rating category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1".
Long Term Debt Ratings.
These rating categories apply principally to investments by High Income
Fund, Strategic Bond Fund and Bond Fund. For Money Fund only, the two
highest rating categories of each Rating Organization are relevant for
securities purchased with a remaining maturity of 397 days or less, or for
rating issuers of short-term obligations.
Moody's: Bonds (including municipal bonds) are rated as follows:
Aaa: Judged to be the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin,
and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong positions of such issues.
Aa: Judged to be of high quality by all standards. Together with the
"Aaa" group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may
not be as large as in "Aaa" securities or fluctuations of protective
elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in
"Aaa" securities.
A: Possess many favorable investment attributes and are to be considered
as upper-medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Considered medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
Ba: Judged to have speculative elements; their future cannot be
considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa: Of poor standing and may be in default or there may be present
elements of danger with respect to principal or interest.
Ca: Represent obligations which are speculative in a high degree and are
often in default or have other marked shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers "1", "2" and "3" in each generic
rating classification from "Aa" through "B" in its corporate bond rating
system. The modifier "1" indicates that the security ranks in the higher
end of its generic rating category; the modifier "2" indicates a mid-range
ranking; and the modifier "3" indicates that the issue ranks in the lower
end of its generic rating category.
Standard & Poor's: Bonds are rated as follows:
AAA: The highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and differ from
"AAA" rated issues only in small degree.
A: Have a strong capacity to pay principal and interest, although they
are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
BBB: Regarded as having an adequate capacity to pay principal and
interest. Whereas they normally exhibit protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this
capacity than for bonds in the "A" category.
BB, B, CCC, CC: Regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. "BB" indicates the lowest
degree of speculation and"CC" the highest degree. While such bonds will
likely have some equality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds
rated "D" are in default and payment of interest and/or repayment of
principal is in arrears.
Fitch:
AAA: Considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA". Plus (+) and minus (-)
signs are used in the "AA" category to indicate the relative position of
a credit within that category.
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+".
Duff & Phelps:
AAA: The highest credit quality. The risk factors are negligible, being
only slightly more than the risk-free U.S. Treasury debt.
AA: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
Plus (+) and minus (-) signs are used in the "AA" category to indicate the
relative position of a credit within that category.
IBCA: Long-term obligations (with maturities of more than 12 months) are
rated as follows:
AAA: The lowest expectation for investment risk. Capacity for timely
repayment of principal and interest is substantial such that adverse
changes in business, economic, or financial conditions are unlikely to
increase investment risks significantly.
AA: A very low expectation for investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in
business, economic, or financial conditions may increase investment risk
albeit not very significantly.
A plus (+) or minus (-) sign may be appended to a long term rating to
denote relative status within a rating category.
TBW: TBW issues the following ratings for companies. These ratings
assess the likelihood of receiving payment of principal and interest on
a timely basis and incorporate TBW's opinion as to the vulnerability of
the company to adverse developments, which may impact the market's
perception of the company, thereby affecting the marketability of its
securities.
A: Possesses an exceptionally strong balance sheet and earnings record,
translating into an excellent reputation and unquestioned access to its
natural money markets. If weakness or vulnerability exists in any aspect
of the company's business, it is entirely mitigated by the strengths of
the organization.
A/B: The company is financially very solid with a favorable track record
and no readily apparent weakness. Its overall risk profile, while low,
it not quite as favorable as for companies in the highest rating category.
<PAGE>
APPENDIX TO PROSPECTUS
Graphic material included in Prospectus of Oppenheimer Variable
Account Funds: "Comparison of Total Return of Oppenheimer Variable Account
Funds with Broad-Based Indices - Changes in Value of a $10,000
Hypothetical Investment"
Linear graphs will be included in the Prospectus of Oppenheimer
Variable Account Funds (the "Funds") depicting the initial account value
and subsequent account value of a hypothetical $10,000 investment in
shares of the Funds for the life of each Fund (except Oppenheimer Money
Fund) and comparing such values with the same investments over the same
time periods in Broad-Based Indices. Set forth below are the relevant
data points that will appear on the linear graphs. Additional information
with respect to the foregoing, including a description of the Broad-Based
Indices, is set forth in the Prospectus under "How Have the Funds
Performed? - Management's Discussion of Performance."
