OPPENHEIMER VARIABLE ACCOUNT FUNDS
Prospectus dated May 1, 1997
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. An
investment in Money Fund is neither insured nor guaranteed by the
U.S. Government. While Money Fund seeks to maintain a stable net
asset value of $1.00 per share, there can be no assurance that it
will be able to do so.
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.
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, but which 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. Current
income is not an objective.
Shares of the Funds are sold to provide benefits under variable
life insurance policies and variable annuity contracts and other
insurance company separate accounts (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, 1997 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 NOR HAS THE 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 Investors Services, Inc. ("Moody's"),
"BBB" or better by Standard & Poor's Corporation ("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, lower-rated
high yield domestic debt securities, commonly known 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
subsidiaries) advises investment company portfolios having over $60
billion in assets as of March 31, 1997. Each Fund's portfolio
manager is primarily responsible for the selection of securities of
that Fund. The portfolio managers are as follows:
Money Fund, Dorothy Warmack;
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);
Capital Appreciation Fund, Paul LaRocco;
Growth Fund, Jane Putnam;
Global Securities Fund, William Wilby; and
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 funds that invest to some degree
in equities, 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 interest rates
and 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 for purchase by Accounts as an investment medium for
variable life insurance policies and variable annuity contracts and
other insurance company separate accounts. 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, 1996,
is included in the Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER MONEY FUND
- ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990 1989
1988 1987
- ----------------------------------------------------------------------------------------------------------------
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
$1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Income from investment
operations - net investment
income and net realized gain .05 .06 .04 .03 .04 .06 .08 .09
.07 .06
Dividends and distributions to
shareholders (.05) (.06) (.04) (.03) (.04) (.06) (.08) (.09)
(.07) (.06)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
$1.00 $1.00
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- -------------------
TOTAL RETURN, AT NET ASSET
VALUE(1) 5.13% 5.62% 4.25% 3.09% 3.93% 6.18% 7.84% 9.56%
6.96% 6.74%
- ----------------------------------------------------------------------------------------------------------------
- -------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $129,719 $65,386 $89,671 $61,221 $58,266 $58,709 $89,143 $68,440
$69,468 $42,538
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Average net assets (in
thousands) $ 99,263 $75,136 $90,264 $57,654 $61,317 $75,747 $82,966 $67,586
$60,241 $35,138
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Ratios to average net assets:
Net investment income 5.01% 5.52% 4.18% 3.12% 3.76% 5.97% 7.80% 8.82%
7.31% 6.33%
Expenses 0.49% 0.51% 0.43% 0.43% 0.50% 0.49% 0.51% 0.53%
0.55% 0.59%
</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.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER HIGH INCOME FUND
- -------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990 1989
1988 1987
- ----------------------------------------------------------------------------------------------------------------
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $10.63 $ 9.79 $11.02 $ 9.74 $9.40 $7.90 $8.59 $9.30
$9.14 $10.04
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Income (loss) from investment
operations:
Net investment income .97 .98 .94 .82 1.19 1.28 1.21 1.09
1.12 1.30
Net realized and unrealized gain
(loss) .58 .94 (1.27) 1.65 .43 1.30 (.82) (.65)
.23 (.51)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total income (loss) from
investment operations 1.55 1.92 (.33) 2.47 1.62 2.58 .39 .44
1.35 .79
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (1.05) (1.08) (.66) (1.19) (1.28) (1.08) (1.08) (1.08)
(1.07) (1.55)
Distributions from net realized
gain -- -- (.24) -- -- -- -- (.07)
(.12) (.14)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total dividends and distributions
to shareholders (1.05) (1.08) (.90) (1.19) (1.28) (1.08) (1.08) (1.15)
(1.19) (1.69)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Net asset value, end of period $11.13 $10.63 $ 9.79 $11.02 $9.74 $9.40 $7.90 $8.59
$9.30 $ 9.14
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- -------------------
TOTAL RETURN, AT NET ASSET
VALUE(1) 15.26% 20.37% (3.18)% 26.34% 17.92% 33.91% 4.65% 4.84%
15.58% 8.07%
- ----------------------------------------------------------------------------------------------------------------
- -------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $191,293 $133,451 $ 95,698 $93,011 $40,817 $27,308 $19,172 $23,698
$25,551 $21,768
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Average net assets (in
thousands) $157,203 $115,600 $101,096 $67,000 $36,861 $23,663 $21,493 $26,040
$24,530 $20,637
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Ratios to average net assets:
Net investment income 9.18% 9.81% 9.15% 10.50% 12.08% 14.26% 14.32% 11.52%
11.94% 13.13%
Expenses 0.81% 0.81% 0.67% 0.68% 0.73% 0.75% 0.75% 0.75%
0.75% 0.75%
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Portfolio turnover rate(2) 125.0% 107.1% 110.1% 135.7% 144.2% 108.0% 95.1% 78.7%
57.9% 42.1%
</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. Purchases and sales of
investment securities (excluding short-term securities) for the
period ended December 31, 1996 were $216,284,607 and $177,884,266,
respectively.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER BOND FUND
- -------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990 1989
1988 1987
- ----------------------------------------------------------------------------------------------------------------
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $11.84 $10.78 $11.65 $10.99 $11.15 $10.33 $10.49 $10.15
$10.19 $11.15
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Income (loss) from investment
operations:
Net investment income .69 .72 .76 .65 .87 .95 .97 .98
.94 .97
Net realized and unrealized gain
(loss) (.15) 1.07 (.98) .76 (.17) .80 (.18) .32
(.05) (.71)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total income (loss) from
investment operations .54 1.79 (.22) 1.41 .70 1.75 .79 1.30
.89 .26
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.74) (.73) (.62) (.75) (.86) (.93) (.95) (.96)
(.93) (1.17)
Distributions from net realized
gain (.01) -- (.03) -- -- -- -- --
-- (.05)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total dividends and distributions
to shareholders (.75) (.73) (.65) (.75) (.86) (.93) (.95) (.96)
(.93) (1.22)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Net asset value, end of period $11.63 $11.84 $10.78 $11.65 $10.99 $11.15 $10.33 $10.49
$10.15 $10.19
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- -------------------
TOTAL RETURN, AT NET ASSET
VALUE(1) 4.80% 17.00% (1.94)% 13.04% 6.50% 17.63% 7.92% 13.32%
8.97% 2.53%
- ----------------------------------------------------------------------------------------------------------------
- -------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $426,439 $211,232 $135,067 $111,846 $63,354 $32,762 $16,576 $13,422
$ 9,989 $10,415
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Average net assets (in
thousands) $296,253 $170,929 $121,884 $87,215 $45,687 $22,169 $15,088 $11,167
$11,028 $ 8,748
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Ratios to average net assets:
Net investment income 6.72% 6.91% 7.30% 7.20% 7.81% 8.73% 9.30% 9.34%
9.08% 9.17%
Expenses 0.78% 0.80% 0.57% 0.46% 0.56% 0.64% 0.61% 0.64%
0.70% 0.75%
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Portfolio turnover rate(2) 82.3% 79.4% 35.1% 36.3% 41.3% 7.6% 7.4% 5.4%
36.3% 5.9%
</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. Purchases and sales of
investment securities (excluding short-term securities) for the
period ended December 31, 1996 were $449,994,454 and $218,747,414,
respectively.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER CAPITAL APPRECIATION FUND
- -----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990 1989
1988 1987
- ----------------------------------------------------------------------------------------------------------------
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $34.21 $25.95 $31.64 $26.04 $23.24 $15.24 $20.40 $16.31
$14.39 $13.12
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Income (loss) from investment
operations:
Net investment income .09 .11 .10 .05 .06 .08 .32 .50
.33 .21
Net realized and unrealized
gain (loss) 6.59 8.29 (2.22) 6.71 3.43 8.18 (3.54) 3.93
1.60 1.67
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total income (loss) from
investment operations 6.68 8.40 (2.12) 6.76 3.49 8.26 (3.22) 4.43
1.93 1.88
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.11) (.09) (.04) (.06) (.14) (.26) (.53) (.34)
-- (.34)
Distributions from net realized
gain (2.07) (.05) (3.53) (1.10) (.55) -- (1.41) --
(.01) (.27)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total dividends and distributions
to shareholders (2.18) (.14) (3.57) (1.16) (.69) (.26) (1.94) (.34)
(.01) (.61)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Net asset value, end of period $38.71 $34.21 $25.95 $31.64 $26.04 $23.24 $15.24 $20.40
$16.31 $14.39
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- -------------------
TOTAL RETURN, AT NET ASSET
VALUE(1) 20.22% 32.52% (7.59)% 27.32% 15.42% 54.72% (16.82)% 27.57%
13.41% 14.34%
- ----------------------------------------------------------------------------------------------------------------
- -------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $617,392 $325,404 $185,774 $136,885 $83,335 $49,371 $23,295 $27,523
$13,667 $9,692
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Average net assets (in
thousands) $467,080 $240,730 $153,832 $98,228 $56,371 $34,887 $24,774 $21,307
$13,239 $8,598
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Ratios to average net assets:
Net investment income 0.32% 0.47% 0.50% 0.23% 0.30% 0.81% 1.93% 3.27%
2.13% 1.68%
Expenses 0.75% 0.78% 0.57% 0.47% 0.54% 0.63% 0.71% 0.68%
0.73% 0.75%
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Portfolio turnover rate(2) 100.1% 125.5% 96.5% 122.8% 78.9% 122.3% 222.0% 130.5%
128.7% 138.7%
Average brokerage commission
rate(3) $0.0583 $0.0577 -- -- -- -- -- --
-- --
</TABLE>
1. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last
business day of the fiscal period. Total returns are not annualized
for periods of less than one full year. Total return information
does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would
reduce the total return figures for all periods shown.
2. The lesser of purchases or sales of portfolio securities for a
period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of
investment securities (excluding short-term securities) for the
period ended December 31, 1996 were $507,743,146 and $384,247,154,
respectively.
3. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period, divided by the total
of related shares purchased and sold.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER GROWTH FUND
- ---------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990 1989
1988 1987
- ----------------------------------------------------------------------------------------------------------------
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $23.55 $17.68 $17.70 $16.96 $15.17 $12.54 $16.38 $13.64
$11.21 $12.53
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Income (loss) from investment
operations:
Net investment income .15 .25 .22 .46 .16 .30 .56 .66
.29 .20
Net realized and unrealized
gain (loss) 5.46 6.10 (.05) .74 1.99 2.82 (1.79) 2.50
2.19 .24
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total income from investment
operations 5.61 6.35 .17 1.20 2.15 3.12 (1.23) 3.16
2.48 .44
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.25) (.22) (.15) (.14) (.36) (.49) (.62) (.35)
-- (.34)
Distributions from net realized
gain (1.67) (.26) (.04) (.32) -- -- (1.99) (.07)
(.05) (1.42)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total dividends and distributions
to shareholders (1.92) (.48) (.19) (.46) (.36) (.49) (2.61) (.42)
(.05) (1.76)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Net asset value, end of period $27.24 $23.55 $17.68 $17.70 $16.96 $15.17 $12.54 $16.38
$13.64 $11.21
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- -------------------
TOTAL RETURN, AT NET ASSET
VALUE(1) 25.20% 36.65% 0.97% 7.25% 14.53% 25.54% (8.21)% 23.59%
22.09% 3.32%
- ----------------------------------------------------------------------------------------------------------------
- -------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $285,920 $117,710 $63,283 $56,701 $36,494 $22,032 $15,895 $19,301
$17,746 $14,692
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Average net assets (in
thousands) $152,466 $88,803 $59,953 $46,389 $25,750 $18,810 $17,235 $18,596
$15,585 $15,121
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Ratios to average net assets:
Net investment income 1.08% 1.46% 1.38% 1.13% 1.36% 2.82% 4.09% 3.72%
2.39% 1.56%
Expenses, before voluntary
reimbursement by the Manager 0.81% 0.79% 0.58% 0.50% 0.61% 0.70% 0.71% 0.70%
0.70% 0.75%
Expenses, net of voluntary
reimbursement by the Manager 0.79% N/A N/A N/A N/A N/A N/A N/A
N/A N/A
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Portfolio turnover rate(2) 65.4% 58.2% 53.8% 12.6% 48.7% 133.9% 267.9% 148.0%
132.5% 191.0%
Average brokerage commission
rate(3) $0.0589 $0.0590 -- -- -- -- -- --
-- --
</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. Purchases and sales of
investment securities (excluding short-term securities) for the
period ended December 31, 1996 were $117,544,250 and $78,446,013,
respectively.
3. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period, divided by the total
number of related shares purchased and sold.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER MULTIPLE STRATEGIES FUND
----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
1987(1)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $14.55 $12.91 $13.88 $12.47 $11.96 $10.90 $12.30 $11.58 $10.04
$10.00
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Income (loss) from
investment operations:
Net investment income .72 .66 .63 .55 .55 .69 .73 .73
.66 .44
Net realized and unrealized
gain (loss) 1.45 2.00 (.90) 1.41 .50 1.15 (.97) 1.04 1.53
.07
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total income (loss) from
investment
operations 2.17 2.66 (.27) 1.96 1.05 1.84 (.24) 1.77 2.19
.51
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.74) (.65) (.60) (.55) (.54) (.78) (.70) (.68) (.65)
(.43)
Distributions from net
realized gain (.35) (.37) (.10) -- -- -- (.46) (.37)
- -- (.04)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Total dividends and
distributions to
shareholders (1.09) (1.02) (.70) (.55) (.54) (.78) (1.16) (1.05)
(.65) (.47)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Net asset value, end of
period $15.63 $14.55 $12.91 $13.88 $12.47 $11.96 $10.90 $12.30 $11.58
$10.04
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- -------------------
TOTAL RETURN, AT NET ASSET
VALUE(2) 15.50% 21.36% (1.95)% 15.95% 8.99% 17.48% (1.91)% 15.76%
22.15% 3.97%
- ----------------------------------------------------------------------------------------------------------------
- -------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $484,285 $381,263 $292,067 $250,290 $159,464 $124,634 $118,888 $121,286
$78,386 $53,291
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Average net assets (in
thousands) $428,277 $344,745 $279,949 $199,954 $139,011 $117,000 $123,231 $101,057
$64,298 $34,256
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Ratios to average net
assets:
Net investment income 4.89% 4.81% 4.90% 4.44% 4.63% 5.95% 6.53% 6.36%
6.18% 6.12% (3)
Expenses 0.77% 0.77% 0.56% 0.48% 0.55% 0.54% 0.55% 0.57%
0.58% 0.65% (3)
- ----------------------------------------------------------------------------------------------------------------
- -------------------
Portfolio turnover rate(4) 40.3% 39.0% 31.4% 32.4% 57.8% 80.3% 99.2% 66.9%
110.0% 46.9%
Average brokerage
commission rate(5) $0.0361 $0.0329 -- -- -- -- -- --
- -- --
</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. Purchases and sales of
investment securities (excluding short-term securities) for the
period ended December 31, 1996 were $211,489,140 and $146,222,245,
respectively.
5. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period, divided by the total
number of related shares purchased and sold.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER GROWTH & INCOME FUND
------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995(1)
- -----------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.51 $10.00
- -----------------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .01
Net realized and unrealized gain 3.91 2.52
- -----------------------------------------------------------------------------
Total income from investment operations 4.05 2.53
Dividends and distributions to shareholders:
Dividends from net investment income (.14) (.02)
Distributions from net realized gain (.05) --
- -----------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.19) (.02)
- -----------------------------------------------------------------------------
Net asset value, end of period $16.37 $12.51
------------------------
------------------------
- -----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 32.51% 25.25%
- -----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $47,009 $4,288
- -----------------------------------------------------------------------------
Average net assets (in thousands) $21,562 $1,809
- -----------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.41% 0.50%(3)
Expenses 1.00% 2.07%(3)
- -----------------------------------------------------------------------------
Portfolio turnover rate(4) 112.6% 23.7%
Average brokerage commission rate(5) $0.0618 $0.0598
</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. Purchases and sales of
investment securities (excluding short-term securities) for the
period ended December 31, 1996 were $58,041,356 and
$22,631,948,respectively.
5. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period, divided by the total
number of related shares purchased and sold.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER GLOBAL SECURITIES FUND
- -----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991
1990(1)
- ----------------------------------------------------------------------------------------------------------------
- -----------
<S> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $15.00 $15.09 $16.30 $9.57 $10.38 $10.04
10.00
- ----------------------------------------------------------------------------------------------------------------
- -----------
Income (loss) from investment operations:
Net investment income (loss) .15 .12 .04 (.02) .07 .04
--
Net realized and unrealized gain (loss) 2.52 .19 (.96) 6.75 (.80) .30
.04
- ----------------------------------------------------------------------------------------------------------------
- -----------
Total income (loss) from investment operations 2.67 .31 (.92) 6.73 (.73) .34
.04
- ----------------------------------------------------------------------------------------------------------------
- -----------
Dividends and distributions to shareholders:
Dividends from net investment income -- -- (.04) -- (.04) --
--
Distributions from net realized gain -- (.40) (.25) -- (.04) --
--
- ----------------------------------------------------------------------------------------------------------------
- -----------
Total dividends and distributions
to shareholders -- (.40) (.29) -- (.08) --
--
- ----------------------------------------------------------------------------------------------------------------
- -----------
Net asset value, end of period $17.67 $15.00 $15.09 $16.30 $9.57 $10.38
$10.04
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- -----------
TOTAL RETURN, AT NET ASSET VALUE(2) 17.80% 2.24% (5.72)% 70.32% (7.11)% 3.39%
0.40%
- ----------------------------------------------------------------------------------------------------------------
- -----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $580,998 $360,979 $297,842 $96,425 $13,537 $7,339
$432
- ----------------------------------------------------------------------------------------------------------------
- -----------
Average net assets (in thousands) $466,750 $332,336 $214,545 $31,696 $11,181 $3,990
$263
- ----------------------------------------------------------------------------------------------------------------
- -----------
Ratios to average net assets:
Net investment income 1.09% 0.86% 0.54% 0.72% 1.04% 0.75%
0.08% (3)
Expenses 0.81% 0.89% 0.91% 0.92% 1.06% 1.32%
6.84% (3)
- ----------------------------------------------------------------------------------------------------------------
- -----------
Portfolio turnover rate(4) 89.9% 131.3% 70.4% 65.1% 34.1% 29.5%
0.0%
Average brokerage commission rate(5) $0.0045 $0.0092 -- -- -- --
--
</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. Purchases and sales of
investment securities (excluding short-term securities)for the
period ended December 31, 1996 were $508,437,343 and $396,821,829,
respectively.
5. Total brokerage commissions paid on applicable purchases and
sales of portfolio securities for the period, divided by the total
number of related shares purchased and sold.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER STRATEGIC BOND FUND
------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993(1)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $4.91 $4.60 $5.12 $5.00
- ------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .38 .38 .35 .10
Net realized and unrealized gain (loss) .19 .30 (.54) .11
- ------------------------------------------------------------------------------------
Total income (loss) from investment
operations .57 .68 (.19) .21
- ------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.39) (.37) (.32) (.09)
Distributions in excess of net
realized gain -- -- (.01) --
- ------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.39) (.37) (.33) (.09)
Net asset value, end of period $5.09 $4.91 $4.60 $5.12
------------------------------------------
------------------------------------------
- ------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 12.07% 15.33% (3.78)% 4.25%
- ------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $118,716 $60,098 $20,320 $9,887
- ------------------------------------------------------------------------------------
Average net assets (in thousands) $82,604 $37,698 $15,389 $4,259
- ------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.48% 9.32% 8.36% 5.67%(3)
Expenses 0.85% 0.85% 0.87% 0.96%(3)
- ------------------------------------------------------------------------------------
Portfolio turnover rate(4) 144.3% 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. Purchases and sales of
investment securities (excluding short-term securities) for the
period ended December 31, 1996 were $173,855,919 and $107,646,460,
respectively.
Investment Objectives and Policies. Each Fund's investment
objective and policies are set forth below. Since market risks are
inherent in all securities to varying degrees, there can be no
assurance that a Fund will meet its investment objectives.
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
Manager, under procedures approved by 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. Under the current provisions of Rule
2a-7, 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 a loss. 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
securities other than those described above that meet 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. 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 or "BBB" or lower by 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. Securities rated by a rating organization
represented the following percentage of High Income Fund's total
assets as of December 31, 1996 (securities rated by any rating
organization are included in the equivalent Standard & Poor's
rating category): AAA, 0.58%; AA, 0.16%; BBB, 1.26%; BB, 14.59%; B,
32.00%; CCC, 2.76%; C, 0.40%. Unrated securities represented 9.25%
of the Fund's total assets. The Manager will not rely principally
on the rating 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. 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 lower than "Baa" by Moody's or "BBB" 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. Securities rated by a rating
organization represented the following percentage of Strategic Bond
Fund's total assets as of December 31, 1996 (securities rated by
any rating organization are included in the equivalent Standard &
Poor's rating category): AAA, 0.11%; A, 0.47%; BBB, 0.93%; BB,
4.80%; B, 14.98%; CCC, 1.24%; C, 0.75%. Unrated securities
represented 0.25% of the Fund's total assets. 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," and "Special Risks of 'Emerging
Markets'."
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 may
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' obligation under the forward roll must be
covered by segregated liquid assets. 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. During an economic downturn,
lower rated securities might decline in value more than investment
grade 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. There is a risk that 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 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 (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). 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), or cash and cash equivalents.
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 "Other
Investment Techniques 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.
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 a 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. Money Fund, High Income Fund, Bond Fund and
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. These Funds can borrow only
if they maintain a 300% ratio of assets to borrowings at all times
in the manner set forth in the Investment Company Act.
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 "D" by Standard &
Poor's or "D" by Fitch, 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 foreign securities of more developed
countries. 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 (for Money Fund, the limit is 10%); 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. None of the
discussion in this section concerning Hedging Instruments applies
to Money Fund, which may not use Hedging Instruments.
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.
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 25% of its total assets. Also, each Fund will segregate
liquid assets of any type, including equity and debt securities of
any grade 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 on which the derivative is based,
and the derivative itself may 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."
The Funds (other than Money Fund) may invest in different
types of derivatives. "Index-linked" or "commodity-linked" notes
are debt securities of companies that call for interest payments
and/or payment on the maturity of the note in different terms than
the typical note where the borrower agrees to pay a fixed sum on
the maturity of the note. Principal and/or interest payments on an
index-linked note depend on the performance of one or more market
indices, such as the S & P 500 Index or a weighted index of
commodity futures, such as crude oil, gasoline and natural gas.
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, the Funds cannot:
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);
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");
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;
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
deviate from the percentage requirements and other
restrictions listed under "Warrants and Rights," and the first
paragraph under "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.
Unless the prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time a Fund
makes an investment, and a Fund need not sell securities to meet
the percentage limits if the value of the investment increases in
proportion 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 the
fourth investment restriction listed above. Other investment
restrictions are listed in "Investment Restrictions" 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 subsidiaries) currently manages investment
companies, including other Oppenheimer funds, with assets of more
than $60 billion as of March 31, 1997, held in more than 3 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, Rubinstein and Negri have also served as
officers of other Oppenheimer funds.
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. LaRocco, Negri and Milnamow, Ms. Putnam and Ms. Warmack are
Vice Presidents of the Manager, Mr. Levine is an Assistant Vice
President of the Manager, and Messrs. Rubinstein, Steinmetz and
Wilby are Senior 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 average annual net assets, 0.425% of the next $500 million,
0.400% of the next $500 million, and 0.375% of average annual 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 average
annual 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
average annual 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 average annual 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 average
annual net assets over $1 billion.
During the fiscal year ended December 31, 1996, 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 0.45% 0.49%
High Income Fund 0.75% 0.81%
Bond Fund 0.74% 0.78%
Capital Appreciation Fund 0.72% 0.75%
Growth Fund 0.75% 0.79%(2)
Multiple Strategies Fund 0.73% 0.77%
Global Securities Fund 0.73% 0.81%
Strategic Bond Fund 0.75% 0.85%
Growth & Income Fund 0.75% 1.00%
____________________
(1) This table does not reflect expenses that apply at the
separate account level or to related insurance products.
(2) Total Operating Expenses would have been 0.81% in the
absence of a voluntary one-time fee reimbursement described in the
Statement of Additional Information under "The Manager and Its
Affiliates."
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, 1996, 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, 1996, the U.S. bond markets and the equity
markets experienced overall substantial growth in response to
declines in interest rates and strong corporate profits in the face
of slower economic growth. These positive market factors
contributed to Fund performance, as did particular investment
strategies of each of the Funds. Investments in foreign securities
contributed far less to Fund performance, due to relatively weak
overall economic growth overseas. During the fiscal year ended
December 31, 1996, the Manager emphasized the following investment
strategies and techniques in the individual Funds. The portfolio
holdings, allocations and strategies of each of the Funds are
subject to change.
High Income Fund emphasized media and cable companies in the
domestic and international sector, and government deregulation of
that sector caused increased demand for telecommunication products.
Bond Fund increased investments in mortgage-backed securities.
During the second half of last year, it focused on corporate bonds
issued by financial services firms, in the expectation that
restructuring and consolidations would improve profitability and
balance sheets, and in oil and gas-related businesses, in
expectation that advances in technology would strengthen profits.
Capital Appreciation Fund took advantage of the favorable
performance of high growth company stocks. The Fund invested in
the health care and technology industries, in the business services
sector, information technology services and industrial services, in
order to take advantage of profits anticipated from the offering of
new products or services or from increased demand.
Growth Fund emphasized large cap stocks in the technology and
financial services sectors and in niche-consumer cyclicals, such as
selected women's apparel companies and footwear manufacturers.
Multiple Strategies Fund's equity and fixed-income investments
were broadly diversified among sectors. Areas of emphasis included
technology, financial services and health care. The Fund's fixed-
income strategy was to focus on high-yield bonds to benefit from
expected strong corporate earnings and refinancings and to capture
the higher yields of foreign bonds, each of which complemented the
Fund's U.S. treasury holdings.
Growth & Income Fund used the following security selection
criteria: companies in emerging and improving industries, large
growth companies that define their industries, smaller companies
with niche-businesses, companies undergoing restructuring, and
companies that were fundamentally strong and selling at extremely
low valuations. Much of the Fund's gains were from the technology
and financial services sectors.
Global Securities Fund experienced most of its growth from the
U.S. market, due to relatively weak economic growth overseas. It
focused on investments in the natural resources sector and
biotechnology holdings within the health care sector.
Strategic Bond Fund's holdings in emerging international markets
were the best performing sector for that Fund, followed by high-
yield corporate bonds, which overcame weak performance by the
Fund's U.S. government bond holdings.
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, 1996.
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 Merrill Lynch High Yield Master Index, an unmanaged index of
fixed-rate, coupon-bearing bonds with an outstanding par which is
greater than or equal to $100 million, a maturity range greater
than or equal to one year and a credit rating which must be rated
lower than BBB/Baa3 (by Standard & Poor's or Moody's, respectively)
but higher than C/D (bonds in default). This index is used as a
measure of the performance of the high-yield corporate bond market
- - the market in which High Income Fund principally invests. This
index was selected in place of the Salomon Brothers High Yield
Market Index (which had been used in the Trust's prior
prospectuses) because a more complete data history is available for
the Merrill Lynch Index. During the fiscal year ended December 31,
1996, the average annual total returns of the two indices and High
Income Fund were as follows: Merrill Lynch High Yield Master Index:
11.06%; Salomon Brothers High Yield Market Index: 11.29%; High
Income Fund: 15.26%.
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 Merrill Lynch High Yield Master Index
[Graph comparing total return of High Income Fund shares to
performance of Merrill Lynch High Yield Master Index]
Average Annual Total Return at 12/31/96(1)
1 year 5 year 10 year
15.26% 14.88% 13.89%
Total returns and the ending account value in the graph show change
in share value and include reinvestment of all dividends and
capital gains distributions.
(1)The inception date of the Fund was 4/30/86.
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 12/31/96(1)
1 year 5 year 10 year
4.80% 7.68% 8.81%
Total returns and the ending account value in the graph show change
in share value and include reinvestment of all dividends and
capital gains distributions.
(1) The inception date of the Fund was 4/3/85.
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 12/31/96(1)
1 year 5 year 10 year
20.22% 16.69% 16.50%
Total returns and the ending account value in the graph show change
in share value and include reinvestment of all dividends and
capital gains distributions.
(1) The inception date of the Fund was 8/15/86.
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 12/31/96(1)
1 year 5 years 10 Years
25.20% 16.24% 14.32%
Total returns and the ending account value in the graph show change
in share value and reflect reinvestment of all dividends and
capital gains distributions.
(1) The inception date of the Fund was 4/3/85.
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 12/31/96(1)
1 year 5 years Life of Fund
15.50% 11.67% 11.52%
Total returns and the ending account value in the graph show change
in share value and reflect reinvestment of all dividends and
capital gains distributions. The performance information in the
graph for the S&P 500 Index begins on 1/31/87.
(1) The inception date of the Fund was 2/9/87.
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 12/31/96(1)
1 year 5 years Life of Fund
17.80% 12.43% 10.69%
Total returns and the ending account value in the graph show change
in share value and reflect reinvestment of all dividends and
capital gains distributions. The performance information in the
graph for the Morgan Stanley World Index begins on 10/31/90.
(1) The inception date of the Fund was 11/12/90.
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 12/31/96(1)
1 year Life of Fund
12.07% 7.35%
______________
Total returns and the ending account value in the graph show change
in share value and reflect reinvestment of all dividends and
capital gains distributions. The performance information in the
graph for the Lehman Brothers Aggregate Bond Index and the Salomon
Brothers World Government Bond Index begins on 4/30/93.
(1) The inception date of the Fund was 5/3/93.
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 12/31/96(1)
1 year Life of Fund
32.51% 40.54%
_________________________
Total returns and the ending account value in the graph show change
in share value and reflect reinvestment of all dividends and
capital gains distributions. The performance information in the
graph for the S&P 500 Index begins on 6/30/95.
(1) The inception date of the Fund was 7/5/95.
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 for purchase by Accounts as an
investment medium for variable life insurance policies and variable
annuity contracts and other insurance company separate accounts, as
described in the accompanying Account Prospectus. 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
Investment Grade Bond Ratings
AAA Bonds 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 Bonds 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."
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+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher
ratings.
Speculative Grade Bond Ratings
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can
be identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest
reflect the obligor's limited margin of safety and the need for
reasonable business and economic activity through out the life of
the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD, DD and D Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation
or reorganization of the obligor. "DDD" represents the highest
potential for recovery on these bonds, and "D" represents the
lowest potential for recovery.
Plus (+) Minus (-) Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the
rating category. Plus and minus signs, however, are not used in
the "AAA," "DDD," "DD," or "D" categories.
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."
Merrill
Lynch
Fiscal High Yield
Year Ended High Income Fund Master Index
12/31/86 $10,000 $10,000
12/31/87 $10,808 $10,466
12/31/88 $12,491 $11,877
12/31/89 $13,096 $12,370
12/31/90 $13,705 $11,841
12/31/91 $18,353 $15,935
12/31/92 $21,641 $18,829
12/31/93 $27,341 $22,064
12/31/94 $26,471 $21,801
12/31/95 $31,863 $26,149
12/31/96 $36,724 $29,043
Lehman
Brothers
Fiscal Corporate
Year Ended Bond Fund Bond Index
12/31/86 $10,000 $10,000
12/31/87 $10,252 $10,256
12/31/88 $11,172 $11,202
12/31/89 $12,660 $12,779
12/31/90 $13,664 $13,681
12/31/91 $16,071 $16,213
12/31/92 $17,116 $17,622
12/31/93 $19,348 $19,765
12/31/94 $18,973 $18,987
12/31/95 $22,198 $23,211
12/31/96 $23,261 $23,974
Fiscal Capital
Year Ended Appreciation Fund S&P 500 Index
12/31/86 $10,000 $10.000
12/31/87 $11,434 $10,525
12/31/88 $12,967 $12,268
12/31/89 $16,542 $16,149
12/31/90 $13,760 $15,647
12/31/91 $21,289 $20,404
12/31/92 $24,572 $21,956
12/31/93 $31,286 $24,164
12/31/94 $28,911 $24,482
12/31/95 $38,313 $33,671
12/31/96 $46,061 $41,397
Fiscal
Year Ended Growth Fund S&P 500 Index
12/31/86 $10,000 $10,000
12/31/87 $10,331 $10,525
12/31/88 $12,614 $12,268
12/31/89 $15,589 $16,149
12/31/90 $14,309 $15,647
12/31/91 $17,964 $20,404
12/31/92 $20,574 $21,956
12/31/93 $22,065 $24,164
12/31/94 $22,278 $24,482
12/31/95 $30,444 $33,671
12/31/96 $38,117 $41,397
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 $ 9,276 $10,133
12/31/88 $12,700 $10,812 $10,932
12/31/89 $14,700 $14,232 $12,520
12/31/90 $14,421 $13,790 $13,642
12/31/91 $16,941 $17,982 $15,825
12/31/92 $18,463 $19,350 $16,996
12/31/93 $21,408 $21,296 $18,653
12/31/94 $20,991 $21,576 $18,109
12/31/95 $25,474 $29,675 $21,455
12/31/96 $29,423 $36,484 $22,234
Morgan
Fiscal Global Stanley
Year Ended Securities Fund World Index
11/12/90(1) $10,000 $10,000
12/31/90 $10,040 $10,046
12/31/91 $10,380 $11,951
12/31/92 $ 9,642 $11,394
12/31/93 $16,424 $14,029
12/31/94 $15,483 $14,812
12/31/95 $15,830 $17,970
12/31/96 $18,648 $20,485
Solomon
Lehman 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 $10,466 $10,531
12/31/94 $10,031 $10,161 $10,776
12/31/95 $11,569 $12,038 $12,828
12/31/96 $12,965 $12,475 $13,294
_______________________
(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 $11,443
12/31/96 $16,598 $14,069
_______________________
(1) Commencement of operations.
<PAGE>
Oppenheimer Variable Account Funds
6803 South Tucson Way
Englewood, Colorado 80112
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.
<PAGE>
Oppenheimer Variable Account Funds
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated May 1, 1997.
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is an investment
company consisting of nine separate Funds (the "Funds"):
Oppenheimer Money Fund ("Money Fund")
Oppenheimer High Income Fund ("High Income Fund")
Oppenheimer Bond Fund ("Bond Fund")
Oppenheimer Capital Appreciation Fund ("Capital Appreciation Fund")
Oppenheimer Growth Fund ("Growth Fund")
Oppenheimer Multiple Strategies Fund ("Multiple Strategies Fund")
Oppenheimer Growth & Income Fund ("Growth & Income Fund")
Oppenheimer Global Securities Fund ("Global Securities Fund")
Oppenheimer Strategic Bond Fund ("Strategic Bond Fund")
Shares of the Funds are sold to provide benefits under variable
life insurance policies and variable annuity contracts and other
insurance company separate accounts (collectively the "Accounts"),
as described in the Account Prospectus.
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and
supplements information in the Prospectus dated May 1, 1997. It
should be read together with the Trust's Prospectus, which may be
obtained by writing to the Funds' Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217, or by calling
the Transfer Agent at the toll-free number shown above, and the
Account Prospectus.
TABLE OF CONTENTS
Page
About the Funds
Investment Objectives and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 11
Other Investment Restrictions 19
How the Funds are Managed 20
Organization and History 20
Trustees and Officers of the Trust 21
The Manager and Its Affiliates 25
Brokerage Policies of the Funds 27
Performance of the Funds 29
About Your Account
How to Buy Shares 32
Dividends, Capital Gains and Taxes 35
Additional Information About the Funds 36
<PAGE>
Page
Financial Information About the Funds
Independent Auditors' Report 37
Financial Statements 38
Appendix A: Industry Classifications A-1
Appendix B: Major Shareholders B-1
ABOUT THE FUNDS
Investment Objectives and Policies
Investment Policies and Strategies. The investment objectives and
policies of each of the Funds are described in the Prospectus. Set
forth below is supplemental information about those policies.
Certain capitalized terms used in this Additional Statement are
defined in the Prospectus.
Money Fund. The Prospectus describes "Eligible Securities"
in which Money Fund may invest and indicates that if a security's
rating is downgraded, the Manager and/or the Board may have to
reassess the security's credit risk. If a security has ceased to
be a First Tier Security, the Manager will promptly reassess
whether the security continues to present "minimal credit risk."
If the Manager becomes aware that any Rating Organization has
downgraded its rating of a Second Tier Security or rated an unrated
security below its second highest rating category, the Trust's
Board of Trustees shall promptly reassess whether the security
presents minimal credit risk and whether it is in Money Fund's best
interests to dispose of it; but if Money Fund disposes of the
security within 5 days of OppenheimerFunds, Inc. (the "Manager")
learning of the downgrade, the Manager will provide the Board with
subsequent notice of such downgrade. If a security is in default,
or ceases to be an Eligible Security, or is determined no longer to
present minimal credit risks, the Board must determine whether it
would be in Money Fund's best interests to dispose of the security.
The Rating Organizations currently designated as such by the
Securities and Exchange Commission ("SEC") are Standard & Poor's
Corporation, Moody's Investors Service, Inc., Fitch Investors
Service, L.P., Duff & Phelps, Inc., IBCA Limited and its affiliate,
INCA, Inc., and Thomson BankWatch, Inc. See Appendix B to the
Prospectus for a description of the rating categories of the Rating
Organizations.
Time Deposits. The Fund may invest in fixed time deposits,
which are non-negotiable deposits in a bank for a specified period
of time at a stated interest rate, whether or not subject to
withdrawal penalties; however, such deposits which are subject to
such penalties, other than deposits maturing in less than 7 days,
are subject to the 10% investment limitation for illiquid
securities set forth in "Other Investment Techniques and Strategies
- - Illiquid and Restricted Securities" in the Prospectus.
Floating Rate/Variable Rate Notes. Money Fund may invest
in instruments with floating or variable interest rates. The
interest rate on a floating rate obligation is based on a stated
prevailing market rate, such as a bank's prime rate, the 90-day
U.S. Treasury Bill rate, the rate of return on commercial paper or
bank certificates of deposit, or some other standard, and is
adjusted automatically each time such market rate is adjusted. The
interest rate on a variable rate obligation is also based on a
stated prevailing market rate but is adjusted automatically at a
specified interval of no less than one year. Some variable rate or
floating rate obligations in which Money Fund may invest have a
demand feature entitling the holder to demand payment at an amount
approximately equal to amortized cost or the principal amount
thereof plus accrued interest at any time, or at specified
intervals not exceeding one year. These notes may or may not be
backed by bank letters of credit. The interest rates on these
notes fluctuate from time to time. The issuer of such obligations
normally has a corresponding right, after a given period, to prepay
in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days'
notice to the holders of such obligations. Generally, the changes
in the interest rate on such securities reduce the fluctuation in
their market value. As interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than
that for fixed-rate obligations of the same maturity.
Master Demand Notes. Master demand notes are corporate
obligations that permit the investment of fluctuating amounts by
Money Fund at varying rates of interest pursuant to direct
arrangements between Money Fund, as lender, and the corporate
borrower that issues the note. These notes permit daily changes in
the amounts borrowed. Money Fund has the right to increase the
amount under the note at any time up to the full amount provided by
the note agreement, or to decrease the amount. The borrower may
repay up to the full amount of the note at any time without
penalty. It is not generally contemplated that master demand notes
will be traded because they are direct lending arrangements between
the lender and the borrower. There is no secondary market for
these notes, although they are redeemable and thus immediately
repayable by the borrower at face value, plus accrued interest, at
any time. Accordingly, where these obligations are not secured by
letters of credit or other credit support arrangements, Money
Fund's right to redeem is dependent upon the ability of the
borrower to pay principal and interest on demand. In evaluating
the master demand arrangements, the Manager considers the earning
power, cash flow, and other liquidity ratios of the issuer. If
they are not rated by Rating Organizations, Money Fund may invest
in them only if, at the time of an investment, they are Eligible
Securities. The Manager will continuously monitor the borrower's
financial ability to meet all of its obligations because Money
Fund's liquidity might be impaired if the borrower were unable to
pay principal and interest on demand. There is no limit on the
amount of the Money Fund's assets that may be invested in floating
rate and variable rate obligations. Floating rate or variable rate
obligations which do not provide for recovery of principal and
interest within seven days' notice will be subject to the
limitations applicable to illiquid securities described in "Other
Investment Techniques and Strategies -Illiquid and Restricted
Securities" in the Prospectus.
Money Fund, High Income Fund, Bond Fund and Strategic Bond
Fund. The market value of fixed income securities in which Money
Fund, High Income Fund, Bond Fund and Strategic Bond Fund may
invest generally will be affected by changes in the level of
interest rates. An increase in interest rates will tend to reduce
the market value of fixed income investments, and a decline in
interest rates will tend to increase their value. In order to take
advantage of differences in securities prices and yields or of
fluctuations in interest rates, consistent with their respective
investment objectives, these Funds may trade for short-term
profits.
High Yield Securities. As stated in the Prospectus, the
corporate debt in which High Income Fund and Strategic Bond Fund
will principally invest may be in the lower rating categories.
Risks of high yield securities include: (i) limited liquidity
and secondary market support, (ii) substantial market price
volatility resulting from changes in prevailing interest rates,
(iii) subordination to the prior claims of banks and other senior
lenders, (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest
rates which may cause the Fund to invest premature redemption
proceeds in lower yielding portfolio securities, (v) the
possibility that earnings of the issuer may be insufficient to meet
its debt service, and (vi) the issuer's low creditworthiness and
potential for insolvency during periods of rising interest rates
and economic downturn. As a result of the limited liquidity of high
yield securities, their prices have at times experienced
significant and rapid decline when a substantial number of holders
decided to sell. A decline is also likely in the high yield bond
market during an economic downturn. An economic downturn or an
increase in interest rates could severely disrupt the market for
high yield bonds and adversely affect the value of outstanding
bonds and the ability of the issuers to repay principal and
interest. In addition, there have been several Congressional
attempts to limit the use of tax and other advantages of high yield
bonds which, if enacted, could adversely affect the value of these
securities and the net asset value of these two Funds. For
example, federally-insured savings and loan associations have been
required to divest their investments in high yield bonds.
Capital Appreciation Fund, Growth Fund, Multiple Strategies
Fund, Growth & Income Fund, Strategic Bond Fund and Global
Securities Fund. The investment risks and rewards of certain of
the investment policies of these six Funds are discussed below.
Securities of Growth-Type Companies. Capital Appreciation
Fund, Growth Fund and Global Securities Fund may emphasize
securities of "growth-type" companies. Such issuers typically are
those whose goods or services have relatively favorable long-term
prospects for increasing demand, or ones which develop new
products, services or markets and normally retain a relatively
large part of their earnings for research, development and
investment in capital assets. They may include companies in the
natural resources fields or those developing industrial
applications for new scientific knowledge having potential for
technological innovation, such as nuclear energy, oceanography,
business services and new customer products.
Small, Unseasoned Companies. Each of these six Funds may
invest in securities of small unseasoned companies. These are
companies that have been in operation for less than three years,
even after including the operations of any of their predecessors.
Securities of these companies may have a limited liquidity (which
means that a Fund may have difficulty selling them at an acceptable
price when it wants to) and the price of those securities may be
volatile.
Domestic Securities. Investments by Strategic Bond Fund,
Growth & Income Fund and Multiple Strategies Fund in fixed-income
securities issued by domestic corporations may include
participation interests, asset-backed securities and other debt
obligations (bonds, debentures, notes, mortgage-backed securities
and CMOs) together with preferred stocks.
Investment Policies - Collateralized Securities. Each of
these Funds may invest in the collateralized securities described
below. High Income Fund, Bond Fund and Strategic Bond Fund are
most likely to make such investments.
Asset-Backed Securities. The value of an asset-backed
security is affected by changes in the market's perception of the
asset backing the security, the creditworthiness of the servicing
agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also
affected if any credit enhancement has been exhausted. The risks
of investing in asset-backed securities are ultimately dependent
upon payment of consumer loans by the individual borrowers. As a
purchaser of an asset-backed security, the Fund would generally
have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject
to prepayments, which shorten the weighted average life of asset-
backed securities and may lower their return, in the same manner as
described above for prepayments of a pool of mortgage loans
underlying mortgage-backed securities.
Mortgage-Backed Securities. These securities represent
participation interests in pools of residential mortgage loans
which may or may not be guaranteed by agencies or instrumentalities
of the U.S. Government. Such securities differ from conventional
debt securities which generally provide for periodic payment of
interest in fixed or determinable amounts (usually semi-annually)
with principal payments at maturity or specified call dates.
Mortgage-backed securities may be backed by the full faith and
credit of the U.S. Treasury (e.g., direct pass-through certificates
of Government National Mortgage Association); some are supported by
the right of the issuer to borrow from the U.S. Government (e.g.,
obligations of Federal Home Loan Mortgage Corporation); and some
are backed by only the credit of the issuer itself. Those
guarantees do not extend to the value or yield of the mortgage-
backed securities themselves or to the net asset value of the
Fund's shares. Any of those government agencies may also issue
collateralized mortgage-backed obligations, discussed below.
The yield on mortgage-backed securities is based on the
average expected life of the underlying pool of mortgage loans.
The actual life of any particular pool will be shortened by any
unscheduled or early payments of principal and interest. Principal
prepayments generally result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages.
The occurrence of prepayments is affected by a wide range of
economic, demographic and social factors and, accordingly, it is
not possible to predict accurately the average life of a particular
pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool, or, in the case of
newly-issued mortgages, the prepayment history of similar pools.
The actual prepayment experience of a pool of mortgage loans may
cause the yield realized by the Fund to differ from the yield
calculated on the basis of the expected average life of the pool.
Prepayments tend to increase during periods of falling
interest rates, while during periods of rising interest rates
prepayments will most likely decline. When prevailing interest
rates rise, the value of a pass-through security may decrease as do
the values of other debt securities, but, when prevailing interest
rates decline, the value of a pass-through security is not likely
to rise to the extent that the values of other debt securities
rise, because of the prepayment feature of pass-through securities.
The Fund's reinvestment of scheduled principal payments and
unscheduled prepayments it receives may occur at times when
available investments offer higher or lower rates than the original
investment, thus affecting the yield of the Fund. Monthly interest
payments received by the Fund have a compounding effect which may
increase the yield to the Fund more than debt obligations that pay
interest semi-annually. Because of those factors, mortgage-backed
securities may be less effective than Treasury bonds of similar
maturity at maintaining yields during periods of declining interest
rates. The Fund may purchase mortgage-backed securities at a
premium or at a discount. Accelerated prepayments adversely affect
yields for pass-through securities purchased at a premium (i.e., at
a price in excess of their principal amount) and may involve
additional risk of loss of principal because the premium may not
have been fully amortized at the time the obligation is repaid.
The opposite is true for pass-through securities purchased at a
discount. The Fund may purchase mortgage-backed securities at a
premium or at a discount.
The Fund may invest in "stripped" mortgage backed securities,
in which the principal and interest portions of the security are
separated and sold. Stripped mortgage-backed securities usually
have at least two classes each of which receives different
proportions of interest and principal distributions on the
underlying pool of mortgage assets. One common variety of stripped
mortgage-backed security has one class that receives some of the
interest and most of the principal, while the other class receives
most of the interest and remainder of the principal. In some cases,
one class will receive all of the interest (the "interest-only" or
"IO" class), while the other class will receive all of the
principal (the "principal-only" or "PO" class). Interest only
securities are extremely sensitive to interest rate changes, and
prepayments of principal on the underlying mortgage assets. An
increase in principal payments or prepayments will reduce the
income available to the IO security. In other types of CMOs, the
underlying principal payments may apply to various classes in a
particular order, and therefore the value of certain classes or
"tranches" of such securities may be more volatile that the value
of the pool as a whole, and losses may be more severe than on other
classes.
Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs
are fully-collateralized bonds that are the general obligations of
the issuer thereof, either the U.S. Government, a U.S. Government
instrumentality, or a private issuer. Such bonds generally are
secured by an assignment to a trustee (under the indenture pursuant
to which the bonds are issued) of collateral consisting of a pool
of mortgages. Payments with respect to the underlying mortgages
generally are made to the trustee under the indenture. Payments of
principal and interest on the underlying mortgages are not passed
through to the holders of the CMOs as such (i.e., the character of
payments of principal and interest is not passed through, and
therefore payments to holders of CMOs attributable to interest paid
and principal repaid on the underlying mortgages do not necessarily
constitute income and return of capital, respectively, to such
holders), but such payments are dedicated to payment of interest on
and repayment of principal of the CMOs. CMOs often are issued in
two or more classes with different characteristics such as varying
maturities and stated rates of interest. Because interest and
principal payments on the underlying mortgages are not passed
through to holders of CMOs, CMOs of varying maturities may be
secured by the same pool of mortgages, the payments on which are
used to pay interest on each class and to retire successive
maturities (known as "tranches") in sequence. Unlike other
mortgage-backed securities (discussed above), CMOs are designed to
be retired as the underlying mortgages are repaid. In the event of
prepayment on such mortgages, the class of CMO first to mature
generally will be paid down. Therefore, although in most cases the
issuer of CMOs will not supply additional collateral in the event
of such prepayment, there will be sufficient collateral to secure
CMOs that remain outstanding.