Salomon
Brothers
Fiscal High Yield
Year Ended High Income Fund Market Index
04/30/86(1) $10,000 $10,000
12/31/86 $10,473 $10,510
12/31/87 $11,318 $10,990
12/31/88 $13,081 $12,664
12/31/89 $13,715 $13,012
12/31/90 $14,352 $12,096
12/31/91 $19,220 $16,851
12/31/92 $22,664 $19,859
12/31/93 $28,632 $24,878
12/31/94 $27,722 $24,569
12/31/95 $33,369 $29,412
Lehman
Brothers
Fiscal Corporate
Year Ended Bond Fund Bond Index
04/03/85 $10,000 $10,000
12/31/85 $11,882 $11,819
12/31/86 $13,084 $13,770
12/31/87 $13,415 $14,112
12/31/88 $14,618 $15,352
12/31/89 $16,565 $17,526
12/31/90 $17,877 $18,811
12/31/91 $21,028 $22,325
12/31/92 $22,395 $24,294
12/31/93 $25,315 $27,209
12/31/94 $24,825 $26,139
12/31/95 $24,444 $27,063
Fiscal Capital
Year Ended Appreciation Fund S&P 500 Index
08/15/86(1) $10,000 $10,000
12/31/86 $ 9,835 $ 9,684
12/31/87 $11,245 $10,192
12/31/88 $12,754 $11,880
12/31/89 $16,269 $15,638
12/31/90 $13,533 $15,152
12/31/91 $20,938 $19,758
12/31/92 $24,167 $21,261
12/31/93 $30,770 $23,400
12/31/94 $28,434 $23,706
12/31/95 $37,681 $32,504
Fiscal
Year Ended Growth Fund S&P 500 Index
04/30/85 $10,000 $10,000
12/31/85 $10,950 $12,076
12/31/86 $12,894 $14,331
12/31/87 $13,322 $15,083
12/31/88 $16,265 $17,581
12/31/89 $20,101 $23,141
12/31/90 $18,450 $22,422
12/31/91 $23,163 $29,238
12/31/92 $26,528 $31,463
12/31/93 $28,451 $34,668
12/31/94 $28,726 $35,081
12/31/95 $35,851 $39,495
Lehman
Brothers
Fiscal Multiple Aggregate
Year Ended Strategies Fund S&P 500 Index Bond Index
02/09/87(1) $10,000 $10,000 $10,000
12/31/87 $10,397 $ 8,923 $10,063
12/31/88 $12,700 $10,401 $10,857
12/31/89 $14,701 $13,690 $12,434
12/31/90 $14,421 $13,265 $13,549
12/31/91 $16,941 $17,297 $15,716
12/31/92 $18,463 $18,613 $16,879
12/31/93 $21,408 $20,486 $18,525
12/31/94 $20,991 $20,754 $17,984
12/31/95 $25,474 $28,457 $21,307
Morgan
Fiscal Global Stanley
Year Ended Securities Fund World Index
11/12/90(1) $10,000 $10,000
12/31/90 $10,040 $10,211
12/31/91 $10,380 $12,148
12/31/92 $ 9,642 $11,582
12/31/93 $16,423 $14,261
12/31/94 $15,483 $14,985
12/31/95 $15,830 $18,090
Lehman Salomon
Brothers Brothers World
Fiscal Strategic Aggregate Government
Year Ended Bond Fund Bond Index Bond Index
05/03/93(1) $10,000 $10,000 $10,000
12/31/93 $10,425 $10,453 $10,426
12/31/94 $10,032 $10,147 $10,671
12/31/95 $11,569 $12,022 $12,703
_______________________
(1) Commencement of operations.
Fiscal Growth & S&P
Year Ended Income Fund 500 Index
07/05/95(1) $10,000 $10,000
12/31/95 $12,525 $11,455
_______________________
(1) Commencement of operations.
<PAGE>
Oppenheimer Variable Account Funds
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Trust, OppenheimerFunds, Inc.
or any affiliate thereof. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities offered
hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
PR0600.001.0496
<PAGE>
Oppenheimer Variable Account Funds
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