Participation Interests. Strategic Bond Fund, Global
Securities Fund, High Income Fund, Multiple Strategies Fund and
Growth & Income Fund may invest in participation interests, subject
to the limitation, described in "Illiquid and Restricted
Securities" in the Prospectus, on investments by the Fund in
illiquid investments. Participation interests provide the Fund an
undivided interest in a loan made by the issuing financial
institution in the proportion that the Fund's participation
interest bears to the total principal amount of the loan. It is
currently intended that no more than 5% of the net assets of
Multiple Strategies Fund, Growth & Income Fund or Strategic Bond
Fund can be invested in participation interests of the same
borrower. Participation interests are primarily dependent upon the
creditworthiness of the borrowing corporation, which is obligated
to make payments of principal and interest on the loan, and there
is a risk that such borrowers may have difficulty making payments.
In the event the borrower fails to pay scheduled interest or
principal payments, the Fund could experience a reduction in its
income and might experience a decline in the net asset value of its
shares. In the event of a failure by the financial institution to
perform its obligation in connection with the participation
agreement, the Fund might incur certain costs and delays in
realizing payment or may suffer a loss of principal and/or
interest.
Foreign Securities. As noted in the Prospectus, each Fund,
other than Money Fund, may invest in securities (which may be
denominated in U.S. dollars or non-U.S. currencies) issued or
guaranteed by foreign corporations, certain supranational entities
(described below) and foreign governments or their agencies or
instrumentalities, and in securities issued by U.S. corporations
denominated in non-U.S. currencies. All of these are considered to
be "foreign securities." Money Fund may invest in certain U.S.
dollar-denominated foreign securities, as described in the
Prospectus. The obligations of foreign governmental entities may or
may not be supported by the full faith and credit of a foreign
government. Obligations of supranational entities include those of
international organizations designated or supported by governmental
entities to promote economic reconstruction or development and of
international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the Inter-American
Development Bank. The governmental members, or "stockholders,"
usually make initial capital contributions to the supranational
entity and in many cases are committed to make additional capital
contributions if the supranational entity is unable to repay its
borrowings. Each supranational entity's lending activities are
limited to a percentage of its total capital (including "callable
capital" contributed by members at the entity's call), reserves and
net income. There is no assurance that foreign governments will be
able or willing to honor their commitments.
Investing in foreign securities, and in particular in
securities in emerging market countries, involves considerations
and risks not typically associated with investing in securities in
the U.S. The values of foreign securities will be affected by
changes in currency rates or exchange control regulations or
currency blockage, application of foreign tax laws, including
withholding taxes, changes in governmental administration or
economic or monetary policy (in the U.S. or abroad) or changed
circumstances in dealings between nations. Costs will be incurred
in connection with conversions between various currencies. Foreign
brokerage commissions are generally higher than commissions in the
U.S., and foreign securities markets may be less liquid, more
volatile and less subject to governmental regulation than in the
U.S. Investments in foreign countries could be affected by other
factors not generally thought to be present in the U.S., including
expropriation or nationalization, confiscatory taxation and
potential difficulties in enforcing contractual obligations, and
could be subject to extended settlement periods.
Because each Fund, other than Money Fund, may purchase
securities denominated in foreign currencies, a change in the value
of any such currency against the U.S. dollar will result in a
change in the U.S. dollar value of each Fund's assets and each
Fund's income available for distribution. In addition, although a
portion of each Fund's investment income may be received or
realized in foreign currencies, the Fund will be required to
compute and distribute its income in U.S. dollars, and absorb the
cost of currency fluctuations. High Income Fund, Strategic Bond
Fund, Multiple Strategies Fund, Growth & Income Fund and Global
Securities Fund may engage in foreign currency exchange
transactions for hedging purposes to attempt to protect against
changes in future exchange rates. See "Hedging - Forward
Contracts," below.
The values of foreign investments and the investment income
derived from them may also be affected unfavorably by changes in
currency exchange control regulations. Although each Fund, other
than Money Fund, will invest only in securities denominated in
foreign currencies that at the time of investment do not have
significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of
currency controls. In addition, the values of foreign securities
will fluctuate in response to changes in U.S. and foreign interest
rates.
Investments in foreign securities offer potential benefits not
available from investments solely in securities of domestic issuers
by offering the opportunity to invest in foreign issuers that
appear to offer growth potential, or in foreign countries with
economic policies or business cycles different from those of the
U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner
parallel to U.S. markets. From time to time, U.S. government
policies have discouraged certain investments abroad by U.S.
investors, through taxation or other restrictions, and it is
possible that such restrictions could be reimposed. If a Fund's
portfolio securities are held abroad, the countries in which they
may be held and the sub-custodians or depositories holding them
must be approved by the Trust's Board of Trustees to the extent
that the approval is required under applicable rules of the
Securities and Exchange Commission.
Under normal market conditions, Global Fund will invest its
assets in securities of issuers located in a minimum of five
different foreign countries; this minimum may be reduced to four
foreign countries when foreign country investments comprise less
than 80% of the Fund's net assets; to three foreign countries when
such investments comprise less than 60% of its net assets, to two
foreign countries when such investments comprise less than 40% of
its net assets and to one foreign country when such investments
comprise less than 20% of its net assets. In addition, no more
than 20% of Global Fund's net assets shall be invested in
securities of issuers located in any one foreign country; that
limit shall be increased to 35% for securities located in
Australia, Canada, France, Japan, the United Kingdom or Germany.
None of the above percentage limits are fundamental policies.
Warrants and Rights. As described in the Prospectus, each
Fund other than Money Fund may invest in warrants and rights.
Warrants basically are options to purchase equity securities at set
prices valid for a specified period of time. Their prices do not
necessarily move in a manner parallel to the prices of the
underlying securities. Any price paid for a warrant will be lost
unless the warrant is exercised prior to its expiration. Rights
are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. Warrants
and rights have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.
Repurchase Agreements. These Funds may acquire securities
that are subject to repurchase agreements in order to generate
income while providing liquidity as set forth in the prospectus.
Money Fund's repurchase agreements must comply with the collateral
requirements of Rule 2a-7 under the Investment Company Act. In a
repurchase transaction, a Fund acquires a security from, and
simultaneously resells it to, an approved vendor (a U.S. commercial
bank or the U.S. branch of a foreign bank or broker-dealer which
has been designated a primary dealer in government securities which
must meet the credit requirements set by the Trust's Board of
Trustees from time to time) for delivery on an agreed-upon future
date. The resale price exceeds the purchase price by an amount
that reflects an agreed-upon interest rate effective for the period
during which the repurchase agreement is in effect. The majority
of these transactions run from day to day, and delivery pursuant to
resale typically will occur within one to five days of the
purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security.
The Funds' repurchase agreements require that at all times while
the repurchase agreement is in effect, the value of the collateral
must equal or exceed the repurchase price to fully collateralize
the repayment obligation. Additionally, the Funds' Manager will
impose creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's
value.
Loans of Portfolio Securities. Each Fund may lend its
respective portfolio securities subject to the restrictions stated
in the Prospectus. Under applicable regulatory requirements (which
are subject to change), the loan collateral must, on each business
day, at least equal the value of the loaned securities and must
consist of cash, bank letters of credit, U.S. Government
securities, or certain other cash equivalents. To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts
demanded by the Trust if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Trust.
Any Fund lending its securities receives amounts equal to the
dividends declared or interest paid on the loaned securities during
the term of the loan as well as the interest on the collateral
securities, less any finders', administrative or other fees the
Fund pays in connection with the loan. A Fund may share the
interest it receives on the collateral securities with the borrower
as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by the Board of
Trustees. The lending Fund will not lend its portfolio securities
to any officer, trustee, employee or affiliate of the Fund or its
Manager. The terms of a Fund's loans must meet certain tests under
the Internal Revenue Code and permit it to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
Borrowing. From time to time, each of Capital Appreciation
Fund, Strategic Bond Fund, Growth Fund, Multiple Strategies Fund,
Growth & Income Fund and Global Fund may borrow from banks on an
unsecured basis to invest the borrowed funds in portfolio
securities. Borrowing is subject to the restrictions stated in the
Prospectus. Any such borrowing will be made only from banks. The
Investment Company Act requires that any such borrowing will be
made only to the extent that the value of that Fund's assets, less
its liabilities other than borrowings, is equal to at least 300% of
all borrowings including the proposed borrowing, as stated in
addition to other percentage restrictions in the Prospectus. If
the value of such Fund's assets, when computed in that manner,
should fail to meet the 300% asset coverage requirement, that Fund
is required within three days to reduce its bank debt to the extent
necessary to meet such requirement. To do so, the Fund may have to
sell a portion of its investments at a time when it would otherwise
not want to sell the securities. Borrowing for investment
increases both investment opportunity and risk. Interest on money
borrowed is an expense these six Funds would not otherwise incur,
so that they may have little or no net investment income during
periods of substantial borrowings. Since substantially all of
these Funds' assets fluctuate in value whereas borrowing
obligations are fixed, when a Fund has outstanding borrowings, its
net asset value will tend to increase and decrease more when its
portfolio assets increase or decrease than would otherwise be the
case. Money Fund, High Income Fund and Bond Fund may only borrow
as a temporary measure for extraordinary or emergency purposes.
When-Issued and Delayed Delivery Transactions. Each Fund
may purchase securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. Although a
Fund will enter into such transactions for the purpose of acquiring
securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the Fund may dispose of a commitment
prior to settlement. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery.
When such transactions are negotiated the price (which is generally
expressed in yield terms) is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a
later date. The commitment to purchase a security for which
payment will be made on a future date may be deemed a separate
security and involve risk of loss if the value of the security
declines prior to the settlement date. During the period between
commitment by a Fund and settlement (generally within two months
but not to exceed 120 days), no payment is made for the securities
purchased by the purchaser, and no interest accrues to the
purchaser from the transaction. Such securities are subject to
market fluctuation; the value at delivery may be less than the
purchase price. The Fund will identify assets to its Custodian,
consisting of cash, U.S. Government securities, or other high grade
debt securities rated "A" or better by Moody's or Standard & Poor's
at least equal to the value of purchase commitments until payment
is made.
The Funds will engage in when-issued transactions in order to
secure what is considered to be an advantageous price and yield at
the time of entering into the obligation. When a Fund engages in
when-issued or delayed delivery transactions, it relies on the
buyer or seller, as the case may be, to consummate the transaction.
Failure to do so may result in the Fund losing the opportunity to
obtain a price and yield considered to be advantageous. If any of
the Funds chooses to (i) dispose of the right to acquire a when-
issued security prior to its acquisition or (ii) dispose of its
right to deliver or receive against a forward commitment, it may
incur a gain or loss. At the time the Fund makes a commitment to
purchase or sell a security on a when-issued or forward commitment
basis, it records the transaction and reflects the value of the
security purchased, or if a sale, the proceeds to be received in
determining its net asset value.
To the extent any Fund engages in when-issued and delayed
delivery transactions, it will do so for the purpose of acquiring
or selling securities consistent with its investment objective and
policies and not for the purposes of investment leverage. Each
Fund enters into such transactions only with the intention of
actually receiving or delivering the securities, although (as noted
above), when-issued securities and forward commitments may be sold
prior to settlement date. In addition, changes in interest rates
in a direction other than that expected by the Manager before
settlement will affect the value of such securities and may cause
loss to that Fund.
When-issued transactions and forward commitments allow a Fund
a technique to use against anticipated changes in interest rates
and prices. For instance, in periods of rising interest rates and
falling prices, the Fund might sell securities in its portfolio on
a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates
and rising prices, a Fund might sell portfolio securities and
purchase the same or similar securities on a when-issued or forward
commitment basis, thereby obtaining the benefit of currently higher
cash yields.
Other Investment Techniques and Strategies
Covered Calls and Hedging
As described in the Prospectus, each Fund (except Money Fund)
may each write covered calls and may also employ one or more types
of Hedging Instruments, including the futures identified in the
Prospectus ("Futures").
The Funds' strategy of hedging with Futures and options on
Futures will be incidental to each such Fund's activities in the
underlying cash market. When hedging to attempt to protect against
declines in the market value of the Fund's portfolio, to permit the
Fund to retain unrealized gains in the value of portfolio
securities which have appreciated, or to facilitate selling
securities for investment reasons, a given Fund would: (i) sell
Futures, (ii) purchase puts on such Futures or securities, or (iii)
write covered calls on securities or on Futures. When hedging to
permit a Fund to establish a position in the securities markets as
a temporary substitute for purchasing individual securities (which
that Fund will normally purchase, and then terminate that hedging
position), or to attempt to protect against the possibility that a
Fund's portfolio debt securities are not fully included in a rise
in the securities market, these Funds may: (i) purchase Futures, or
(ii) purchase calls on such Futures or on securities.
When hedging to attempt to protect against declines in the
dollar value of a foreign currency-denominated security or in a
payment on such security, a Fund would: (a) purchase puts on that
foreign currency or on foreign currency Futures, (b) write calls on
that currency or on such Futures, or (c) enter into Forward
Contracts at a lower or higher rate than the spot ("cash") rate.
Additional information about the Hedging Instruments these Funds
may use is provided below. At present, the Funds do not intend to
purchase or sell Futures or related options if, after any such
purchase, the sum of initial margin deposits on Futures and
premiums paid for related options exceeds 5% of the value of that
Fund's total assets. Certain options on foreign currencies are
considered related options for this purpose. In the future, a Fund
may employ Hedging Instruments and strategies that are not
presently contemplated but which may be developed, to the extent
such investment methods are consistent with that Fund's investment
objective, legally permissible and adequately disclosed.
Writing Covered Call Options. When any of the Funds (except Money
Fund) write a call on a security, it receives a premium and agrees
to sell the underlying security to a purchaser of a corresponding
call on the same security during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the
market price of the underlying security), regardless of market
price changes during the call period. Such Fund has retained the
risk of loss should the price of the underlying security decline
during the call period, which may be offset to some extent by the
premium.
To terminate its obligation on a call it has written, each
such Fund may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized, depending upon
whether the net of the amount of the option transaction costs and
the premium received on the call written was more or less than the
price of the call subsequently purchased. A profit may also be
realized if the call expires unexercised, because a Fund retains
the underlying security and the premium received. Any such profits
are considered short-term capital gains for Federal income tax
purposes, and when distributed by each such Fund are taxable as
ordinary income. If the Fund could not effect a closing purchase
transaction due to lack of a market, it would have to hold the
callable securities until the call expired or was exercised. Call
writing may affect a Fund's turnover rate and brokerage
commissions. The exercise of calls written by a Fund may cause
that Fund to sell related portfolio securities, thus increasing its
turnover rate in a manner beyond its control.
The Funds may also write (and purchase) calls on foreign
currencies. A call written on a foreign currency by any of the
Funds is "covered" if the Fund owns the underlying foreign currency
covered by the call or has an absolute and immediate right to
acquire that foreign currency without additional cash consideration
(or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other foreign
currency held in its portfolio. A call written by any of the Funds
on a foreign currency is for cross-hedging purposes if it is not
covered, but is designed to provide a hedge against a decline (due
to an adverse change in the exchange rate) in the U.S. dollar value
of a security which the Fund owns or has the right to acquire and
which is denominated in the currency underlying the option. In
such circumstances, the Fund collateralizes the option by
maintaining in a segregated account with the Funds' custodian, cash
or U.S. Government securities in an amount not less than the value
of the underlying foreign currency in U.S. dollars marked-to-market
daily.
A Fund may also write calls on Futures without owning a
futures contract (or, with respect to the High Income Fund, a
deliverable bond) provided that at the time the call is written,
the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional
liquid assets if the value of the escrowed assets drops below 100%
of the current value of the Future. In no circumstances would an
exercise notice require a Fund to deliver a futures contract; it
would simply put the Fund in a short futures position, which is
permitted by each Fund's hedging policies.
Hedging. Set forth below are the Hedging Instruments which the
Funds (except Money Fund) may use.
Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy,
the underlying investment at the exercise price during the option
period. Writing a put covered by segregated liquid assets equal to
the exercise price of the put has the same economic effect to a
Fund as writing a covered call. The premium the Fund receives from
writing a put option represents a profit, as long as the price of
the underlying investment remains above the exercise price.
However, a Fund has also assumed the obligation during the option
period to buy the underlying investment from the buyer of the put
at the exercise price, even though the value of the investment may
fall below the exercise price. If the put expires unexercised, the
Fund (as the writer of the put) realizes a gain in the amount of
the premium less transaction costs. If the put is exercised, the
Fund must fulfill its obligation to purchase the underlying
investment at the exercise price, which will usually exceed the
market value of the investment at that time. In that case, the
Fund may incur a loss, equal to the sum of the sale price of the
underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options on securities or on foreign
currencies, to secure its obligation to pay for the underlying
security, the Fund will earmark liquid assets with a value equal to
or greater than the exercise price of the underlying securities.
The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long
as the obligation of the Fund as the put writer continues, it may
be assigned an exercise notice by the exchange or broker-dealer
through whom such option was sold, requiring the Fund to take
delivery of the underlying security against payment of the exercise
price. The Fund may be assigned an exercise notice at any time
prior to the termination of its obligation as the writer of the
put. This obligation terminates upon expiration of the put, or
such earlier time at which the Fund effects a closing purchase
transaction by purchasing a put of the same series as that
previously sold. Once the Fund has been assigned an exercise
notice, it is thereafter not allowed to effect a closing purchase
transaction.
The Fund may effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent
an underlying security from being put. Furthermore, effecting such
a closing purchase transaction will permit the Fund to write
another put option to the extent that the exercise price thereof is
secured by the deposited assets, or to utilize the proceeds from
the sale of such assets for other investments by that Fund. The
Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the
premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary
income.
Purchasing Calls and Puts. When a Fund purchases a call
(other than in a closing purchase transaction), it pays a premium
and has the right to buy the underlying investment from a seller of
a corresponding call on the same investment during the call period
at a fixed exercise price. The Fund benefits only if the call is
sold at a profit or if, during the call period, the market price of
the underlying investment is above the sum of the call price plus
the transaction costs and the premium paid for the call and the
call is exercised. If the call is not exercised or sold (whether
or not at a profit), it will become worthless at its expiration
date and the Fund will lose its premium payment and the right to
purchase the underlying investment.
When such Fund purchases a put, it pays a premium and has the
right to sell the underlying investment to a seller of a put on a
corresponding investment during the put period at a fixed exercise
price. Buying a put on securities or Futures a Fund owns enables
the Fund to attempt to protect itself during the put period against
a decline in the value of the underlying investment below the
exercise price by selling the underlying investment at the exercise
price to a seller of a corresponding put. If the market price of
the underlying investment is equal to or above the exercise price
and, as a result, the put is not exercised or resold, the put will
become worthless at its expiration date and the Fund will lose its
premium payment and the right to sell the underlying investment;
the put may, however, be sold prior to expiration (whether or not
at a profit).
Purchasing a put on either Futures or on securities it does
not own permits a Fund either to resell the put or, if applicable,
to buy the underlying investment and sell it at the exercise price.
The resale price of the put will vary inversely with the price of
the underlying investment. If the market price of the underlying
investment is above the exercise price, and, as a result, the put
is not exercised, the put will become worthless on its expiration
date. In the event of a decline in price of the underlying
investment, the Fund could exercise or sell the put at a profit to
attempt to offset some or all of its loss on its portfolio
securities. When the Fund purchases a put on a Future or security
not held by it, the put protects the Fund to the extent that the
prices of the underlying Future or securities move in a similar
pattern to the prices of the securities in a Fund's portfolio.
Futures. No price is paid or received upon the purchase or
sale of a Future. Upon entering into a Futures transaction, a Fund
will be required to deposit an initial margin payment with the
futures commission merchant (the "futures broker"). The initial
margin will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however the futures broker
can gain access to that account only under specified conditions.
As the Future is marked to market to reflect changes in its market
value, subsequent margin payments, called variation margin, will be
paid to or by the futures broker on a daily basis. Prior to
expiration of the Future, if the Fund elects to close out its
position by taking an opposite position, a final determination of
variation margin is made, additional cash is required to be paid by
or released to the Fund, and any loss or gain is realized for tax
purposes. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts
are traded.
Forward Contracts. A Forward Contract involves bilateral
obligations of one party to purchase, and another party to sell, a
specific currency at a future date (which may be any fixed number
of days from the date of the contract agreed upon by the parties),
at a price set at the time the contract is entered into. These
contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their
customers.
The Funds may use Forward Contracts to protect against
uncertainty in the level of future exchange rates. The use of
Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities the Fund owns or intends to acquire, but
it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the
value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies
increase.
These Funds may enter into Forward Contracts with respect to
specific transactions. For example, when a Fund enters into a
contract for the purchase or sale of a security denominated in a
foreign currency, or when a Fund anticipates receipt of dividend
payments in a foreign currency, a Fund may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of
such payment by entering into a Forward Contract, for a fixed
amount of U.S. Dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the
underlying transaction. A Fund will thereby be able to protect
itself against a possible loss resulting from an adverse change in
the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold,
or on which the payment is declared, and the date on which such
payments are made or received.
These Funds may also use Forward Contracts to lock in the U.S.
dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when a Fund believes that foreign
currency may suffer a substantial decline against the U.S. dollar,
it may enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of that
Fund's portfolio securities denominated in such foreign currency,
or when a Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a
fixed dollar amount. In this situation the Fund may, in the
alternative, enter into a Forward Contract to sell a different
foreign currency for a fixed U.S. dollar amount where that Fund
believes that the U.S. dollar value of the currency to be sold
pursuant to the Forward Contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio
securities of that Fund are denominated ("cross-hedge").
These Funds will not enter into such Forward Contracts or
maintain a net exposure to such contracts where the consummation of
the contracts would obligate that Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency or another
currency that is also the subject of the hedge. The Fund, however,
in order to avoid excess transactions and transaction costs, may
maintain a net exposure to Forward Contracts in excess of the value
of the Fund's portfolio securities or other assets denominated in
these currencies provided the excess amount is "covered" by liquid,
high-grade debt securities, denominated in that foreign currency or
U.S. dollars, at least equal at all times to the amount of such
excess. As an alternative, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than
the forward contract price or the Fund may purchase a put option
permitting the Fund to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than
the forward contract price. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the
value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
these securities between the date the Forward Contract is entered
into and the date it is sold. Accordingly, it may be necessary for
a Fund to purchase additional foreign currency on the spot (i.e.,
cash) market (and bear the expense of such purchase), if the market
value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency
a Fund is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing a Fund
to sustain losses on these contracts and transactions costs.
At or before the maturity of a Forward Contract requiring any
Fund to sell a currency, the Fund may either sell a portfolio
security and use the sale proceeds to make delivery of the currency
or retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to
which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly,
the Fund may close out a Forward Contract requiring it to purchase
a specified currency by entering into a second contract entitling
it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss
as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the
contract period and the market conditions then prevailing. Because
Forward Contracts are usually entered into on a principal basis, no
fees or commissions are involved. Because such contracts are not
traded on an exchange, a Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward
Contract.
Although each Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Fund may
convert foreign currency from time to time, and investors should be
aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to
realize a profit based on the difference between the prices at
which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should that Fund desire to
resell that currency to the dealer.
Interest Rate Swap Transactions. The risk incurred by Bond
Fund, High Income Fund and Strategic Bond Fund in entering into a
swap agreement is twofold: interest rate risk and credit risk.
There is a risk that, based on movements of interest rates in the
future, the payments made by the Fund under a swap agreement will
have been greater than those received by it. Credit risk arises
from the possibility that the counterparty will default. If the
counterparty to an interest rate swap defaults, the Fund's loss
will consist of the net amount of contractual interest payments
that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. These Funds will enter into swap
transactions with appropriate counterparties pursuant to master
netting agreements. A master netting agreement provides that all
swaps done between the Fund and that counterparty under the master
agreement shall be regarded as parts of an integral agreement. If
on any date amounts are payable in the same currency in respect of
one or more swap transactions, the net amount payable on that date
in that currency shall be paid. In addition, the master netting
agreement may provide that if one party defaults generally or on
one swap, the counterparty may terminate the swaps with that party.
Under such agreements, if there is a default resulting in a loss to
one party, the measure of that party's damages is calculated by
reference to the average cost of a replacement swap with respect to
each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are
then netted, and the result is the counterparty's gain or loss on
termination. The termination of all swaps and the netting of gains
and losses on termination is generally referred to as
"aggregation."
Additional Information About Hedging Instruments and Their
Use. Each Fund's Custodian, or a securities depository acting for
the Custodian, will act as that Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
securities on which the Fund has written options or as to other
acceptable escrow securities, so that no margin will be required
for such transactions. OCC will release the securities on the
expiration of the option or upon the Fund's entering into a closing
transaction. An option position may be closed out only on a market
which provides secondary trading for options of the same series,
and there is no assurance that a liquid secondary market will exist
for any particular option.
When a Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a securities dealer, which would
establish a formula price at which that Fund would have the
absolute right to repurchase that OTC option. This formula price
would generally be based on a multiple of the premium received for
the option, plus the amount by which the option is exercisable
below for a put, above for a call, the market price of the
underlying security ("in-the-money"). For any OTC option which any
of these three Funds writes, it will treat as illiquid (for
purposes of the 15% of net assets restriction on illiquid
securities, stated in the Prospectus) the mark-to-market value of
any OTC option held by it, unless subject to a buy-back agreement
with the executing broker. The SEC is evaluating the general issue
of whether or not OTC options should be considered as liquid
securities, and the procedure described above could be affected by
the outcome of that evaluation.
Each Fund's option activities may affect its turnover rate and
brokerage commissions. As noted above, the exercise of calls
written by a Fund may cause that Fund to sell related portfolio
securities, thus increasing its turnover rate in a manner beyond a
Fund's control. The exercise by a Fund of puts on securities or
Futures may cause the sale of related investments, also increasing
portfolio turnover. Although such exercise is within the Fund's
control, holding a put might cause the Fund to sell the underlying
investment for reasons which would not exist in the absence of the
put. Each Fund will pay a brokerage commission each time it buys
or sells a call, buys a put or sells an underlying investment in
connection with the exercise of a put or call. Such commissions
may be higher than those which would apply to direct purchases or
sales of the underlying investments. Premiums paid for options are
small in relation to the market value of such investments and
consequently, put and call options offer large amounts of leverage.
The leverage offered by trading in options could result in a Fund's
net asset value being more sensitive to changes in the value of the
underlying investment.
Regulatory Aspects of Hedging Instruments. These Funds must
each operate within certain restrictions as to its long and short
positions in Futures and options thereon under a rule (the "CFTC
Rule") adopted by the Commodity Futures Trading Commission (the
"CFTC") under the Commodity Exchange Act (the "CEA"), which
excludes the Fund from registration with the CFTC as a "commodity
pool operator" (as defined in the CEA) if it complies with the CFTC
Rule. The Rule does not limit the percentage of each Fund's assets
that may be used for Futures margin and related options premiums
for a bona fide hedging position. However, under the Rule each
Fund must limit its aggregate initial futures margin and related
option premiums to no more than 5% of that Fund's net assets for
hedging strategies that are not considered bona fide hedging
strategies under the Rule. Under the restrictions, each Fund also
must, as to its short positions, use Futures and options thereon
solely for bona-fide hedging purposes within the meaning and intent
of the applicable provisions under the CEA. Certain options on
foreign currencies are considered related options for this purpose.
Transactions in options by these Funds are subject to
limitations established by each of the exchanges governing the
maximum number of options which may be written or held by a single
investor or group of investors acting in concert, regardless of
whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through
one or more exchanges or brokers. Thus, the number of options
which the Fund may write or hold may be affected by options written
or held by other entities, including other investment companies
having the same or an affiliated investment adviser. Position
limits also apply to Futures. An exchange may order the
liquidation of positions found to be in violation of those limits
and may impose certain other sanctions. Due to requirements under
the Investment Company Act, when a Fund purchases a Future, the
Fund will maintain, in a segregated account or accounts with its
custodian bank, cash or readily-marketable, short-term (maturing in
one year or less) debt instruments in an amount equal to the market
value of the securities underlying such Future, less the margin
deposit applicable to it.
Tax Aspects of Hedging Instruments and Covered Calls. Each
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986. That qualification enables each
Fund to "pass-through" its income and realized capital gains to
shareholders without the Fund having to pay tax on them. One of
the tests for each Fund's qualification is that less than 30% of
its gross income must be derived from gains realized on the sale of
securities held for less than three months. To comply with that
30% cap, the Funds will limit the extent to which they engage in
the following activities, but will not be precluded from them: (i)
selling investments, including Futures, held for less than three
months, whether or not they were purchased on the exercise of a
call held by that Fund; (ii) purchasing calls or puts which expire
in less than three months; (iii) effecting closing transactions
with respect to calls or puts purchased less than three months
previously; (iv) exercising puts held by that Fund for less than
three months; and (v) writing calls on investments held for less
than three months.
Possible Risk Factors in Hedging. In addition to the risks
with respect to options discussed in the Prospectus and above,
there is a risk in using short hedging by: (i) selling Futures or
(ii) purchasing puts on broadly-based indices or Futures to attempt
to protect against declines in the value of the Fund's securities
that the prices of the Futures or applicable index (thus the prices
of the Hedging Instruments) will correlate imperfectly with the
behavior of the cash (i.e., market value prices) of the Fund's
securities. The ordinary spreads between prices in the cash and
futures markets are subject to distortions due to differences in
the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the
futures markets depend on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause
temporary price distortions.
The risk of imperfect correlation increases as the composition
of a Fund's portfolio diverges from the securities included in the
applicable index. To compensate for the imperfect correlation of
movements in the price of the securities being hedged and movements
in the price of the Hedging Instruments, each Fund may use Hedging
Instruments in a greater dollar amount than the dollar amount of
securities being hedged if the historical volatility of the prices
of such securities being hedged is more than the historical
volatility of the applicable index. It is also possible that where
a Fund has used Hedging Instruments in a short hedge, the market
may advance and the value of securities held in the Fund's
portfolio may decline. If this occurred, the Fund would lose money
on the Hedging Instruments and also experience a decline in value
in its securities. However, while this could occur for a very
brief period or to a very small degree, over time the value of a
diversified portfolio of equity securities will tend to move in the
same direction as the indices upon which the Hedging Instruments
are based.
If a Fund uses Hedging Instruments to establish a position in
the securities markets as a temporary substitute for the purchase
of individual securities (long hedging) by buying Futures and/or
calls on such Futures, on securities, or on stock indices, it is
possible that the market may decline. If either Fund then
concludes not to invest in such securities at that time because of
concerns as to possible further market decline or for other
reasons, that Fund will realize a loss on the Hedging Instruments
that is not offset by a reduction in the price of the equity
securities purchased.
Short Sales Against-the-Box. Each Fund (except Money Fund)
may sell securities short in "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 the 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. In a short sale against-
the-box, the Fund owns an equivalent amount of the securities sold
short. This technique is primarily used for tax purposes.
Other Investment Restrictions
The significant investment restrictions of all the Funds are
set forth in the Prospectus. The following investment restrictions
are also fundamental policies. Fundamental policies and the Funds'
investment objectives cannot be changed without the vote of a
"majority" of the outstanding shares of the Trust (or of the Fund,
as to matters affecting only that Fund). Under the Investment
Company Act, such a "majority" vote is defined as the vote of the
holders of the lesser of: (1) 67% or more of the shares present or
represented by proxy at such meeting, if the holders of more than
50% of the outstanding shares are present or represented by proxy,
or (2) more than 50% of the outstanding shares.
Under these additional restrictions, each of the Funds cannot:
(1) invest in oil or gas exploration or development programs; (2)
invest in real estate or in interests in real estate, but may
purchase securities of issuers holding real estate or interests
therein; (3) invest in companies for the purpose of acquiring
control of management thereof; (4) underwrite securities of other
companies, except insofar as it might be deemed to be an
underwriter for purposes of the Securities Act of 1933 in the
resale of any securities held in its own portfolio; (5) invest or
hold securities of any issuer if those officers and trustees or
directors of the Trust or its adviser owning individually more than
1/2 of 1% of the securities of such issuer together own more than
5% of the securities of such issuer; or (6) invest in other open-
end investment companies, or invest more than 5% of its net assets
at the time of purchase in closed-end investment companies,
including small business investment companies, nor make any such
investments at commission rates in excess of normal brokerage
commissions.
For purposes of the Funds' policy not to concentrate described
in the fourth investment restriction in the Prospectus, the Funds
have adopted the industry classifications set forth in Appendix A
to the Statement of Additional Information. This is not a
fundamental policy.
New York's insurance laws require that investments of each
Fund be made with a degree of care of an "ordinarily prudent
person." The Manager believes that compliance with this standard
will not have a negative impact on the performance of any of the
Funds. In addition, each Fund's investments must comply with the
diversification requirements contained in Section 817(h) of the
Internal Revenue Code, and each Fund has undertaken to comply with
the diversification requirements of Section 10506 of the California
Insurance Code (see "Other Investment Techniques and Strategies --
Foreign Securities" in the Prospectus) and with the regulations
adopted under those statutes.
How the Funds are Managed
Organization and History. As a Massachusetts business trust, the
Trust is not required to hold, and does not plan to hold, regular
annual meetings of shareholders. The Trust will hold meetings when
required to do so by the Investment Company Act or other applicable
law, or when a shareholder meeting is called by the Trustees or
upon proper request of the shareholders. At all shareholder
meetings, shareholders only vote on matters affecting their Fund.
Shareholders have the right, upon the declaration in writing or
vote of two-thirds of the outstanding shares of the Trust, to
remove a Trustee. The Trustees will call a meeting of shareholders
to vote on the removal of a Trustee upon the written request of the
record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who
have been shareholders for at least six months) holding shares of
the Trust valued at $25,000 or more or holding at least 1% of the
Trust's outstanding shares, whichever is less, stating that they
wish to communicate with other shareholders to request a meeting to
remove a Trustee, the Trustees will then either make the Trust's
shareholder list available to the applicants or mail their
communication to all other shareholders at the applicants' expense,
or the Trustees may take such other action as set forth under
Section 16(c) of the Investment Company Act. At all shareholder
meetings, shareholders only vote on matters affecting their Fund,
and each Fund votes separately on such matters. However, matters
that require a vote by all shareholders of the Trust are submitted
to all the shareholders, without individual voting by Fund.
The Trust's Declaration of Trust contains an express
disclaimer of shareholder or Trustee liability for the Trust's
obligations, and provides for indemnification and reimbursement of
expenses out of its property for any shareholder held personally
liable for its obligations. The Declaration of Trust also provides
that the Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust
and satisfy any judgment thereon. Thus, while Massachusetts law
permits a shareholder of a business trust (such as the Trust) to be
held personally liable as a "partner" under certain circumstances,
the risk of a Trust shareholder incurring financial loss on
account of shareholder liability is limited to the relatively
remote circumstances in which the Trust would be unable to meet its
obligations described above. Any person doing business with the
Trust, and any shareholder of the Trust, agrees under the Trust's
Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand which may arise out of any
dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Trust. The Trust's Trustees and
officers and their principal occupations and business affiliations
during the past five years are set forth below. Each Trustee is
also a Trustee, Director or Managing General Partner of Daily Cash
Accumulation Fund, Inc., Centennial Money Market Trust, Centennial
Tax Exempt Trust, Centennial Government Trust, Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust,
Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income
Fund, Oppenheimer Champion Income Fund, Oppenheimer High Yield
Fund, Oppenheimer Cash Reserves, Oppenheimer Main Street Funds,
Inc., Oppenheimer International Bond Fund, Oppenheimer Integrity
Funds, Oppenheimer Strategic Income Fund, Oppenheimer Strategic
Income & Growth Fund, Oppenheimer Real Asset Fund, Centennial
America Fund, L.P., Oppenheimer Municipal Fund, Oppenheimer
Limited-Term Government Fund, Panorama Series Fund, Inc. and The
New York Tax-Exempt Income Fund, Inc. (collectively, the "Denver-
based Oppenheimer Funds"). Ms. Macaskill is President and Mr. Swain
is Chairman and Chief Executive Officer of each of the Denver-based
Oppenheimer funds. As of March 31, 1997, none of the Trustees or
officers were Account owners and thus none owned any Fund shares.
Robert G. Avis, Trustee*, Age: 65
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and
A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E.
Asset Management and A.G. Edwards Trust Company (its affiliated
investment adviser and trust company, respectively).
William A. Baker, Trustee; Age: 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 66
1501 Quail Street, Newport Beach, California 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services
management company); formerly Vice President of McDonnell Douglas
Space Systems, Co. and associated with the National Aeronautics
and Space Administration.
Sam Freedman, Trustee; Age 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds
Services, Chairman, Chief Executive Officer and a director of
Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), Vice President and a director of
Oppenheimer Acquisition Corp. ("OAC") and a director of the
Manager.
Raymond J. Kalinowski, Trustee; Age: 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; formerly Vice
Chairman and a director of A.G. Edwards, Inc., parent holding
company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which he
was a Senior Vice President.
___________________
*A Trustee who is an "interested person" of the Trust as defined in
the Investment Company Act.
C. Howard Kast, Trustee; Age: 75
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
Robert M. Kirchner, Trustee; Age: 75
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill, President*; Age 48
President, Chief Executive Officer and a Director of the Manager
and HarbourView Asset Management Corporation ("HarbourView"), a
subsidiary of the Manager, Chairman and a director of SSI and SFSI;
President and a director of OAC and Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager, a
director of Oppenheimer Real Asset Management, inc.; formerly an
Executive Vice President of the Manager.
Ned M. Steel, Trustee; Age: 81
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting
Nurse Corporation of Colorado; formerly Senior Vice President and
a Director of Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman, Chief Executive Officer and Trustee*;
Age: 63
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman of the Manager; formerly President and a director of
Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager ("Centennial"); formerly Chairman of the
Board of SSI.
Andrew J. Donohue, Vice President and Secretary; Age: 46
Two World Trade Center, New York, New York 10048-0203
Executive Vice President, General Counsel and a Director of the
Manager, OppenheimerFunds Distributor, Inc. ("OFDI"), HarbourView,
SSI, SFSI, Oppenheimer Partnership Holdings, Inc. and MultiSource
Services, Inc. (a broker-dealer); President and a director of
Centennial; President and a director of Oppenheimer Real Asset
Management, Inc.; General Counsel of OAC; an officer of other
Oppenheimer funds.
George C. Bowen, Vice President and Treasurer; Age: 60
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of OFDI and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and a director of Centennial Capital
Corporation; Senior Vice President, Treasurer and Secretary of SSI;
Vice President, Treasurer and Secretary of SFSI; Treasurer of OAC;
Treasurer of Oppenheimer Partnership Holdings, Inc.; Vice President
and Treasurer of Oppenheimer Real Asset Management, Inc.; Chief
Executive Officer, Treasurer and a director of MultiSource
Services, Inc. (a broker-dealer); an officer of other Oppenheimer
funds.
___________________
*A Trustee who is an "interested person" of the Trust as defined in
the Investment Company Act.
Paul LaRocco, Vice President; Capital Appreciation Fund Portfolio
Manager; Age: 39
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer
funds Associate Portfolio Manager for other Oppenheimer funds;
formerly a securities analyst with Columbus Circle Investors, prior
to which he was investment analyst for Chicago Title & Trust Co.
Jane Putnam, Vice President; Growth Fund Portfolio Manager; Age 36
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; formerly a portfolio manager and
equity research analyst for Chemical Bank.
Michael S. Levine, Growth & Income Fund Assistant Portfolio
Manager; Age: 31
Two World Trade Center, New York, New York 10048-0203
Assistant Vice President and Associate Portfolio Manager of the
Manager; formerly portfolio manager and research associate for Amas
Securities, Inc.; before which he was an analyst for Shearson
Lehman Hutton, Inc.
David P. Negri, Vice President; High Income Fund, Bond Fund,
Multiple Strategies Fund and Strategic Bond Fund Portfolio Manager;
Age: 43
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer
funds.
Richard H. Rubinstein, Vice President; Multiple Strategies Fund
Portfolio Manager; Age: 48
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager; an officer of other
Oppenheimer funds.
William L. Wilby, Vice President; Global Securities Fund Portfolio
Manager; Age: 52
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager and Vice President of
HarbourView; an officer of other Oppenheimer funds; formerly an
international investment strategist at Brown Brothers, Harriman &
Co., prior to which he was a Managing Director and Portfolio
Manager at AIG Global Investors.
Robert J. Milnamow, Vice President; Growth & Income Fund Portfolio
Manager; Age 46
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer
funds; previously a portfolio manager with Phoenix Securities
Group.
Robert G. Zack, Assistant Secretary; Age: 48
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 38
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.
Scott Farrar, Assistant Treasurer; Age: 31
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting, an officer of
other Oppenheimer funds; previously a Fund Controller for the
Manager.
Dorothy Warmack, Vice President; Money Fund Portfolio Manager; Age:
60
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager and Centennial; an officer of other
Oppenheimer funds.
Remuneration of Trustees. The officers of the Trust and one
of the Trustees of the Trust (Mr. Swain) who is affiliated with the
Manager receive no salary or fee from the Trust. The remaining
Trustees of the Trust received the total amounts shown below. Mr.
Freedman became a Trustee on June 27, 1996, and received no
compensation from the Trust before that date. The compensation
from the Trust was paid during its fiscal year ended December 31,
1996. The compensation from all of the Denver-based Oppenheimer
funds includes the Trust and compensation is received as a
director, trustee, managing general partner or member of a
committee or Board of those funds during the calendar year 1996.
<TABLE>
<CAPTION>
Total
Compensation
Aggregate From All
Compensation Denver-based
Name Position From Trust OppenheimerFunds1
<S> <C> <C> <C>
Robert G. Avis Trustee $3,833 $58,003
William A. Baker Audit and Review $5,622 $79,715
Committee Chairman
and Trustee
Charles Conrad, Jr. Audit and Review $4,937 $74,717
Committee Member
and Trustee
Sam Freedman Trustee $1,950 $29,502
Raymond J. Kalinowski Derivative Instruments
Oversight Committee
Member and
Trustee $4,900 $74,173
C. Howard Kast Derivative Instruments
Oversight Committee $4,900 $74,173
Member and
Trustee
Robert M. Kirchner Audit and Review $4,937 $74,717
Committee Member
and Trustee
Ned M. Steel Trustee $3,833 $58,003
</TABLE>
1 For the 1996 calendar year.
Major Shareholders. As of March 31, 1997, the holders of 5%
or more of the outstanding shares of any Fund were separate
accounts of (i) Monarch Life Insurance Company ("Monarch"),
Springfield, MA; (ii) ReliaStar Bankers Security Life Insurance
Company ("ReliaStar"), Minneapolis, MN; (iii) The Life Insurance
Company of Virginia ("Life of Virginia"), Richmond, VA; (iv)
Nationwide Life Insurance Company ("Nationwide"), Columbus, OH; (v)
Aetna Life Insurance and Annuity Company ("Aetna"), Hartford, CT;
(vi) Massachusetts Mutual Life Insurance Company, Springfield, MA
("MassMutual"), (vii) Jefferson-Pilot Life Insurance Company
("Jefferson Pilot"), Greensboro, NC, and their respective
subsidiaries. Such shares were held as shown in Appendix B.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Trust, and one of whom (Mr.
Swain) serves as a Trustee of the Trust.
The Manager and the Funds have a Code of Ethics. It is
designed to detect and prevent improper personal trading by certain
employees, including portfolio managers, that would compete with or
take advantage of a Fund's portfolio transactions. Compliance with
the Code of Ethics is carefully monitored and strictly enforced by
the Manager.
The Investment Advisory Agreements. The investment
advisory agreements between the Manager and the Trust for each of
the nine Funds require the Manager, at its expense, to provide each
Fund with adequate office space, facilities and equipment, and to
provide and supervise the activities of all administrative and
clerical personnel required to provide effective corporate
administration for each Fund, including the compilation and
maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of
proxy materials and registration statements for continuous public
sale of shares of each Fund.
Expenses not expressly assumed by the Manager under the
advisory agreement are paid by the Trust. The advisory agreements
list examples of expenses paid by the Trust, the major categories
of which relate to interest, taxes, brokerage commissions, fees to
certain Trustees, legal and audit expenses, custodian and transfer
agent expenses, share issuance costs, certain printing and
registration costs and non-recurring expenses, including litigation
costs. Expenses with respect to any two or more Funds are
allocable in proportion to the net assets of the respective Funds
except where allocations of direct expenses can be made. The
management fees paid by the Funds to the Manager for the Funds'
most recent three fiscal years (except for Growth & Income Fund,
which commenced operations within that period) were as follows:
<TABLE>
<CAPTION>
Fiscal year ended December 31,
1994 1995 1996
<S> <C> <C> <C>
Money Fund $ 341,324 $ 338,483 $ 445,899
High Income Fund $ 617,198 $ 866,154 $1,177,754
Bond Fund $ 630,514 $1,280,422 $2,188,350
Capital Appreciation Fund $ 803,231 $1,790,785 $3,382,840
Growth Fund $ 307,904 $ 644,977 $1,139,255
Multiple Strategies Fund $1,433,107 $2,540,311 $3,132,569
Global Securities Fund $1,517,234 $2,451,556 $3,395,740
Strategic Bond Fund $ 105,760 $ 281,335 $ 618,338
Growth & Income Fund(1) $ 6,710(1) $ 160,819
</TABLE>
____________________
(1)From July 5, 1995 (commencement of operations) to December 31,
1996.
The advisory agreements provide that the Manager is not liable
for any loss sustained by the Trust and/or any Fund in connection
with matters to which the Agreements relate, except a loss
resulting by reason of the Manager's willful misfeasance, bad faith
or gross negligence in the performance of its duties or reckless
disregard for its obligations thereunder. The Manager may act as
investment adviser for any other person, firm or corporation, and
the Agreements permit the Manager to use the name "Oppenheimer" in
connection with other investment companies for which it may act as
investment adviser or general distributor. If the Manager shall no
longer act as investment adviser to the Trust, the right of the
Trust or any of the Funds to use the name "Oppenheimer" as part of
their names may be withdrawn.
Independently of the advisory agreements, the Manager has
voluntarily undertaken since January 1, 1995 that the total
expenses of any Fund shall not exceed 2.5% of the first $30 million
of average net assets of that Fund, 2.0% of the next $70 million
and 1.5% of average net assets over $100 million. In addition, the
Manager has voluntarily undertaken since September 1, 1994 that it
will limit the management fee charged under Strategic Bond Fund's
Agreement so that the ordinary operating expenses of that Fund
would not exceed 1.0% of its average net assets in any fiscal year.
The payment of the management fee will be reduced or eliminated
during any fiscal year in which such payment would cause the
expenses of a Fund to exceed its expense limitation. The Manager
reserves the right to terminate or amend the undertakings at any
time. Any assumption of a Fund's expenses under these limitations
would lower that Fund's overall expense ratio and increase its
total return during any period in which expenses are limited. The
Manager has advised the Trust that it may withdraw these expense
limit undertakings in the near future, in which event this
Statement of Additional Information may not be supplemented. During
the fiscal year ended December 31, 1996, the Manager reimbursed
Oppenheimer Growth Fund $27,276 for certain SEC registration fees
incurred in connection with the acquisition by that Fund of J.P.
Capital Appreciation Fund, Inc.
The Transfer Agent. OppenheimerFunds Services, the Trust's
Transfer Agent, is responsible for maintaining the Trust's
shareholder registry and shareholder accounting records.
Brokerage Policies of the Funds
Brokerage Provisions of the Investment Advisory Agreements
Affecting Capital Appreciation Fund, Growth Fund, Multiple
Strategies Fund, Growth & Income Fund, Global Securities Fund and
Strategic Bond Fund. One of the duties of the Manager under the
advisory agreements is to arrange the portfolio transactions for
the Funds. The advisory agreements contain provisions relating to
the employment of broker-dealers ("brokers") to effect the Funds'
portfolio transactions. In doing so, the Manager is authorized by
the advisory agreements to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment
Company Act, as may, in its best judgment based on all relevant
factors, implement the policy of the Funds to obtain, at reasonable
expense, the "best execution" (prompt and reliable execution at the
most favorable price obtainable) of such transactions. The Manager
need not seek competitive commission bidding but is expected to
minimize the commissions paid to the extent consistent with the
interests and policies of the Funds as established by the Board of
Trustees. Purchases of securities from underwriters include a
commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked
price.
Under the advisory agreements, the Manager is authorized to
select brokers that provide brokerage and/or research services for
the Funds and/or the other accounts over which the Manager or its
affiliates have investment discretion. The commissions paid to
such brokers may be higher than another qualified broker would have
charged if a good faith determination is made by the Manager that
the commission is fair and reasonable in relation to the services
provided.
Description of Brokerage Practices Followed by the Manager.
Subject to the provisions of the advisory agreements, and the
procedures and rules described above, allocations of brokerage are
generally made by the Manager's portfolio traders based upon
recommendations from the Manager's portfolio managers. In certain
instances portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the advisory agreement
and the procedures and rules described above. In either case,
brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those
for which an exchange is the primary market are generally done with
principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities or for
certain fixed-income agency transactions in the secondary market,
and are otherwise paid only if it appears likely that a better
price or execution can be obtained. When Funds engage in an option
transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent
orders to purchase or sell the same security by more than one of
the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase
or sale orders actually placed for each account. Option
commissions may be relatively higher than those which would apply
to direct purchases and sales of portfolio securities.
Most purchases of money market instruments and debt
obligations are principal transactions at net prices. Instead of
using a broker for those transactions, the Fund normally deals
directly with the selling or purchasing principal or market maker
unless the Manager determines that a better price or execution can
be obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer
to the underwriter. Purchases from dealers include a spread
between the bid and asked prices. The Funds seek to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its affiliates, and investment research received for the
commissions of those other accounts may be useful both to the Funds
and one or more of such other accounts. Such research, which may
be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as
well as market or economic trends and portfolio strategy, receipt
of market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If
a research service also assists the Manager in a non-research
capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to
the Manager in the investment decision-making process may be paid
in commission dollars. The Board of Trustees permits the Manager
to use concessions on fixed price offerings to obtain research in
the same manner as is permitted for agency transactions. The Board
also permits the Manager to use stated commissions on secondary
fixed-income agency trades to obtain research where the broker has
represented to the Manager that: (i) the trade is not from or for
the broker's own inventory, (ii) the trade was executed by the
broker on an agency basis at the stated commission, and (iii) the
trade is not a riskless principal transaction. The research
services provided by brokers broaden the scope and supplement the
research activities of the Manager, by making available additional
views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of
securities held in the Fund's portfolio or being considered for
purchase.
Money Fund, High Income Fund, Bond Fund and Strategic Bond Fund.
As most purchases made by Money Fund, High Income Fund, Bond Fund
and Strategic Bond Fund are principal transactions at net prices,
these Funds incur little or no brokerage costs. Purchases of
securities from underwriters include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers
include a spread between the bid and asked price. No principal
transactions and, except under unusual circumstances, no agency
transactions for these Funds will be handled by any affiliated
securities dealer. In the unusual circumstance when these Funds
pay brokerage commissions, the above-described brokerage practices
and policies are followed. Money Fund's policy of investing in
short-term debt securities with maturities of less than 397 days
results in high portfolio turnover. However, since brokerage
commissions, if any, are small, high portfolio turnover does not
have an appreciable adverse effect upon the net asset value of that
Fund.
During the Funds' fiscal year ended December 31, 1994, 1995
and 1996, total brokerage commissions paid by the Funds (not
including spreads or concessions on principal transactions on a net
trade basis) were $1,570,251, $4,083,132 and $507,501,
respectively, for Capital Appreciation Fund; $13,640, $104,203 and
$24,248, respectively, for High Income Fund; $96,732, $152,870 and
$215,286, respectively, for Growth Fund; $332,782, $400,275 and
$351,373, respectively, for Multiple Strategies Fund; $2,245,838,
$2,826,016 and $2,101,076, respectively for Global Securities Fund;
$3,742, $13,074 and $11,995, respectively, for Strategic Bond Fund;
$1,413, $2,100 and $13,852, respectively, for Bond Fund; and
$42,952 and $71,023, respectively for Growth & Income Fund. During
the fiscal year ended December 31, 1996, $81,236, $124,381,
$116,119, $1,492,561, $36, $0, $1,137, and $31, 319 was paid by
Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund,
Global Securities Fund, Strategic Bond Fund, Bond Fund, High Income
Fund and Growth & Income Fund, respectively, to dealers as
brokerage commissions in return for research services; the
aggregate amount of those transactions was $46,134,716,
$78,755,197, $44,923,811, $216,949,646, $14,637, $0, $310,798, and
$16,575,898 for these respective Funds.
Performance of the Funds
Money Fund Yield Information. Money Fund's current yield
for a seven day period of time is determined in accordance with
regulations adopted under the Investment Company Act as follows.
First, a base period return is calculated for the seven-day period
by determining the net change in the value of a hypothetical pre-
existing account having one share at the beginning of a seven day
period. The change includes dividends declared on the original
share and dividends declared on any shares purchased with dividends
on that share, but such dividends are adjusted to exclude any
realized or unrealized capital gains or losses affecting the
dividends declared. Next, the base period return is multiplied by
365/7 to obtain the current yield to the nearest hundredth of one
percent. The compounded effective yield for a seven-day period is
calculated by (a) adding 1 to the base period return (obtained as
described above), (b) raising the sum to a power equal to 365
divided by 7 and (c) subtracting 1 from the result. For the seven
days ended December 31, 1996, Money Fund's "current yield" was
5.03% and its compounded "effective yield" for that period was
5.15%.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each
daily dividend to the nearest full cent. Since the calculation of
yield under either procedure described above does not take into
consideration any realized or unrealized gains or losses on the
Fund's portfolio securities which may affect dividends, the
dividends declared during a period may not be the same on an
annualized basis as the yield for that period.
High Income Fund, Bond Fund and Strategic Bond Fund Yield
Information. The "yield" or "standardized yield" of High Income
Fund, Bond Fund and Strategic Bond Fund for a 30-day period is
calculated using the following formula set forth in the SEC rules:
The symbols above represent the following factors:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of Fund shares outstanding
during the 30-day period that were entitled to receive
dividends.
d = the Fund's maximum offering price (including sales
charge) per share on the last day of the period.
Each Fund's yield for a 30-day period may differ from its
yield for any other period. The SEC formula assumes that the yield
for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. For
the 30 days ended December 31, 1996, the yield of High Income Fund,
Bond Fund and Strategic Bond Fund, calculated as described above,
was 8.29%, 6.13% and 7.43%, respectively. The "standardized" yield
is not based on distributions paid by a Fund to shareholders in the
30-day period, but is a hypothetical yield based upon the return on
a Fund's portfolio investments, and may differ from a Fund's
"distribution return" described below.
Dividend Yield and Distribution Return. From time to time
High Income, Bond and Strategic Bond Funds may quote a "dividend
yield" or a "distribution return." Dividend yield is based on that
Fund's dividends derived from net investment income during a stated
period, and distribution return includes dividends derived from net
investment income and from realized capital gains declared during
a stated period. Under those calculations, the Fund's dividends
and/or distributions declared during a stated period of one year or
less (for example, 30 days) are added together, and the sum is
divided by the Fund's maximum offering price (equal to its net
asset value) per share on the last day of the period. The result
may be annualized if the period of measurement is less than one
year. The dividend yield of High Income Fund, Bond Fund and
Strategic Bond Fund for the quarter ended December 31, 1996, was
8.98%, 6.53% and 9.86%, respectively.
Total Return. Each Fund, except Money Fund, may quote its "total
return" or "average annual total return." "Average annual total
return" (see the formula below) is an average annual compounded
rate of return. It is the rate of return based on factors which
include a hypothetical initial investment of $1,000 ("P" in the
formula below) over a number of years ("n") with an Ending
Redeemable Value ("ERV") of that investment, according to the
following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
The cumulative "total return" calculation measures the change in
value of a hypothetical investment of $1,000 over a stated period.
Its calculation uses some of the same factors as average annual
total return, but it does not average the rate of return on an
annual basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
Both formulas assume that all dividends and capital gains
distributions during the period are reinvested at net asset value
per share, and that the investment is redeemed at the end of the
period. Set forth below is the "average annual total return" and
"total return" for each Fund (using the method described above)
during the periods indicated:
<TABLE>
<CAPTION>
Average Annual Total Return for:
Cumulative
Total
Fiscal Year Five Year Ten Year Return From
Ended Period Period Inception(1)Inception(1)
Fund 12/31/96 Ended 12/31/96 Ended 12/31/96 to 12/31/96 to 12/31/96
<S> <C> <C> <C> <C> <C>
High Income Fund 15.26% 14.88% 13.89% 13.46% 284.59%
Bond Fund 4.80% 7.68% 8.81% 9.94% 204.37%
Capital Appreciation Fund 20.22% 16.69% 16.50% 15.67% 353.02%
Growth Fund 25.20% 16.24% 14.32% 14.52% 391.50%
Multiple Strategies Fund 15.50% 11.67% N/A 11.52% 194.22%
Global Securities Fund 17.53% 12.38% N/A 10.65% 86.05%
Strategic Bond Fund 12.07% N/A N/A 7.35% 29.66%
Growth & Income Fund 32.51% N/A N/A 40.54% 65.98%
</TABLE>
______________
(1)Inception dates are as follows: 4/30/86 for High Income Fund;
4/3/85 for Bond Fund and Growth Fund; 8/15/86 for Capital
Appreciation Fund; 2/9/87 for Multiple Strategies Fund; 11/12/90
for Global Securities Fund; 5/3/93 for Strategic Bond Fund; and
7/5/95 for Growth & Income Fund.
The total return on an investment made in shares of any one of
these Funds may be compared with performance for the same period of
either the Standard & Poor's 500 Index ("S&P 500") or the Dow Jones
Industrial Average ("Dow"). Both the S&P 500 and the Dow are
widely recognized indices of stock market performance consisting of
unmanaged groups of common stocks (the Dow consists of 30 such
issues). The performance of both indices includes a factor for the
reinvestment of income dividends but not capital gains and does not
take sales charges or taxes into consideration.
Yield and total return information may be useful to investors
in reviewing performance of the Funds. However, a number of
factors should be taken into account before using such performance
information as a basis for comparison with alternative investments.
An investment in any of these Funds is not insured. Their
performance is not guaranteed and will fluctuate over time. Yield
and total return for any Fund for any given past period is not an
indication or representation by that Fund of future yields or rates
of return on its shares. In comparing the performance of one Fund
to another, consideration should be given to each Fund's investment
policy, portfolio quality, portfolio maturity, type of instrument
held and operating expenses. When comparing yield, total return
and investment risk of an investment in any of the Funds with those
of other investment instruments, investors should understand that
certain other investment alternatives such as money market
instruments, certificates of deposits ("CDs"), U.S. Government
securities or bank accounts provide yields that are fixed or that
may vary above a stated minimum, and may be insured or guaranteed.
Finally, the performance quotations do not reflect the charges
deducted from an Account, as explained in the attached Prospectus
for the Policies. If these charges were deducted, that performance
would be lower than as described above.
Other Performance Comparisons. From time to time the Trust may
publish the ranking of any of the Funds by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent service.
Lipper monitors the performance of regulated investment companies,
including the Funds, and ranks their performance for various
periods based on categories relating to investment objectives. The
performance of the Funds is ranked against all other funds
underlying variable insurance products. The Lipper performance
analysis includes the reinvestment of capital gains distributions
and income dividends but does not take sales charges or taxes into
consideration.
From time to time, the Trust may include in its advertisements
and sales literature performance information about the Trust cited
in other newspapers and periodicals, such as The New York Times,
which may include performance quotations from other sources,
including Lipper.
From time to time the Trust may publish the ranking of the
performance of any of the separate accounts that offer any of the
Funds by Morningstar, Inc., an independent mutual fund monitoring
service, that ranks mutual funds, including the Funds, monthly in
broad investment categories (domestic stock, international stock,
taxable bond, municipal bond and hybrid) based on risk-adjusted
investment return. Investment return measures a fund's three, five
and ten-year average annual total returns (when available) in
excess of 90-day U.S. Treasury bill returns after considering sales
charges and expenses. Risk reflects fund performance below 90-day
U.S. Treasury bill monthly returns. Risk and return are combined
to produce star rankings reflecting performance relative to the
average fund in a fund's category. Five stars is the "highest"
ranking (top 10%), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average"
(next 22.5%) and one star is "lowest" (bottom 10%). Rankings are
subject to change.
About Your Account
How To Buy Shares
Determination of Net Asset Value Per Share. The sale of shares of
the Funds is currently limited to Accounts as explained on the
cover page of this Statement of Additional Information and the
Prospectus. Such shares are sold at their respective offering
prices (net asset values without sales charges) and redeemed at
their respective net asset values as described in the Prospectus.
The net asset value per share of each Fund is determined as of
the close of business of The New York Stock Exchange (the "NYSE")
on each day that the NYSE is open, by dividing the value of the
Fund's net assets by the number of shares that are outstanding.
The NYSE normally closes at 4:00 P.M., New York time, but may close
earlier on some days (for example, in case of weather emergencies
or on days falling before a holiday). The NYSE's most recent
annual announcement (which is subject to change) states that it
will close on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days. Dealers may
conduct trading at times when the Exchange is closed (including
weekends and holidays). Trading may occur in debt securities and
in foreign securities at times when the NYSE is closed (including
weekends and holidays or after 4:00 P.M., New York time, on a
regular business day). Because the net asset value of the Funds
will not be calculated on those days, the net asset values per
share of the Funds may be significantly affected at times when
shareholders may not purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the
valuation of each Fund's (other than Money Fund's) securities,
generally as follows: (i) equity securities traded on a U.S.
securities exchange or on the Automated Quotation System ("NASDAQ")
of the Nasdaq Stock Market, Inc. for which last sale information is
regularly reported are valued at the last reported sale price on
their primary exchange or NASDAQ that day (or, in the absence of
sales that day, at values based on the last sale prices of the
preceding trading day, or the closing bid price on the day of
valuation); (ii) securities traded on a foreign securities exchange
are valued generally at the last sale price available to the
pricing service approved by the Trust's Board of Trustees or to the
Manager as reported by the principal exchange on which the security
is traded; or at the mean between "bid" and "asked" prices obtained
from the principal exchange or two active market makers in the
security; (iii) long-term debt securities having a remaining
maturity in excess of 60 days are valued based on the mean between
the "bid" and "asked" prices determined by a portfolio pricing
service approved by the Trust's Board of Trustees or obtained by
the Manager from two active market makers in the security on the
basis of reasonable inquiry; (iv) debt instruments having a
maturity of more than 397 days when issued, and non-money market
type instruments having a maturity of 397 days or less when issued,
which have a remaining maturity of 60 days or less are valued at
the mean between the "bid" and "asked" prices determined by a
pricing service approved by the Trust's Board of Trustees or
obtained from active market makers in the security on the basis of
reasonable inquiry; (v) money market debt securities that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vi)
securities (including restricted securities) not having readily-
available market quotations are valued at fair value determined
under the Board's procedures. If the Manager is unable to locate
two market makers willing to give quotes (see (ii), (iii) and (iv)
above), the security may be priced (i) at the "official bid" or
"market maker bid" available to the pricing service or the Manager
as reported by the principal exchange at its last trading session
on or immediately prior to the date of valuation, or (ii) at the
mean of the "bid" and "asked" prices provided by a single active
market maker (which in certain cases may be the bid price if no
ask price is available).
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the NYSE. Events affecting the values of foreign securities traded
in securities markets that occur between the time their prices are
determined and the close of the NYSE will not be reflected in a
Fund's calculation of net asset value unless the Board of Trustees
or the Manager, under procedures established by the Board of
Trustees, determines that the particular event would materially
affect a Fund's net asset value, in which case an adjustment would
be made, if necessary.
In the case of U.S. Government Securities, mortgage-backed
securities, foreign fixed-income securities and corporate bonds,
when last sale information is not generally available, such pricing
procedures may include "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity,
and other special factors involved. The Manager may use pricing
services approved by the Board of Trustees to price U.S. Government
Securities, mortgage-backed securities, foreign government
securities and corporate bonds. The Manager will monitor the
accuracy of such pricing services which may include comparing
prices used for portfolio evaluation to actual sales prices of
selected securities. Foreign currency, including forward
contracts, will be valued at the closing price in the London
foreign exchange market that day as provided by a reliable bank,
dealer or pricing service. The values of securities denominated in
foreign currency will be converted to U.S. dollars at the closing
price in the London foreign exchange market that day as provided by
a reliable bank, dealer or pricing service.
Puts, calls and futures are valued at the last sale price on
the principal exchanges on which they are traded or on NASDAQ, as
applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager. If there were no sales that
day, value shall be the last sale price on the preceding trading
day if it is within the spread of the closing bid and ask prices
on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing bid price on the principal
exchange or on NASDAQ on the valuation date. If the put, call or
future is not traded on an exchange or on NASDAQ, it shall be
valued at the mean between bid and ask prices obtained by the
Manager from two active market makers (which in certain cases may
be the bid price if no ask price is available).
When a Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset, and an equivalent deferred credit is
included in the liability section. Credit is adjusted ("marked-to-
market") to reflect the current market value of the option. In
determining a Fund's gain on investments, if a call or put written
by the Fund is exercised, the proceeds are increased by the premium
received. If a call or put written by a Fund expires, the Fund has
a gain in the amount of the premium; if the Fund enters into a
closing purchase transaction, it will have a gain or loss depending
on whether the premium received was more or less than the cost of
the closing transaction. If a Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment
is reduced by the amount of premium paid by the Fund.
Money Fund Net Asset Valuation. Money Fund will seek to maintain
a net asset value of $1.00 per share for purchases and redemptions.
There can be no assurance that it will do so. The Fund operates
under SEC Rule 2a-7, under which the Fund may use the amortized
cost method of valuing its shares. The amortized cost method
values a security initially at its cost and thereafter assumes a
constant amortization of any premium or accretion of any discount,
regardless of the impact of fluctuating interest rates on the
market value of the security. The method does not take into
account unrealized capital gains or losses.
The Trust's Board of Trustees has established procedures
intended to stabilize Money Fund's net asset value at $1.00 per
share. If the Fund's net asset value per share were to deviate
from $1.00 by more than 0.5%, Rule 2a-7 requires the Board promptly
to consider what action, if any, should be taken. If the Trustees
find that the extent of any such deviation may result in material
dilution or other unfair effects on shareholders, the Board will
take whatever steps it considers appropriate to eliminate or reduce
such dilution or unfair effects, including, without limitation,
selling portfolio securities prior to maturity, shortening the
average portfolio maturity, withholding or reducing dividends,
reducing the outstanding number of Fund shares without monetary
consideration, or calculating net asset value per share by using
available market quotations.
As long as it uses Rule 2a-7, Money Fund must abide by certain
conditions described above and in the prospectus. For purposes of
the Rule, the maturity of an instrument is generally considered to
be its stated maturity (or in the case of an instrument called for
redemption, the date on which the redemption payment must be made),
with special exceptions for certain variable and floating rate
instruments. Repurchase agreements and securities loan agreements
are, in general, treated as having a maturity equal to the period
scheduled until repurchase or return, or if subject to demand,
equal to the notice period.
While the amortized cost method provides certainty in
valuation, there may be periods during which the value of an
instrument as determined by amortized cost is higher or lower than
the price the Fund would receive if it sold the instrument. During
periods of declining interest rates, the daily yield on Money Fund
shares may tend to be lower than a like computation made by a fund
with identical investments utilizing a method of valuation based
upon market prices or estimates of market prices for its portfolio.
Conversely, during periods of rising interest rates, the daily
yield on Money Fund shares will tend to be higher than that of a
portfolio priced at market value.
Dividends, Capital Gains and Taxes
Distributions and Taxes. The Trust intends for each Fund to
qualify as a "regulated investment company" under Subchapter M of
the Internal Revenue Code. By so qualifying, the Funds will not be
subject to Federal income taxes on amounts paid by them as
dividends and distributions, as described in the Prospectus. Each
Fund is treated as a single entity for purposes of determining
Federal tax treatment. The Trust will endeavor to ensure that each
Fund's assets are so invested so that all such requirements are
satisfied, but there can be no assurance that it will be successful
in doing so.
The Internal Revenue Code requires that a holder (such as a
Fund) of a zero coupon security accrue a portion of the discount at
which the security was purchased as income each year even though
that Fund receives no interest payment in cash on the security
during the year. As an investment company, each Fund must pay out
substantially all of its net investment income each year.
Accordingly, when a Fund holds zero coupon securities, it may be
required to pay out as an income distribution each year an amount
which is greater than the total amount of cash interest the Fund
actually received. Such distributions will be made from the cash
assets of that Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales.
In the event the Fund realizes net capital gains from such
transactions, its shareholders may receive a larger capital gain
distribution than they would have had in the absence of such
transactions.
Additional Information About the Funds
The Custodian and the Transfer Agent. The Bank of New York is the
custodian of the Trust's securities. The custodian's
responsibilities include safeguarding and controlling the Trust's
portfolio securities, collecting income on the portfolio
securities, and handling the delivery of portfolio securities to
and from the Trust. The Manager has represented to the Trust that
its banking relationships with the Custodian have been and will
continue to be unrelated to and unaffected by the relationship
between the Trust and the Custodian. It will be the practice of
the Trust to deal with the Custodian in a manner uninfluenced by
any banking relationship the Custodian may have with the Manager
and its affiliates.
OppenheimerFunds Services, a subsidiary of the Manager, is
responsible as Transfer Agent for maintaining the Trust's
shareholder registry and shareholder accounting records, and for
administrative functions. It also acts as the shareholder servicing
agent for the other Oppenheimer funds.
Independent Auditors. The independent auditors of the Trust
examine its financial statements and perform other related audit
services. They also act as auditors for the Manager and certain
other funds advised by the Manager and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Variable
Account Funds:
We have audited the accompanying statements of assets and
liabilities, including the statements of investments, of
Oppenheimer Money Fund, Oppenheimer High Income Fund, Oppenheimer
Bond Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer
Growth Fund, Oppenheimer Multiple Strategies Fund, Oppenheimer
Global Securities Fund, Oppenheimer Strategic Bond Fund and
Oppenheimer Growth & Income Fund (all of which are series of
Oppenheimer Variable Account Funds) as of December 31, 1996, the
related statements of operations for the year then ended, the
statements of changes in net assets for the years ended December
31, 1996 and 1995, and the financial highlights for the applicable
periods ended December 31, 1996, 1995, 1994, 1993 and 1992. These
financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned at December 31, 1996 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed
other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Oppenheimer Money Fund, Oppenheimer High Income Fund, Oppenheimer
Bond Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer
Growth Fund, Oppenheimer Multiple Strategies Fund, Oppenheimer
Global Securities Fund, Oppenheimer Strategic Bond Fund and
Oppenheimer Growth & Income Fund at December 31, 1996, the results
of their operations, the changes in their net assets, and the
financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -----------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 22, 1997
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKERS' ACCEPTANCES - 1.0%
- ----------------------------------------------------------------------------------------------------------
First National Bank of Boston, 5.45%, 2/3/97
(Cost $1,293,506) $ 1,300,000 $ 1,293,506
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
DIRECT BANK OBLIGATIONS - 3.1%
- ----------------------------------------------------------------------------------------------------------
Bank of Scotland Treasury Services PLC, 5.45%, 2/25/97 2,000,000 1,983,347
----------------------------------------------------------------------------------------------------
CoreStates Capital Corp., 5.54%, 12/18/97 (1) 2,000,000 1,998,908
------------
Total Direct Bank Obligations (Cost $3,982,255) 3,982,255
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
LETTERS OF CREDIT - 3.8%
- ----------------------------------------------------------------------------------------------------------
Bayerische Vereinsbank AG, guaranteeing commercial paper
of Galicia Funding Corp.-Series B:
5.38%, 2/28/97 (2) 500,000 495,682
5.41%, 3/5/97 (2) 2,000,000 1,981,065
----------------------------------------------------------------------------------------------------
Societe Generale, guaranteeing commercial paper of:
Girsa Funding Corp., 5.32%, 4/3/97 (2) 2,000,000 1,972,809
Nacional Financiera, SNC-Series A, 5.44%, 1/9/97 500,000 499,396
------------
Total Letters of Credit (Cost $4,948,952) 4,948,952
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES - 82.8%
- ----------------------------------------------------------------------------------------------------------
BEVERAGES - 3.1%
----------------------------------------------------------------------------------------------------
Coca-Cola Enterprises, Inc., 5.34%, 1/31/97 (2) 4,000,000 3,982,200
- ----------------------------------------------------------------------------------------------------------
BROKER/DEALERS - 12.5%
----------------------------------------------------------------------------------------------------
Dean Witter, Discover & Co.:
5.73%, 1/15/97 2,000,000 2,000,181
5.81%, 9/29/97 (1) 2,500,000 2,504,222
----------------------------------------------------------------------------------------------------
Goldman Sachs Group, L.P.:
5.42%, 1/17/97 4,000,000 3,990,364
8.25%, 1/2/97 2,050,000 2,049,530
----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 5.33%, 1/2/97 700,000 699,896
----------------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc., 5.26%, 6/27/97 (1) 5,000,000 5,000,000
------------
16,244,193
- ----------------------------------------------------------------------------------------------------------
COMMERCIAL FINANCE - 11.9%
----------------------------------------------------------------------------------------------------
CIT Group Holdings, Inc.:
5.67%, 3/11/98 (1) 1,000,000 1,000,000
7%, 1/3/97 5,000,000 4,998,055
----------------------------------------------------------------------------------------------------
Countrywide Home Loans, 5.33%, 1/23/97 590,000 588,078
----------------------------------------------------------------------------------------------------
FINOVA Capital Corp., 5.43%, 2/26/97 4,000,000 3,966,276
----------------------------------------------------------------------------------------------------
Heller Financial, Inc.:
5.45%, 3/21/97 3,000,000 2,964,121
5.46%, 10/10/97 (1) 2,000,000 1,999,691
------------
15,516,221
</TABLE>
1
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONGLOMERATES - 4.2%
------------------------------------------------------------------------------------------------
Mitsubishi International Corp.:
5.34%, 1/8/97 $ 500,000 $ 499,481
5.50%, 3/17/97 5,000,000 4,942,708
----------
5,442,189
- ------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 3.8%
------------------------------------------------------------------------------------------------
Island Finance Puerto Rico, Inc., 5.32%, 2/26/97 5,000,000 4,958,622
- -------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 10.9%
------------------------------------------------------------------------------------------------
Associates Corp. of North America, 7.28%, 1/2/97 6,000,000 5,998,787
------------------------------------------------------------------------------------------------
Ford Motor Credit Co.:
5.32%, 1/6/97 385,000 384,715
5.40%, 1/2/97 5,000,000 4,999,011
------------------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
5.35%, 1/8/97 500,000 499,480
7.75%, 4/15/97 2,200,000 2,213,215
----------
14,095,208
- -------------------------------------------------------------------------------------------------------
ELECTRONICS - 3.0%
------------------------------------------------------------------------------------------------
Mitsubishi Electric Finance America, Inc.:
5.33%, 1/30/97 (2) 715,000 711,918
5.36%, 2/12/97 (2) 3,200,000 3,179,989
----------
3,891,907
- -------------------------------------------------------------------------------------------------------
MANUFACTURING - 0.9%
------------------------------------------------------------------------------------------------
Rexam PLC, 5.32%, 1/29/97 (2) 1,125,000 1,120,345
- -------------------------------------------------------------------------------------------------------
OIL-INTEGRATED - 3.8%
------------------------------------------------------------------------------------------------
Repsol International Finance BV, 5.33%, 1/6/97 5,000,000 4,996,299
- -------------------------------------------------------------------------------------------------------
SPECIAL PURPOSE FINANCIAL - 23.8%
------------------------------------------------------------------------------------------------
CIESCO L.P.:
5.35%, 2/14/97 800,000 794,769
5.78%, 5/19/97 (1)(2) 3,000,000 2,999,805
------------------------------------------------------------------------------------------------
Cooperative Association of Tractor Dealers, Inc.,
5.40%, 1/24/97 1,176,000 1,171,943
------------------------------------------------------------------------------------------------
Enterprise Funding Corp., 6.10%, 1/9/97 (2) 1,525,000 1,522,933
------------------------------------------------------------------------------------------------
Falcon Asset Securitization Corp., 5.32%, 1/13/97 (2) 590,000 588,954
------------------------------------------------------------------------------------------------
First Deposit Master Trust 1993-3:
5.32%, 2/24/97 (2) 2,000,000 1,984,040
5.35%, 1/21/97 (2) 774,000 771,699
5.36%, 1/15/97 (2) 3,000,000 2,993,747
------------------------------------------------------------------------------------------------
Preferred Receivables Funding Corp., 5.53%, 1/16/97 5,000,000 4,988,479
------------------------------------------------------------------------------------------------
RACERS Series 1996-MM-12-3, 5.59%, 12/15/97 (1)(3) 2,000,000 2,000,000
------------------------------------------------------------------------------------------------
Sheffield Receivables Corp.:
5.32%, 1/16/97 (2) 3,550,000 3,542,131
5.32%, 1/9/97 2,000,000 1,997,636
------------------------------------------------------------------------------------------------
Sigma Finance, Inc.:
5.31%, 2/25/97 (2) 545,000 540,579
5.37%, 4/15/97 (2) 3,000,000 2,953,460
5.44%, 2/28/97 (2) 2,000,000 1,982,471
----------
30,832,646
</TABLE>
2
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
SPECIALTY RETAILING - 1.1%
-------------------------------------------------------------------------------------------------
Marks & Spencer, guaranteeing commercial paper of:
St. Michael Finance Ltd., 5.70%, 2/10/97 $ 1,390,000 $ 1,381,197
- -------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 3.8%
-------------------------------------------------------------------------------------------------
NYNEX Corp., 5.42%, 1/13/97 5,000,000 4,990,967
-------------
Total Short-Term Notes (Cost $107,451,994) 107,451,994
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 3.8%
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.68%, 8/1/97 (Cost $4,997,438) (1) 5,000,000 4,997,438
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS - 3.1%
- -------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, 5.07%, 7/29/97 (1) 2,000,000 2,000,000
-------------------------------------------------------------------------------------------------
Westdeutsche Landesbank Girozentrale, guaranteeing commercial
paper of: Comision Federal de Electricidad-Series A, 5.36%,
3/11/97 2,000,000 1,979,453
-------------
Total Foreign Government Obligations (Cost $3,979,453) 3,979,453
-------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE 97.6% 126,653,598
-------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.4 3,064,922
------------- ------------
NET ASSETS 100.0% $129,718,520
------------- ------------
------------- ------------
</TABLE>
Short-term notes, bankers' acceptances, direct bank obligations and
letters of credit are generally traded on a discount basis; the
interest rate is the discount rate received by the Fund at the time
of purchase. Other securities normally bear interest at the rates
shown.
1. Floating or variable rate obligation. The interest rate, which is
based on specific, or an index of, market interest rates, is subject
to change periodically and is the effective rate on December 31, 1996.
This instrument may also have a demand feature which allows the
recovery of principal at any time, or at specified intervals not
exceeding one year, on up to 30 days' notice. Maturity date shown
represents effective maturity based on variable rate and, if
applicable, demand feature.
2. Restricted securities, including those issued in exempt
transactions without registration under the Securities Act of 1933
(the Act), amounting to $33,323,827 or 25.69% of the Fund's net
assets, have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
3. Restricted securities which are considered illiquid, by virtue of
the absence of a readily available market or because of legal or
contractual restrictions on resale, amount to $2,000,000, or 1.54% of
the Fund's net assets. The Fund may not invest more than 10% of its
net assets (determined at the time of purchase) in illiquid
securities.
See accompanying Notes to Financial Statements.
3
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS - 4.1%
- --------------------------------------------------------------------------------------------------------------
CBA Mortgage Corp., Mtg. Pass-Through Certificates,
Series 1993-C1, Cl. F, 7.773%, 12/25/03 (2)(3) $ 700,000 $ 548,625
------------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., Collateralized
Mtg. Obligation, Series 1996-C1, Cl. E, 8.075%, 12/25/20 (2)(4) 250,000 252,344
------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through
Certificates, Series 1995-C2, Cl. D, 7.989%, 6/15/21 (2) 449,587 456,050
------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-
Through Certificates, Series 1996-C1, Cl. E, 7.51%, 2/15/28 (2)(3) 835,342 678,715
------------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., Multifamily Mtg. Pass-
Through Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06 (4) 750,000 607,969
------------------------------------------------------------------------------------------------------------
NationsCommercial Corp., NB Commercial Mtg. Pass-
Through Certificates, Series-DMC, Cl. C, 8.921%, 8/12/11 (4) 900,000 916,312
------------------------------------------------------------------------------------------------------------
Nomura Asset Securities Corp., Series 1994-MD1, Cl. B2,
8.421%, 3/15/18 (2)(3) 750,000 658,008
------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates:
Series 1994-C1, Cl. E, 8%, 6/25/26 700,166 644,153
Series 1994-C2, Cl. G, 8%, 4/25/25 815,728 732,244
Series 1995-C1, Cl. F, 6.90%, 2/25/27 913,739 805,519
------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Series 1996-B,
Cl. 1, 7.136%, 4/25/26 1,491,164 892,835
------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1996-C3, Cl. E, 8.458%, 6/25/30 (4) 650,000 574,234
-----------
Total Mortgage-Backed Obligations (Cost $7,521,680) 7,767,008
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS - 10.7%
- --------------------------------------------------------------------------------------------------------------
Argentina (Republic of):
Treasury Bills, Zero Coupon, 12.117%, 1/17/97 (5) ARP 700,000 698,215
Unsec. Unsub. Bonds, 11.50%, 8/14/01 GBP 120,000 211,727
------------------------------------------------------------------------------------------------------------
Banco Estado Minas Gerais, 8.25%, 2/10/00 550,000 531,094
------------------------------------------------------------------------------------------------------------
Banco Nacional de Comercio Exterior SNC International
Finance BV Gtd. Registered Bonds, 11.25%, 5/30/06 180,000 196,425
------------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion, Zero Coupon:
25.785%, 11/6/97 (5) MXP 4,000,000 416,640
29.171%, 7/3/97 (5) MXP 3,450,000 387,598
27.799%, 9/4/97 (5) MXP 3,900,000 423,613
------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Multi-Year Discount Facility
Agreement Trust Certificates, Series REGS, 6.688%, 9/15/07 (2) 390,000 334,669
------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds, 10%, 3/5/01 DEM 420,000 291,881
------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of) Disc. Bonds, Tranche A, 6.688%,
7/28/24 (2) 540,000 306,450
------------------------------------------------------------------------------------------------------------
Canada (Government of) Debs., 10.50%, 7/1/00 CAD 2,015,000 1,724,474
------------------------------------------------------------------------------------------------------------
Central Bank of Costa Rica Interest Claim Bonds, Series B,
6.344%, 5/21/05 (2)(4) 224,763 212,120
------------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds, 8%, 11/15/01 DKK 6,640,000 1,249,452
</TABLE>
4
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
Financiera Energetica Nacional SA Nts., 9.375%, 6/15/06 $ 820,000 $ 875,042
------------------------------------------------------------------------------------------------------------
Hashemite Kingdom of Jordan:
Disc. Bonds, 6.50%, 12/23/23 (2) 1,000,000 773,750
Interest Arrears Bonds, 6.50%, 12/23/05 (2) 300,000 276,750
------------------------------------------------------------------------------------------------------------
Italy (Republic of):
Sr. Unsec. Unsub. Global Bonds, 0.563%, 7/26/99 (2) JPY 91,000,000 788,086
Treasury Bonds, Buoni del Tesoro Poliennali, 10.50%, 11/1/98 ITL 940,000,000 662,028
------------------------------------------------------------------------------------------------------------
New Zealand (Government of):
Bonds, 8%, 4/15/04 NZD 545,000 402,253
Index Linked Bonds, 4.60%, 2/15/16 (2) NZD 303,000 209,750
------------------------------------------------------------------------------------------------------------
Norwegian Government Bonds, 9.50%, 10/31/02 NOK 1,105,000 206,693
------------------------------------------------------------------------------------------------------------
Panama (Republic of) Interest Reduction Bonds, 3.50%,
7/17/14 (6) 1,550,000 1,078,707
------------------------------------------------------------------------------------------------------------
Portugal (Republic of) Gtd. Bonds, Obrigicion do tes Medio
Prazo, 11.625%, 2/23/98 PTE 146,000,000 997,525
------------------------------------------------------------------------------------------------------------
Russia (Government of) Interest Nts., 12/29/49 (7)(8) 330,000 229,763
------------------------------------------------------------------------------------------------------------
Sweden (Kingdom of) Bonds, Series 1030, 13%, 6/15/01 SEK 3,600,000 679,774
------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA Bonds, 13%, 2/5/99 ITL 385,000,000 272,666
------------------------------------------------------------------------------------------------------------
Telkom SA Ltd. Bonds, Series TK05, 12%, 3/31/98 ZAR 955,000 194,442
------------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds, 12%, 9/22/01 AUD 1,325,000 1,258,521
------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 12.50%, 11/21/05 GBP 975,000 2,115,904
------------------------------------------------------------------------------------------------------------
United Mexican States Bonds, 10.375%, 1/29/03 DEM 1,895,000 1,326,160
------------------------------------------------------------------------------------------------------------
Venezuela (Republic of):
Collateralized Par Bonds, Series W-A, 6.75%, 3/31/20 250,000 191,875
Front-Loaded Interest Reduction Bonds, Series B,
6.50%, 3/31/07 (2) 500,000 446,875
New Money Bonds, Series P, 6.50%, 12/18/05 (2) 500,000 447,344
-----------
Total Foreign Government Obligations (Cost $19,831,187) 20,418,266
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
LOAN PARTICIPATIONS - 1.3%
- --------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan
Participation Agreement, Tranche A, 6.625%, 9/4/06 (2)(4) 1,305,000 1,008,113
------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09 (2)(9) 990,000 807,159
------------------------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement,
Tranche B, 1.772%, 9/30/00 (2)(4) JPY 82,062,000 657,514
-----------
Total Loan Participations (Cost $2,329,670) 2,472,786
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES - 0.8%
- --------------------------------------------------------------------------------------------------------------
San Joaquin Hills, California Transportation Corridor
Agency Toll Road Capital Appreciation Revenue Bonds, Jr.
Lien, Zero Coupon, 9.002%, 1/1/28 (Cost $816,147) (5) 12,500,000 1,499,000
</TABLE>
5
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 61.0%
- --------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY - 5.5%
- --------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.3%
------------------------------------------------------------------------------------------------------------
NL Industries, Inc.:
0%/13% Sr. Sec. Disc. Nts., 10/15/05 (8) $ 300,000 $ 260,250
11.75% Sr. Sec. Nts., 10/15/03 260,000 276,250
-----------
536,500
- --------------------------------------------------------------------------------------------------------------
METALS/MINING - 0.9%
------------------------------------------------------------------------------------------------------------
Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts., 9/1/03 454,000 498,265
------------------------------------------------------------------------------------------------------------
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06 1,250,000 1,275,000
-----------
1,773,265
- --------------------------------------------------------------------------------------------------------------
PAPER - 3.0%
------------------------------------------------------------------------------------------------------------
APP International Finance Co. BV, 11.75% Gtd. Sec. Nts.,
10/1/05 1,400,000 1,499,750
------------------------------------------------------------------------------------------------------------
Florida Coast Paper Co. LLC, 12.75% First Mtg. Nts., 6/1/03 550,000 598,125
------------------------------------------------------------------------------------------------------------
Indah Kiat International Finance Co. BV:
11.875% Sr. Sec. Gtd. Nts., 6/15/02 100,000 109,375
12.50% Sr. Sec. Gtd. Nts., Series C, 6/15/06 1,000,000 1,106,250
------------------------------------------------------------------------------------------------------------
Repap New Brunswick, Inc., 10.625% Second Priority Sr.
Sec. Nts., 4/15/05 1,000,000 1,050,000
------------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts.,
2/1/02 500,000 508,750
------------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., Series B, 12/15/04 250,000 271,250
------------------------------------------------------------------------------------------------------------
Stone Container Corp.:
10.75% First Mtg. Nts., 10/1/02 500,000 528,750
10.75% Sr. Sub. Nts., 6/15/97 100,000 101,750
-----------
5,774,000
- --------------------------------------------------------------------------------------------------------------
STEEL - 1.3%
------------------------------------------------------------------------------------------------------------
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 (3) 1,400,000 1,438,500
------------------------------------------------------------------------------------------------------------
Bar Technologies, Inc., 13.50% Sr. Sec. Nts., 4/1/01 600,000 612,000
------------------------------------------------------------------------------------------------------------
Gulf States Steel, Inc. (Alabama), 13.50% First Mtg. Nts.,
Series B, 4/15/03 200,000 190,000
------------------------------------------------------------------------------------------------------------
Jorgensen (Earle M.) Co., 10.75% Sr. Nts., 3/1/00 175,000 179,375
-----------
2,419,875
- --------------------------------------------------------------------------------------------------------------
CONSUMER RELATED - 7.7%
- --------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS - 2.4%
------------------------------------------------------------------------------------------------------------
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 11.617%, 5/27/98 (5) 750,000 629,062
------------------------------------------------------------------------------------------------------------
E & S Holdings Corp., 10.375% Sr. Sub. Nts., 10/1/06 (3) 550,000 578,187
------------------------------------------------------------------------------------------------------------
Harman International Industries, Inc., 12% Sr. Sub. Nts.,
8/1/02 1,650,000 1,806,750
------------------------------------------------------------------------------------------------------------
International Semi-Tech Microelectronics, Inc., 0%/11.50%
Sr. Sec. Disc. Nts., 8/15/03 (8) 500,000 326,250
------------------------------------------------------------------------------------------------------------
Revlon Worldwide Corp., Zero Coupon Sr. Sec. Disc. Nts.,
12.333%, 3/15/98 (5) 350,000 305,375
------------------------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05 350,000 404,250
------------------------------------------------------------------------------------------------------------
Williams (J. B.) Holdings, Inc., 12% Sr. Nts., 3/1/04 600,000 612,000
-----------
4,661,874
</TABLE>
6
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO - 0.5%
------------------------------------------------------------------------------------------------------------
Consolidated Cigar Corp., 10.50% Sr. Sub. Nts., 3/1/03 $ 400,000 $ 418,000
------------------------------------------------------------------------------------------------------------
Doane Products Co., 10.625% Sr. Nts., 3/1/06 250,000 265,000
------------------------------------------------------------------------------------------------------------
Foodbrands America, Inc., 10.75% Sr. Sub. Nts., 5/15/06 235,000 250,275
-----------
933,275
- --------------------------------------------------------------------------------------------------------------
HEALTHCARE - 1.4%
------------------------------------------------------------------------------------------------------------
Genesis Health Ventures, Inc., 9.25% Sr. Sub. Nts., 10/1/06 (3) 850,000 877,625
------------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc., 13% Sr. Sub. Nts., 7/15/02 400,000 452,000
------------------------------------------------------------------------------------------------------------
IHF Holdings, Inc., 0%/15% Sr. Sub. Disc. Nts., Series B,
11/15/04 (4)(8) 1,050,000 769,303
------------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts.,
Series A, 4/15/04 500,000 557,500
-----------
2,656,428
- --------------------------------------------------------------------------------------------------------------
HOTEL/GAMING - 1.0%
------------------------------------------------------------------------------------------------------------
Capital Gaming International, Inc., Promissory Nts., 8/1/95 (10) 9,500 --
------------------------------------------------------------------------------------------------------------
Majestic Star Casino LLC (The), 12.75% Sr. Sec. Nts.,
5/15/03 280,000 302,400
------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 13.50% Sr. Sec. Nts.,
Series B, 11/15/02 600,000 795,000
------------------------------------------------------------------------------------------------------------
Showboat Marina Casino Partnership/Showboat Marina
Finance Corp., 13.50% First Mtg. Nts., Series B, 3/15/03 750,000 828,750
-----------
1,926,150
- --------------------------------------------------------------------------------------------------------------
LEISURE - 0.1%
------------------------------------------------------------------------------------------------------------
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A,
6/30/02 (4) 278,779 290,976
- --------------------------------------------------------------------------------------------------------------
RESTAURANTS - 1.1%
------------------------------------------------------------------------------------------------------------
Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 505,000 525,200
------------------------------------------------------------------------------------------------------------
Carrols Corp., 11.50% Sr. Nts., 8/15/03 430,000 456,875
------------------------------------------------------------------------------------------------------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 200,000 204,000
9.75% Sr. Sub. Nts., 6/1/02 950,000 971,375
-----------
2,157,450
- --------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL - 1.2%
------------------------------------------------------------------------------------------------------------
Clark-Schwebel, Inc., 10.50% Sr. Nts., 4/15/06 725,000 775,750
------------------------------------------------------------------------------------------------------------
Polysindo International Finance Co. BV, 11.375% Gtd. Sec.
Nts., 6/15/06 600,000 647,250
------------------------------------------------------------------------------------------------------------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 500,000 553,750
------------------------------------------------------------------------------------------------------------
William Carter Co., 10.375% Sr. Sub. Nts., 12/1/06 (3) 350,000 364,000
-----------
2,340,750
- --------------------------------------------------------------------------------------------------------------
ENERGY - 6.9%
------------------------------------------------------------------------------------------------------------
BP America, Inc., 10.875% Nts., 8/1/01 CAD 350,000 307,221
------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
10.50% Sr. Nts., 6/1/02 600,000 654,000
9.125% Sr. Nts., 4/15/06 1,000,000 1,042,500
------------------------------------------------------------------------------------------------------------
DeepTech International, Inc., 12% Sr. Sec. Nts., 12/15/00 200,000 215,000
------------------------------------------------------------------------------------------------------------
Falcon Drilling Co., Inc., 8.875% Sr. Nts., Series B, 3/15/03 300,000 307,875
------------------------------------------------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 1,400,000 1,473,500
------------------------------------------------------------------------------------------------------------
Mariner Energy, Inc., 10.50% Sr. Sub. Nts., 8/1/06 (3) 925,000 985,125
------------------------------------------------------------------------------------------------------------
Maxus Energy Corp., 11.50% Debs., 11/15/15 800,000 848,000
</TABLE>
7
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
ENERGY (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
Mesa Operating Co.:
0%/11.625% Gtd. Sr. Sub. Disc. Nts., 7/1/06 (8) $ 1,050,000 $ 729,750
10.625% Gtd. Sr. Sub. Nts., 7/1/06 1,450,000 1,576,875
------------------------------------------------------------------------------------------------------------
Parker Drilling Corp., 9.75% Gtd. Sr. Nts., 11/15/06 (3) 150,000 158,625
------------------------------------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.:
12.25% Sub. Debs., 2/1/05 157,000 176,232
9.375% Sub. Debs., 2/1/06 850,000 828,750
------------------------------------------------------------------------------------------------------------
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02 3,300,000 3,584,625
------------------------------------------------------------------------------------------------------------
Triton Energy Corp., 9.75% Sr. Sub. Disc. Nts., 12/15/00 200,000 210,000
------------------------------------------------------------------------------------------------------------
Vintage Petroleum, Inc., 9% Sr. Sub. Nts., 12/15/05 100,000 103,000
-----------
13,201,078
- --------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 4.2%
- --------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS - 1.8%
------------------------------------------------------------------------------------------------------------
Bank of America Malaysia, Zero Coupon Nts., 7.12%,
4/30/97 (5)(7) MYR 1,100,000 425,930
------------------------------------------------------------------------------------------------------------
Chase Malaysia, Zero Coupon Nts., 7.203%, 4/25/97 (5) MYR 1,000,000 387,455
------------------------------------------------------------------------------------------------------------
Citibank Malaysia Banker's Acceptance, Zero Coupon
Negotiable CD, 7.169%, 4/30/97 (5) MYR 500,000 193,567
------------------------------------------------------------------------------------------------------------
First Nationwide Escrow Corp., 10.625% Sr. Sub. Nts.,
10/1/03 (3) 750,000 813,750
------------------------------------------------------------------------------------------------------------
Ocwen Financial Corp., 11.875% Nts., 10/1/03 800,000 876,000
------------------------------------------------------------------------------------------------------------
PT Inti Indorayon Utama, Zero Coupon Promissory Nts.,
17.234%, 2/12/97 (5) IDR 1,800,000,000 748,885
-----------
3,445,587
- --------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 2.0%
------------------------------------------------------------------------------------------------------------
Aames Financial Corp., 9.125% Sr. Nts., 11/1/03 200,000 204,500
------------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I., 14% Sub. Nts., 6/10/02 (4) 144,131 159,265
------------------------------------------------------------------------------------------------------------
GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98 1,500,000 1,533,750
------------------------------------------------------------------------------------------------------------
Snap Ltd., 11.50% Sec. Bonds, 1/29/09 DEM 2,070,000 1,359,978
------------------------------------------------------------------------------------------------------------
Wilshire Financial Services Group, Inc., 13% Nts., 1/1/04 600,000 606,000
-----------
3,863,493
- --------------------------------------------------------------------------------------------------------------
INSURANCE - 0.4%
------------------------------------------------------------------------------------------------------------
Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 (3) 750,000 761,250
- --------------------------------------------------------------------------------------------------------------
HOUSING RELATED - 1.4%
- --------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS - 0.1%
------------------------------------------------------------------------------------------------------------
Building Materials Corp. of America, 8.625% Sr. Nts.,
12/15/06 (3) 165,000 164,587
- --------------------------------------------------------------------------------------------------------------
HOMEBUILDERS/REAL ESTATE - 1.3%
------------------------------------------------------------------------------------------------------------
First Place Tower, Inc.:
9.22% First Mtg. Bonds, 12/15/05 CAD 300,400 244,863
Units (each unit consists of one $10 principal amount of
8.50% cv. sub. debs., 12/15/15 and 40 common shares) (11) CAD 180,660 270,202
------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec.
Nts., Series B, 4/1/02 1,200,000 1,296,000
------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A,
12/1/11 (3) 700,000 586,687
-----------
2,397,752
</TABLE>
8
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
MANUFACTURING - 2.3%
- --------------------------------------------------------------------------------------------------------------
AEROSPACE/ELECTRONICS/COMPUTERS - 1.2%
------------------------------------------------------------------------------------------------------------
Communications & Power Industries, Inc., 12% Sr. Sub.
Nts., Series B, 8/1/05 $ 1,000,000 $ 1,117,500
------------------------------------------------------------------------------------------------------------
Rohr, Inc., 11.625% Sr. Nts., 5/15/03 800,000 900,000
------------------------------------------------------------------------------------------------------------
Unisys Corp., 11.75% Sr. Nts., 10/15/04 250,000 267,813
-----------
2,285,313
- --------------------------------------------------------------------------------------------------------------
AUTOMOTIVE - 0.9%
------------------------------------------------------------------------------------------------------------
Aftermarket Technology Corp., 12% Sr. Sub. Nts., Series B,
8/1/04 400,000 446,000
------------------------------------------------------------------------------------------------------------
Foamex LP/Foamex Capital Corp., 9.50% Gtd. Sr. Sec. Nts.,
6/1/00 240,000 247,200
------------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc., 11% Sr. Sub. Nts.,
7/15/06 400,000 436,000
------------------------------------------------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts., 7/15/06 300,000 321,000
------------------------------------------------------------------------------------------------------------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 225,000 218,250
-----------
1,668,450
- --------------------------------------------------------------------------------------------------------------
CAPITAL GOODS - 0.2%
------------------------------------------------------------------------------------------------------------
Farley, Inc., Zero Coupon Sub. Debs., 14.143%, 12/30/12 (4)(5) 198,000 22,516
------------------------------------------------------------------------------------------------------------
Mettler Toledo, Inc., 9.75% Gtd. Sr. Sub. Nts., 10/1/06 350,000 369,250
-----------
391,766
- --------------------------------------------------------------------------------------------------------------
MEDIA - 11.5%
- --------------------------------------------------------------------------------------------------------------
BROADCASTING - 2.3%
------------------------------------------------------------------------------------------------------------
American Radio Systems Corp., 9% Sr. Sub. Nts., 2/1/06 700,000 693,000
------------------------------------------------------------------------------------------------------------
Argyle Television, Inc., 9.75% Sr. Sub. Nts., 11/1/05 200,000 203,000
------------------------------------------------------------------------------------------------------------
Outlet Broadcasting, Inc., 10.875% Sr. Sub. Nts., 7/15/03 (12) 1,000,000 1,104,535
------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.625% Sr. Sub. Nts.,
10/1/02 815,000 855,750
------------------------------------------------------------------------------------------------------------
Summit Communications Group, Inc., 10.50% Sr. Sub.
Debs., 4/15/05 (4) 850,000 928,625
------------------------------------------------------------------------------------------------------------
Young Broadcasting, Inc., 9% Sr. Sub. Nts., Series B,
1/15/06 550,000 537,625
-----------
4,322,535
- --------------------------------------------------------------------------------------------------------------
CABLE TELEVISION - 5.8%
------------------------------------------------------------------------------------------------------------
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts.,
6/15/04 (8) 50,106 20,794
------------------------------------------------------------------------------------------------------------
Bell Cablemedia plc:
0%/11.875% Sr. Disc. Nts., 9/15/05 (8) 1,100,000 893,750
0%/11.95% Sr. Disc. Nts., 7/15/04 (8) 1,700,000 1,496,000
------------------------------------------------------------------------------------------------------------
Cablevision Industries Corp., 9.25% Sr. Debs., Series B,
4/1/08 600,000 637,107
------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp.:
10.50% Sr. Sub. Debs., 5/15/16 250,000 260,000
10.75% Sr. Sub. Debs., 4/1/04 500,000 521,250
------------------------------------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs.,
11/15/07 (8) 800,000 574,000
------------------------------------------------------------------------------------------------------------
Diamond Cable Communications plc:
0%/11.75% Sr. Disc. Nts., 12/15/05 (8) 1,425,000 1,020,656
0%/13.25% Sr. Disc. Nts., 9/30/04 (8) 250,000 206,563
</TABLE>
9
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
CABLE TELEVISION (CONTINUED)
------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 0%/12.875% Sr. Disc.
Nts., 6/1/04 (8) $ 400,000 $ 333,000
------------------------------------------------------------------------------------------------------------
Helicon Group LP/Helicon Capital Corp., 11% Sr. Sec. Nts.,
Series B, 11/1/03 (2) 885,000 907,125
------------------------------------------------------------------------------------------------------------
International CableTel, Inc.:
0%/10.875% Sr. Deferred Coupon Nts., 10/15/03 (8) 100,000 85,250
0%/12.75% Sr. Deferred Coupon Nts., 4/15/05 (8) 350,000 263,375
------------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd.:
10% Sr. Sec. Second Priority Debs., 12/1/07 200,000 212,000
11% Sr. Sub. Gtd. Debs., 12/1/15 250,000 269,375
------------------------------------------------------------------------------------------------------------
TeleWest plc, 0%/11% Sr. Disc. Debs., 10/1/07 (8) 4,050,000 2,835,000
------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 300,000 324,608
------------------------------------------------------------------------------------------------------------
Videotron Holdings plc, 0%/11% Sr. Disc. Nts., 8/15/05 (8) 250,000 204,375
-----------
11,064,228
- --------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA - 2.5%
------------------------------------------------------------------------------------------------------------
Ackerley Communications, Inc., 10.75% Sr. Sec. Nts.,
Series A, 10/1/03 750,000 798,750
------------------------------------------------------------------------------------------------------------
GSPI Corp., 10.15% First Mtg. Bonds, 6/24/10 (3) 471,719 443,846
------------------------------------------------------------------------------------------------------------
Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 350,000 337,750
------------------------------------------------------------------------------------------------------------
Katz Media Corp., 10.50% Sr. Sub. Nts., 1/15/07 (3) 475,000 486,281
------------------------------------------------------------------------------------------------------------
Lamar Advertising Co., 9.625% Sr. Sub. Nts., 12/1/06 400,000 416,000
------------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub.
Disc. Nts., 8/1/03 (8) 1,850,000 1,725,125
------------------------------------------------------------------------------------------------------------
Universal Outdoor, Inc.:
9.75% Sr. Sub. Nts., 10/15/06 250,000 258,750
9.75% Sr. Sub. Nts., 10/15/06 (3) 250,000 258,125
-----------
4,724,627
- --------------------------------------------------------------------------------------------------------------
ENTERTAINMENT/FILM - 0.9%
------------------------------------------------------------------------------------------------------------
Imax Corp., 7% Sr. Nts., 3/1/01 (6) 1,600,000 1,640,000
- --------------------------------------------------------------------------------------------------------------
OTHER - 1.3%
- --------------------------------------------------------------------------------------------------------------
CONGLOMERATES - 0.0%
------------------------------------------------------------------------------------------------------------
Maxxam Group, Inc., 0%/12.25% Sr. Sec. Disc. Nts., 8/1/03 (8) 100,000 85,000
- --------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL - 0.3%
------------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 10.25% Sr. Sub. Nts.,
12/1/06 (3) 525,000 553,219
- --------------------------------------------------------------------------------------------------------------
SERVICES - 1.0%
------------------------------------------------------------------------------------------------------------
Coinstar, Inc., Units (each unit consists of $1,000 principal
amount of 0%/13% sr. sub. disc. nts., 10/1/06 and one
warrant to purchase seven ordinary shares) (4)(8)(11) 750,000 526,500
------------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 10.125% Sr. Sub. Nts., 10/1/06 500,000 532,500
------------------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc.:
0%/13.625% Sr. Disc. Nts., 6/30/05 (8) 550,000 525,250
6.75% Cv. Gtd. Sr. Sub. Nts., 9/15/03 390,000 358,800
-----------
1,943,050
- --------------------------------------------------------------------------------------------------------------
RETAIL - 1.9%
- --------------------------------------------------------------------------------------------------------------
SPECIALTY RETAILING - 0.4%
------------------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc., 12% Sr. Nts., 10/1/03 630,000 683,550
</TABLE>
10
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
SUPERMARKETS - 1.5%
------------------------------------------------------------------------------------------------------------
Grand Union Co., 12% Sr. Nts., 9/1/04 $ 800,000 $ 852,000
------------------------------------------------------------------------------------------------------------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04 250,000 266,875
10.45% Sr. Nts., 6/15/04 1,100,000 1,174,250
------------------------------------------------------------------------------------------------------------
Smith's Food & Drug Centers, Inc., 11.25% Sr. Unsec. Sub.
Nts., 5/15/07 550,000 610,500
-----------
2,903,625
- --------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 1.3%
- --------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION - 0.4%
------------------------------------------------------------------------------------------------------------
Atlas Air, Inc., 12.25% Pass-Through Certificates, 12/1/02 750,000 836,250
- --------------------------------------------------------------------------------------------------------------
RAILROADS - 0.9%
------------------------------------------------------------------------------------------------------------
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375%
Sr. Disc. Nts., Series B, 12/15/03 (8) 2,200,000 1,771,000
- --------------------------------------------------------------------------------------------------------------
UTILITIES - 17.0%
- --------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 2.4%
------------------------------------------------------------------------------------------------------------
CalEnergy, Inc., 9.50% Sr. Nts., 9/15/06 (3) 425,000 440,938
------------------------------------------------------------------------------------------------------------
California Energy, Inc., 0%/10.25% Sr. Disc. Nts., 1/15/04 (8) 1,400,000 1,487,500
------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E,
5/1/11 1,000,000 1,075,000
------------------------------------------------------------------------------------------------------------
First PV Funding Corp.:
10.15% Lease Obligation Bonds, Series 1986B, 1/15/16 210,000 223,913
10.30% Lease Obligation Bonds, Series 1986A, 1/15/14 740,000 789,025
------------------------------------------------------------------------------------------------------------
Subic Power Corp., 9.50% Sr. Sec. Nts., 12/28/08 620,689 648,621
-----------
4,664,997
- --------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 14.6%
------------------------------------------------------------------------------------------------------------
American Communications Services, Inc.:
0%/12.75% Sr. Disc. Nts., 4/1/06 (8) 600,000 334,500
0%/13% Sr. Disc. Nts., 11/1/05 (8) 500,000 297,500
------------------------------------------------------------------------------------------------------------
Arch Communications Group, Inc., 0%/10.875% Sr. Disc.
Nts., 3/15/08 (8) 200,000 115,250
------------------------------------------------------------------------------------------------------------
Brooks Fiber Properties, Inc.:
0%/10.875% Sr. Disc. Nts., 3/1/06 (8) 200,000 134,500
0%/11.875% Sr. Disc. Nts., 11/1/06 (3)(8) 2,050,000 1,317,125
------------------------------------------------------------------------------------------------------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04 (4)(8) 1,025,000 855,875
------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/13% Sr. Disc. Nts., 6/15/05 (4)(8) 600,000 417,000
------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc., Zero Coupon
Sr. Disc. Nts., 12.376%, 8/15/00 (5)(9)(13) 3,600,000 2,511,000
------------------------------------------------------------------------------------------------------------
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03 (8) 2,000,000 1,830,000
------------------------------------------------------------------------------------------------------------
Central Temica Guemes, 12% Bonds, 11/26/01 (4) 200,000 203,000
------------------------------------------------------------------------------------------------------------
Colt Telecom Group plc, Units (each unit consists of $1,000
principal amount of 0%/12% sr. disc. nts., 12/15/06 and one
warrant to purchase 7.8 ordinary shares) (8)(11) 1,100,000 665,500
------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred
Coupon Bonds, 11/15/03 (8) 875,000 581,875
------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc., 0%/15% Sr. Sec. Disc. Nts.,
7/15/05 (8) 1,350,000 857,250
------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub.
Disc. Nts., 12/15/05 (3)(8) 178,000 115,700
</TABLE>
11
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
------------------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Bonds, 12/15/05 (8) $ 1,499,000 $ 921,885
------------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts.,
Series B, 4/15/03 (8) 100,000 57,250
------------------------------------------------------------------------------------------------------------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06 (8) 150,000 98,625
0%/13.50% Sr. Disc. Nts., 9/15/05 (8) 1,550,000 1,108,250
------------------------------------------------------------------------------------------------------------
Metrocall, Inc., 10.375% Sr. Sub. Nts., 10/1/07 1,225,000 1,047,375
------------------------------------------------------------------------------------------------------------
MFS Communications Co., Inc., 0%/9.375% Sr. Disc. Nts.,
1/15/04 (8) 1,650,000 1,443,750
------------------------------------------------------------------------------------------------------------
Occidente y Caribe Celular SA, Units (each unit consists of
$1,000 principal amount of 0%/14% sr. disc. nts., 3/15/04
and one warrant to purchase 5.709 ordinary shares) (3)(8)(11) 300,000 181,500
------------------------------------------------------------------------------------------------------------
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 700,000 731,500
11.625% Sr. Nts., 8/15/06 (3) 500,000 522,500
------------------------------------------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr.
Nts., 8/15/04 (3) 1,060,000 1,078,550
------------------------------------------------------------------------------------------------------------
Petersburg Long Distance, Inc.:
9% Cv. Sub. Nts., 6/1/06 (3) 170,000 179,350
Units (each unit consists of $1,000 principal amount of
0%/14% sr. disc. nts., 6/1/04 and one warrant to purchase 34
ordinary shares) (3)(8)(11) 1,150,000 948,750
------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03 (8) 500,000 430,000
0%/14% Sr. Sub. Disc. Nts., 11/15/01 (8) 1,750,000 1,710,625
10.75% Sr. Nts., 11/1/04 (3) 800,000 834,000
------------------------------------------------------------------------------------------------------------
Real Time Data, Inc., Units (each unit consists of $1,000
principal amount of 0%/13.50% sub. disc. nts., 8/15/06 and
one warrant to purchase six ordinary shares) (4)(8)(11) 1,900,000 1,045,000
------------------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp.,
0%/12.50% Sr. Disc. Nts., 8/15/06 (8) 1,350,000 914,625
------------------------------------------------------------------------------------------------------------
Teleport Communications Group, Inc.:
0%/11.125% Sr. Disc. Nts., 7/1/07 (8) 2,975,000 2,052,750
9.875% Sr. Nts., 7/1/06 300,000 322,500
------------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 9.50% Sr. Nts.,
2/1/04 150,000 143,250
------------------------------------------------------------------------------------------------------------
Western Wireless Corp.:
10.50% Sr. Sub. Nts., 2/1/07 (3) 350,000 367,063
10.50% Sr. Sub. Nts., 6/1/06 (9) 1,400,000 1,471,750
-----------
27,846,923
-----------
Total Corporate Bonds and Notes (Cost $110,703,118) 116,688,823
SHARES
- --------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 1.7%
- --------------------------------------------------------------------------------------------------------------
Berg Electronics Corp. (3)(14) 11,246 330,351
------------------------------------------------------------------------------------------------------------
Celcaribe SA (4)(14) 121,950 207,315
------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., Cl. A (14) 4,000 88,000
</TABLE>
12
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I. (4) 150 $ 150,750
------------------------------------------------------------------------------------------------------------
El Paso Electric Co. (14) 12,384 80,496
------------------------------------------------------------------------------------------------------------
Equitable Bag, Inc. (4)(14) 3,723 18,615
------------------------------------------------------------------------------------------------------------
Gillett Holdings, Inc. (4)(14) 22,355 804,780
------------------------------------------------------------------------------------------------------------
Grand Union Co. (14) 20,511 102,555
------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc. (14) 8,800 78,100
------------------------------------------------------------------------------------------------------------
J. Ray McDermott SA (14) 10,965 241,230
------------------------------------------------------------------------------------------------------------
MFS Communications, Inc. (14) 147 8,011
------------------------------------------------------------------------------------------------------------
Omnipoint Corp. (4)(14) 46,875 857,227
------------------------------------------------------------------------------------------------------------
Triangle Wire & Cable, Inc. (4)(14) 21,111 21,111
------------------------------------------------------------------------------------------------------------
Walter Industries, Inc. (14) 18,455 260,677
-----------
Total Common Stocks (Cost $2,637,945) 3,249,218
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 7.9%
- --------------------------------------------------------------------------------------------------------------
BankAmerica Corp., 8.375%, Series K 13,000 328,250
------------------------------------------------------------------------------------------------------------
BankUnited Capital Trust Preferred Securities (3) 600 600,750
------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 8.50% Cum. Cv., Series I 14,600 299,300
------------------------------------------------------------------------------------------------------------
California Federal Bank, 10.625% Non-Cum., Series B 9,500 1,054,500
------------------------------------------------------------------------------------------------------------
CRIIMI MAE, Inc., 10.875% Cum. Cv. Preferred Stock,
Series B 37,000 1,073,000
------------------------------------------------------------------------------------------------------------
Earthwatch, Inc., 12% Cv. Sr. Preferred Stock, Series C (4)(15) 90,000 900,000
------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 11.40% Series A Preferred Stock (15) 5,367 601,104
------------------------------------------------------------------------------------------------------------
Fidelity Federal Bank, 12% Non-Cum. Exchangeable
Perpetual Preferred Stock, Series A (4) 20,000 565,000
------------------------------------------------------------------------------------------------------------
First Nationwide Bank, 11.50% Non-Cum. 6,000 688,500
------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Trust, 9% Preferred Securities 2,260,000 2,305,200
------------------------------------------------------------------------------------------------------------
Glendale Federal Bank, F.S.B., 8.75% Non-Cum. Cv.,
Series E 16,500 969,375
------------------------------------------------------------------------------------------------------------
K-III Communications Corp., $11.625 Exchangeable,
Series B (4)(15) 8,423 852,849
------------------------------------------------------------------------------------------------------------
Kelley Oil & Gas Corp., $2.625 Cv. (14) 13,000 310,375
------------------------------------------------------------------------------------------------------------
Navistar International Corp., $6.00 Cv., Series G 2,500 141,250
------------------------------------------------------------------------------------------------------------
Panamsat Corp., 12.75% Sr. Preferred Exchangeable (4)(15) 1,450 1,779,875
------------------------------------------------------------------------------------------------------------
Pantry Pride, Inc., $14.875 Exchangeable, Series B 2,000 201,000
------------------------------------------------------------------------------------------------------------
Prime Retail, Inc., $19.00 Cv., Series B 7,000 152,250
------------------------------------------------------------------------------------------------------------
SDW Holdings Corp., 15% Cum. Sr. Exchangeable
Preferred Stock (4) 37,500 1,312,500
------------------------------------------------------------------------------------------------------------
Walden Residential Properties, Inc.:
Preferred Stock 5,000 120,625
9.16% Cv. Preferred Stock, Series B 30,000 866,250
-----------
Total Preferred Stocks (Cost $13,725,104) 15,121,953
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
OTHER SECURITIES - 0.6%
- --------------------------------------------------------------------------------------------------------------
MFS Communications Co., Inc., 8% Cv. Depositary Shares
each Representing 1/100 Share of Dividend Enhanced
Convertible Stock (Cost $968,719) 13,000 1,186,250
</TABLE>
13
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
UNITS (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES - 0.5%
- --------------------------------------------------------------------------------------------------------------
American Communications Services, Inc. Wts., Exp. 11/05 475 $ 42,750
------------------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts., Exp. 6/99 6,000 10,500
------------------------------------------------------------------------------------------------------------
Ames Department Stores, Inc.:
Excess Cash Flow Payment Certificates, Series AG-7A (4) 12,400 124
Litigation Trust (4) 39,658 397
------------------------------------------------------------------------------------------------------------
Australis Media Ltd. Wts., Exp. 5/00 (4) 125 1
------------------------------------------------------------------------------------------------------------
Capital Gaming International, Inc. Wts., Exp. 2/99 (4) 21,112 327
------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc. Wts., Exp. 6/05 (3) 4,800 70,200
------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc. Wts., Exp. 8/03 (4) 2,920 58,400
------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/03 (4) 875 65,625
------------------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc. Wts., Exp. 10/03 (4) 630 2,835
------------------------------------------------------------------------------------------------------------
Foamex LP/JPS Automotive Corp. Wts., Exp. 7/99 (4) 500 15,000
------------------------------------------------------------------------------------------------------------
Gaylord Container Corp. Wts., Exp. 11/02 14,410 88,261
------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc. Wts., Exp. 7/05 52,500 131,250
------------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01 (4) 100 2,000
------------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc. Wts., Exp. 11/99 (4) 400 20,000
------------------------------------------------------------------------------------------------------------
IHF Holdings, Inc. Wts., Exp. 11/99 (4) 250 37,500
------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/02 950 --
------------------------------------------------------------------------------------------------------------
IntelCom Group, Inc. Wts., Exp. 9/05 5,940 53,460
------------------------------------------------------------------------------------------------------------
Jewel Recovery LP, Participation Units of Limited Partners'
Interest 2,360 --
------------------------------------------------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/00 (4) 7,500 137,157
------------------------------------------------------------------------------------------------------------
Protection One, Inc. Wts.:
Exp. 11/03 (4) 28,000 175,000
Exp. 6/05 (4) 1,600 13,200
------------------------------------------------------------------------------------------------------------
SDW Holdings Corp., Cl. B Wts., Exp. 12/06 (4) 3,750 48,750
------------------------------------------------------------------------------------------------------------
Trizec Corp. Wts., Exp. 7/99 3,970 16,944
------------------------------------------------------------------------------------------------------------
United International Securities Ltd. Wts., Exp. 11/99 (4) 1,440 28,800
------------------------------------------------------------------------------------------------------------
Venezuela Government Wts., Exp. 4/20 1,250 --
-----------
Total Rights, Warrants and Certificates (Cost $399,755) 1,018,481
PRINCIPAL
AMOUNT(1)
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
STRUCTURED INSTRUMENTS - 3.4%
- --------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, New York Branch,
6.28% Deutsche Mark Currency Protected Yield Curve CD,
7/25/97 $ 300,000 298,950
------------------------------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce, New York Branch:
16.75% CD, 4/16/97 (indexed to the Federation GKO, Zero
Coupon, 4/9/97) (4) 800,000 797,600
17% CD, 2/26/97 (indexed to the Federation GKO, Zero
Coupon, 2/19/97) (4) 250,000 249,625
17% CD, 4/2/97 (indexed to the Russian Federation GKO,
Zero Coupon, 3/26/97) 400,000 399,000
17.30% CD, 2/26/97 (indexed to the Federation GKO, Zero
Coupon, 2/19/97) (4) 300,000 299,550
</TABLE>
14
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
STRUCTURED INSTRUMENTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
ING (U.S.) Financial Holdings Corp., Zero Coupon:
Korean Won/U.S. Dollar Linked Nts., 10.871%, 6/9/97 (5) $ 200,000 $ 185,960
Nts. Linked to the Greek Drachma/Swiss Franc Exchange
Rate, 14.829%, 12/4/97 (5) 600,000 509,040
Nts., Linked to Greek Drachma/Swiss Franc Exchange Rate,
14.437%, 12/10/97 (5) 285,000 243,048
------------------------------------------------------------------------------------------------------------
Internationale Nederlanden (U.S.) Capital Holdings Corp.,
Zero Coupon:
Chilean Peso Linked Nts., 11.813%, 6/23/97 (5) 420,000 384,468
Czech Koruna Linked Nts., 11.911%, 6/26/97 (5) 350,000 333,585
------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings:
U.S. Dollar Nts. Linked to Czech Koruna/Swiss Franc, 15%,
12/21/98 100,000 99,920
Zero Coupon, U.S. Dollar Nts. Linked to:
Czech Koruna/Swiss Franc, 15.411%, 12/29/97 (5) 500,000 500,900
Greek Drachma/Swiss Franc, 15.453%, 12/26/97 (5) 400,000 399,440
Greek Drachma/Swiss Franc, 15.499%, 12/30/97 (5) 200,000 200,000
Greek Drachma/Swiss Franc, 15.639%, 12/23/97 (5) 400,000 398,640
------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Zero Coupon Brazilian Credit
Linked Nts., 12.677%, 1/3/97 (indexed to the Brazilian
National Treasury Nts., Zero Coupon, 1/2/97) (5) 800,000 799,680
------------------------------------------------------------------------------------------------------------
Swiss Bank Corp., New York Branch, 6.05% CD, 6/20/97
(indexed to the closing Nikkei 225 Index on 1/23/97, 5 yr. &
3 mos. Japanese Yen Swap rate & New Zealand Dollar) 450,000 459,225
-----------
Total Structured Instruments (Cost $6,588,493) 6,558,631
</TABLE>
<TABLE>
DATE STRIKE CONTRACTS
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
PUT OPTIONS PURCHASED - 0.0%
- --------------------------------------------------------------------------------------------------------------
Australian Dollar Put Opt. 1/97 1.28AUD 770,000 1,040
------------------------------------------------------------------------------------------------------------
Australian Dollar Put Opt. 2/97 1.282AUD 770,000 2,041
------------------------------------------------------------------------------------------------------------
Deutsche Mark Put Opt. 2/97 1.545DEM 6,160,000 33,855
------------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 9.50%, 2/1/06 Put Opt. 7/97 99.96%ITL 480 336
------------------------------------------------------------------------------------------------------------
Japanese Yen Put Opt. 3/97 115JPY 165,000,000 22,770
------------------------------------------------------------------------------------------------------------
New Zealand Dollar Put Opt. 3/97 1.4286NZD 573,000 3,461
------------------------------------------------------------------------------------------------------------
New Zealand Dollar Put Opt. 3/97 1.44NZD 205,700 749
------------------------------------------------------------------------------------------------------------
New Zealand Dollar Put Opt. 3/97 1.453NZD 91,500 210
-----------
Total Put Options Purchased (Cost $104,672) 64,462
</TABLE>
15
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 6.8%
- --------------------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co.,
6.52%, dated 12/31/96, to be repurchased at $12,904,673
on 1/2/97, collateralized by U.S. Treasury Nts.,
5.50%-7.50%, 7/15/99-8/15/05, with a value of $13,195,771
(Cost $12,900,000) $ 12,900,000 $ 12,900,000
------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $178,526,490) 98.8% 188,944,878
------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.2 2,348,495
------------ ------------
NET ASSETS 100.0% $191,293,373
------------ ------------
------------ ------------
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted
in the following currencies:
ARP - Argentine Peso JPY - Japanese Yen
AUD - Australian Dollar MXP - Mexican Peso
CAD - Canadian Dollar MYR - Malaysian Ringgit
DEM - German Deutsche Mark NOK - Norwegian Krone
DKK - Danish Krone NZD - New Zealand Dollar
GBP - British Pound Sterling PTE - Portuguese Escudo
IDR - Indonesian Rupiah SEK - Swedish Krona
ITL - Italian Lira ZAR - South African Rand
2. Represents the current interest rate for a variable rate security.
3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These
securities have been determined to be liquid under guidelines
established by the Board of Trustees. These securities amount to
$17,341,932 or 9.07% of the Fund's net assets, at December 31, 1996.
4. Identifies issues considered to be illiquid - See applicable note of
Notes to Financial Statements.
5. For zero coupon bonds, the interest rate shown is the effective
yield on the date of purchase.
6. Represents the current interest rate for an increasing rate security.
7. When-issued security to be delivered and settled after December 31, 1996.
8. Denotes a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
9. A sufficient amount of securities has been designated to cover
outstanding written call options, as follows:
<TABLE>
CONTRACTS/PRINCIPAL
SUBJECT EXPIRATION EXERCISE PREMIUM MARKET
VALUE
TO CALL DATE PRICE RECEIVED
(NOTE 1)
- ----------------------------------------------------------------------------------------------------------------
- -----------
<S> <C> <C> <C> <C> <C>
Call option on Australian Dollar 626,780 1/97 1.2285AUD $ 4,043 $
63
Call option on British Pound Sterling 300,000 1/97 1.632GBP 6,756
23,970
Call option on British Pound Sterling 600,000 3/97 1.69GBP 11,040
20,004
Call option on British Pound Sterling 200,000 3/97 1.71GBP 3,906
6,220
Call option on Morocco (Kingdom of)
Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09 990,000 1/97 79.88% 10,791
29,700
Call option on New Zealand Dollar 205,700 3/97 1.4194NZD 1,327
1,483
Call option on New Zealand Dollar 573,000 3/97 1.4124NZD 3,782
3,364
Call option on New Zealand Dollar 91,500 3/97 1.4276NZD 640
866
-------
- -------
$42,285
$85,670
-------
- -------
-------
- -------
</TABLE>
16
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
10. Non-income producing--issuer is in default of interest payment.
11. Units may be comprised of several components, such as debt and
equity and/or warrants to purchase equity at some point in the
future. For units which represent debt securities, principal
amount disclosed represents total underlying principal.
12. Securities with an aggregate market value of $104,535 are held
in collateralized accounts to cover initial margin requirements
on open futures sales contracts. See applicable note of Notes to
Financial Statements.
13. A sufficient amount of securities has been designated to cover
outstanding forward foreign currency exchange contracts. See
applicable note of Notes to Financial Statements.
14. Non-income producing security.
15. Interest or dividend is paid in kind.
See accompanying Notes to Financial Statements.
17
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM NOTES - 0.2%
- ------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 7.75%, 4/15/97
(Cost $733,498) $ 700,000 $ 733,498
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS - 26.2%
- ------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY - 18.9%
- ------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED - 13.2%
--------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates:
Series 1712, Cl. B, 6%, 3/15/09 1,000,000 928,430
Series 1714, Cl. M, 7%, 8/15/23 2,000,000 1,898,740
7%, 4/1/26 5,078,575 4,985,942
Interest-Only Stripped Mtg.-Backed Security, Trust 177, Cl. B:
14.13%, 7/1/26 (2) 6,902,607 2,409,441
14.341%, 7/15/26 (2) 3,155,477 1,101,459
--------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 3/1/11 928,945 912,281
7%, 11/1/25 1,839,735 1,800,733
7%, 11/1/25 7,646,654 7,484,545
7%, 4/1/04 404,189 408,094
7.50%, 1/1/08 344,370 350,324
7.50%, 1/1/26 4,860,349 4,864,772
7.50%, 1/15/27 (3) 23,200,000 23,185,616
7.50%, 4/1/08 269,575 274,237
8%, 5/1/17 784,672 811,021
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates:
8.75%, 11/25/05 3,000,000 3,124,680
10.40%, 4/25/19 1,565,940 1,689,258
------------
56,229,573
- ------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED - 5.7%
--------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
6%, 10/20/25 4,710,209 4,818,403
7%, 1/15/09-10/20/24 9,630,297 9,582,739
7.50%, 7/15/26 9,903,936 9,915,128
------------
24,316,270
- ------------------------------------------------------------------------------------------------------------------
PRIVATE - 7.3%
- ------------------------------------------------------------------------------------------------------------------
COMMERCIAL - 6.0%
--------------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., Collateralized Mtg.
Obligation, Series 1996-C1, Cl. D, 7.605%, 12/25/20 (4)(5) 2,500,000 2,515,625
--------------------------------------------------------------------------------------------------------------
Criimi Mae Financial Corp., Collateralized Mtg. Obligations,
Trust I, Cl. A-2, 7.56%, 8/30/05 (4) 2,000,000 1,996,250
--------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-
Through Certificates, Series 1994-C1:
Cl. 2-D, 8.70%, 9/25/25 (5) 1,500,000 1,580,156
Cl. 2-E, 8.70%, 9/25/25 (5) 1,500,000 1,573,594
</TABLE>
18
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL (CONTINUED)
--------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-
Through Certificates, Series 1995-C2, Cl. C, 7.629%, 6/15/21 (4) $ 894,334 $ 905,164
--------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-
Through Certificates, Series 1996-C1, Cl. D-1, 7.51%, 2/15/28 (4)(5) 1,000,000 983,125
--------------------------------------------------------------------------------------------------------------
NationsCommercial Corp., NB Commercial Mtg. Pass-Through
Certificates, Series-DMC:
Cl. B, 8.562%, 8/12/11 (5) 1,600,000 1,629,750
Cl. C, 8.921%, 8/12/11 (5) 3,500,000 3,563,437
--------------------------------------------------------------------------------------------------------------
Potomac Gurnee Financial Corp., Commercial Mtg. Pass-
Through Certificates:
Cl. C, 7.217%, 12/21/26 250,000 250,078
Cl. D, 7.685%, 12/21/26 500,000 500,156
--------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. C, 8.25%, 12/25/20 1,008,390 1,019,735
Series 1994-C1, Cl. C, 8%, 6/25/26 1,500,000 1,542,422
Series 1995-C1, Cl. D, 6.90%, 2/25/27 3,000,000 2,827,266
--------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates:
Series 1996-C3, Cl. C, 7.375%, 6/25/30 (4)(5) 3,000,000 2,992,500
Series 1996-CFL, Cl. D, 7.034%, 2/25/28 1,800,000 1,784,250
-------------
25,663,508
- ------------------------------------------------------------------------------------------------------------------
MANUFACTURED HOUSING - 0.2%
--------------------------------------------------------------------------------------------------------------
Green Tree Financial Corp., Series 1994-6, Cl. A3, 7.70%, 1/15/20 1,000,000 1,015,620
- ------------------------------------------------------------------------------------------------------------------
MULTI-FAMILY - 0.8%
--------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp., Series 1993-12, Cl. B1, 6.625%, 2/25/24 1,000,000 917,109
--------------------------------------------------------------------------------------------------------------
Merrill Lynch Trust, Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates,
Series 43, Cl. E, 6.50%, 8/27/15 500,000 485,465
--------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1991-M5, Cl. A, 9%, 3/25/17 1,846,874 1,903,146
-------------
3,305,720
- ------------------------------------------------------------------------------------------------------------------
OTHER - 0.1%
--------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Series 1994-14, Cl. A1,
6.50%, 4/25/24 141,512 141,070
--------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VI:
Interest-Only Stripped Mtg.-Backed Security, Series 1987-3, Cl. B:
6.113%, 10/23/17 (2) 98,443 31,871
6.113%, 10/23/17 (2) 34,999 11,331
Principal-Only Stripped Mtg.-Backed Security,
Series 1987-3, Cl. A, Zero Coupon:
9.543%, 10/23/17 (6) 143,993 100,480
8.411%, 10/23/17 (6) 51,121 35,673
------------
320,425
</TABLE>
19
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
RESIDENTIAL - 0.2%
--------------------------------------------------------------------------------------------------------------
Contimortgage Home Equity Loan Trust, Series 1995-2,
Cl. A2, 7.95%, 4/15/10 $ 547,848 $ 552,813
--------------------------------------------------------------------------------------------------------------
Ryland Mortgage Securities Corp. III, Sub. Bonds,
Series 1992-A, Cl. 1A, 8.285%, 3/29/30 (4) 378,157 378,040
------------
930,853
------------
Total Mortgage-Backed Obligations (Cost $110,759,887) 111,781,969
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 38.8%
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
10.375%, 11/15/09-11/15/12 1,000,000 1,262,188
12.75%, 11/15/10 1,000,000 1,415,938
6.75%, 8/15/26 5,000,000 5,035,940
6.875%, 8/15/25 3,500,000 3,567,816
7.125%, 2/15/23 4,500,000 4,696,879
7.50%, 11/15/16 9,200,000 9,959,008
8%, 11/15/21 5,000,000 5,732,815
8.125%, 8/15/19 2,800,000 3,236,626
8.875%, 8/15/17 1,500,000 1,852,032
9.25%, 2/15/16 1,000,000 1,269,063
STRIPS, Zero Coupon:
7.144%, 5/15/15 (7) 1,500,000 432,256
7.142%, 8/15/14 (7) 5,000,000 1,520,869
--------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.125%, 11/30/98 500,000 493,125
5.75%, 8/15/03 470,000 456,047
5.875%, 4/30/98 2,500,000 2,498,440
6%, 8/31/97-12/31/97 26,000,000 26,032,524
6.375%, 6/30/97 (8) 1,000,000 1,003,751
6.375%, 3/31/01-8/15/02 2,000,000 2,013,752
6.50%, 4/30/99-10/15/06 31,500,000 31,715,643
6.75%, 6/30/99 (9) 22,150,000 22,544,557
6.875%, 3/31/00 500,000 511,407
7.25%, 5/15/04 1,000,000 1,052,813
7.25%, 8/15/04 (10) 12,750,000 13,427,355
7.375%, 11/15/97 2,000,000 2,023,752
7.50%, 11/15/01-2/15/05 15,150,000 16,157,358
7.875%, 11/15/04 2,000,000 2,183,126
8.50%, 5/15/97-7/15/97 1,000,000 1,012,500
9.25%, 8/15/98 (8) 2,000,000 2,101,252
-------------
Total U.S. Government Obligations (Cost $162,639,776) 165,208,832
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS - 15.4%
- ------------------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion, Zero Coupon:
25.785%, 11/6/97 (7)MXP 8,000,000 833,280
24.602%, 12/4/97 (7)MXP 9,915,000 1,015,679
37.786%, 3/6/97 (7)MXP 5,300,000 643,949
</TABLE>
20
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS - 15.4%
- ------------------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion, Zero Coupon:
28.589%, 7/31/97 (7)MXP 5,200,000 $ 574,528
27.799%, 9/4/97 (7)MXP 6,820,000 740,780
--------------------------------------------------------------------------------------------------------------
Canada (Government of) Debs., 10.50%, 7/1/00 CAD 5,180,000 4,433,139
--------------------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento Sr. Unsec. Debs.:
6.625%, 10/14/98 (11) 1,000,000 1,004,050
7.25%, 4/30/98 (11) 1,000,000 1,012,425
--------------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds, 8%, 11/15/01 DKK 26,800,000 5,042,968
--------------------------------------------------------------------------------------------------------------
Financiera Energetica Nacional SA:
Eurobonds, 9.375%, 6/15/06 (11) 2,350,000 2,507,744
Nts., 9.375%, 6/15/06 700,000 746,987
--------------------------------------------------------------------------------------------------------------
Germany (Republic of) Bonds, Series 90, 8.50%, 8/21/00 DEM 4,500,000 3,318,552
--------------------------------------------------------------------------------------------------------------
Italy (Republic of):
Sr. Unsec. Unsub. Global Bonds, 0.563%, 7/26/99 (4)JPY 434,000,000 3,758,566
Treasury Bonds, Buoni del Tesoro Poliennali,
10.50%, 11/1/98 ITL 3,425,000,000 2,412,175
--------------------------------------------------------------------------------------------------------------
Landesbank Rheinland-Pfalz-Girozentrale Bonds, 5.75%, 10/16/03 DEM 3,400,000 2,229,975
--------------------------------------------------------------------------------------------------------------
Netherlands (Government of) Bonds, 8.75%, 9/15/01 NLG 900,000 608,503
--------------------------------------------------------------------------------------------------------------
New Zealand (Government of):
Bonds, 8%, 4/15/04 NZD 1,345,000 992,717
Index Linked Bonds, 4.60%, 2/15/16 (4)NZD 333,000 230,518
--------------------------------------------------------------------------------------------------------------
Norwegian Government Bonds, 9.50%, 10/31/02 NOK 17,135,000 3,205,142
--------------------------------------------------------------------------------------------------------------
Ontario, Canada (Province of) Bonds, 8%, 10/17/01 750,000 797,737
--------------------------------------------------------------------------------------------------------------
Poland (Republic of) Disc. Bonds, 6.50%, 10/27/24 (4) 7,250,000 7,059,687
--------------------------------------------------------------------------------------------------------------
Portugal (Republic of) Gtd. Bonds, Obrigicion do tes Medio Prazo,
11.625%, 2/23/98 PTE 259,000,000 1,769,583
--------------------------------------------------------------------------------------------------------------
South Africa (Republic of) Debs., 9.625%, 12/15/99 1,000,000 1,066,250
--------------------------------------------------------------------------------------------------------------
Sweden (Kingdom of) Bonds, Series 1030, 13%, 6/15/01 SEK 5,200,000 981,896
--------------------------------------------------------------------------------------------------------------
Telkom SA Ltd. Bonds, Series TK05, 12%, 3/31/98 ZAR 2,390,000 486,614
--------------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds, 12%, 9/22/01 AUD 2,885,000 2,740,252
--------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 12.50%, 11/21/05 GBP 3,365,000 7,302,580
--------------------------------------------------------------------------------------------------------------
United Mexican States Bonds, 7.688%, 8/6/01 (4)(11) 8,000,000 8,030,000
-------------
Total Foreign Government Obligations (Cost $64,734,768) 65,546,276
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
LOAN PARTICIPATIONS - 0.3%
- ------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) 1989-1990 Integrated Loan Facility
Bonds, 6.563%, 7/1/01 (Cost $1,335,840) (4)(5) 1,428,800 1,364,504
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES - 0.4%
- ------------------------------------------------------------------------------------------------------------------
Dade County, FL Educational Facilities Authority:
Exchangeable Revenue Bonds, University of Miami,
Prerefunded, MBIA Insured, 7.65%, 4/1/10 175,000 195,919
Revenue Bonds, University of Miami, MBIA Insured, 7.65%, 4/1/10 205,000 226,960
</TABLE>
21
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
Dade County, FL Educational Facilities Authority: (Continued)
Taxable Exchange Revenue Bonds, University of Miami,
MBIA Insured, 9.70%, 4/1/10 $ 120,000 $ 132,854
--------------------------------------------------------------------------------------------------------------
Pinole, CA Redevelopment Agency Tax Allocation
Taxable Bonds, Pinole Vista Redevelopment,
Series B, 8.35%, 8/1/17 670,000 702,703
--------------------------------------------------------------------------------------------------------------
Port of Portland, OR Special Obligation Taxable Revenue
Bonds, PAMCO Project, 9.20%, 5/15/22 500,000 567,900
----------
Total Municipal Bonds and Notes (Cost $1,664,053) 1,826,336
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 18.2%
- ------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY - 1.3%
- ------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.6%
--------------------------------------------------------------------------------------------------------------
Lyondell Petrochemical Co., 8.25% Nts., 3/15/97 262,000 263,155
--------------------------------------------------------------------------------------------------------------
Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03 2,100,000 2,282,357
----------
2,545,512
- ------------------------------------------------------------------------------------------------------------------
PAPER - 0.7%
--------------------------------------------------------------------------------------------------------------
Boise Cascade Corp., 9.90% Nts., 3/15/00 750,000 816,983
--------------------------------------------------------------------------------------------------------------
Potlatch Corp., 9.46% Medium-Term Nts., 4/2/02 500,000 560,402
--------------------------------------------------------------------------------------------------------------
Scotia Pacific Holding Co., 7.95% Timber Collateralized Nts., 7/20/15 1,484,210 1,488,992
----------
2,866,377
- ------------------------------------------------------------------------------------------------------------------
CONSUMER RELATED - 1.4%
- ------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS - 0.6%
--------------------------------------------------------------------------------------------------------------
Fletcher Challenge Capital Canada, Inc., 7.75% Nts.,
6/20/06 1,800,000 1,868,207
--------------------------------------------------------------------------------------------------------------
Procter & Gamble Co., 9.36% Debs., 1/1/21 500,000 609,486
----------
2,477,693
- ------------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO - 0.2%
--------------------------------------------------------------------------------------------------------------
Bass America, Inc., 6.75% Gtd. Nts., 8/1/99 750,000 756,647
- ------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 0.3%
--------------------------------------------------------------------------------------------------------------
Roche Holdings, Inc., 2.75% Bonds, 4/14/00 1,250,000 1,137,500
- ------------------------------------------------------------------------------------------------------------------
HOTEL/GAMING - 0.1%
--------------------------------------------------------------------------------------------------------------
Circus Circus Enterprises, Inc., 6.75% Nts., 7/15/03 375,000 370,134
- ------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL - 0.2%
--------------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., 7% Debs., 3/15/11 1,097,000 1,021,576
- ------------------------------------------------------------------------------------------------------------------
ENERGY - 2.0%
- ------------------------------------------------------------------------------------------------------------------
BP America, Inc., 10.875% Nts., 8/1/01 CAD 650,000 570,554
--------------------------------------------------------------------------------------------------------------
Coastal Corp.:
8.75% Sr. Nts., 5/15/99 500,000 524,372
9.75% Sr. Debs., 8/1/03 200,000 229,281
--------------------------------------------------------------------------------------------------------------
Colorado International Gas Corp., 10% Sr. Debs., 6/15/05 500,000 592,560
--------------------------------------------------------------------------------------------------------------
Eastern Energy Ltd., 6.75% Nts., 12/1/06 (5) 2,000,000 1,950,000
--------------------------------------------------------------------------------------------------------------
Enron Corp., 9.875% Debs., 6/15/03 375,000 434,551
--------------------------------------------------------------------------------------------------------------
HNG Internorth/Enron Corp., 9.625% Debs., 3/15/06 500,000 587,111
--------------------------------------------------------------------------------------------------------------
McDermott, Inc., 9.375% Nts., 3/15/02 400,000 421,403
</TABLE>
22
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------
Mitchell Energy & Development Corp., 9.25% Sr. Nts.,
1/15/02 $ 1,000,000 $ 1,072,891
--------------------------------------------------------------------------------------------------------------
Southwest Gas Corp., 9.75% Debs., Series F, 6/15/02 500,000 557,007
--------------------------------------------------------------------------------------------------------------
Texaco Capital, Inc., 8.875% Gtd. Debs., 9/1/21 500,000 590,300
--------------------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 750,000 940,815
------------
8,470,845
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 6.7%
- ------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS - 3.8%
--------------------------------------------------------------------------------------------------------------
Banco Ganadero SA, 9.75% Sr. Unsec. Unsub. Nts.,
8/26/99 (11) 250,000 264,375
--------------------------------------------------------------------------------------------------------------
BankAmerica Corp., 7.75% Sub. Nts., 7/15/02 750,000 785,092
--------------------------------------------------------------------------------------------------------------
BankAmerica Institute, 8.07% Gtd. Bonds, Series A,
12/31/26 (5) 2,000,000 2,024,600
--------------------------------------------------------------------------------------------------------------
Chase Malaysia, Zero Coupon Nts.:
7.203%, 4/23/97 (7)MYR 2,125,000 823,667
7.202%, 4/25/97 (7)MYR 475,000 184,041
--------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New), 10.125% Sub. Nts.,
11/1/00 750,000 839,884
--------------------------------------------------------------------------------------------------------------
Citibank Malaysia Banker's Acceptance, Zero Coupon Negotiable CD:
7.19%, 4/28/97 (7)MYR 600,000 232,371
7.169%, 4/30/97 (7)MYR 400,000 154,853
7.121%, 5/26/97 (3)(7)MYR 1,439,000 554,225
--------------------------------------------------------------------------------------------------------------
Citicorp Capital Trust I, 7.933% Gtd. Bonds, 2/15/27 2,000,000 2,026,200
--------------------------------------------------------------------------------------------------------------
Deutsche Bank Financial, Inc., 6.70% Gtd. Nts., 12/13/06 2,000,000 1,982,500
--------------------------------------------------------------------------------------------------------------
First Chicago Corp.:
11.25% Sub. Nts., 2/20/01 750,000 871,756
9% Sub. Nts., 6/15/99 150,000 159,024
--------------------------------------------------------------------------------------------------------------
First Fidelity Bancorporation, 8.50% Sub. Capital Nts., 4/1/98 850,000 872,074
--------------------------------------------------------------------------------------------------------------
PT Hutama Karya, Zero Coupon Medium-Term Nts., 15.103%, 4/15/97 (7)IDR 2,500,000,000 1,013,588
--------------------------------------------------------------------------------------------------------------
Standard Charter Berhad Banker's Acceptance, Zero Coupon
Negotiable CD, 7.313%, 4/4/97 (7)MYR 2,270,000 883,179
--------------------------------------------------------------------------------------------------------------
Suntrust Banks, Inc., 8.875% Debs., 2/1/98 500,000 514,460
--------------------------------------------------------------------------------------------------------------
Swiss Bank Corp., 7.25% Sub. Nts., 9/1/06 2,000,000 2,035,610
------------
16,221,499
- ------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 2.6%
--------------------------------------------------------------------------------------------------------------
Allied-Lyons Finance BV, 6.50% Debs., 8/26/97 500,000 501,325
--------------------------------------------------------------------------------------------------------------
American Car Line Co., 8.25% Equipment Trust
Certificates, Series 1993-A, 4/15/08 578,000 591,416
--------------------------------------------------------------------------------------------------------------
American General Finance Corp., 5.875% Sr. Nts., 7/1/00 196,000 192,315
--------------------------------------------------------------------------------------------------------------
Associates Corp. of North America, 8.625% Sr. Nts., 6/15/97 500,000 506,450
--------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp., 6.57% Gtd. Medium-Term Nts., Series A, 8/4/97 196,000 196,970
--------------------------------------------------------------------------------------------------------------
Fleet Mtg. Group, Inc., 6.50% Nts., 9/15/99 500,000 501,476
--------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6.75% Nts., 8/15/08 1,000,000 967,526
</TABLE>
23
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED FINANCIAL (CONTINUED)
--------------------------------------------------------------------------------------------------------------
Golden West Financial Corp.:
10.25% Sub. Nts., 5/15/97 $ 131,000 $ 133,058
8.625% Sub. Nts., 8/30/98 250,000 259,376
--------------------------------------------------------------------------------------------------------------
Household Finance Corp., 8.95% Debs., 9/15/99 500,000 531,395
--------------------------------------------------------------------------------------------------------------
Household International BV, 6% Gtd. Sr. Nts., 3/15/99 131,000 129,772
--------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.875% Nts., 3/1/03 750,000 750,541
--------------------------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc., 7% Debs., 10/1/13 1,000,000 965,282
--------------------------------------------------------------------------------------------------------------
Norsk Hydro AS, 8.75% Bonds, 10/23/01 1,000,000 1,087,500
--------------------------------------------------------------------------------------------------------------
Penske Truck Leasing Co. LP, 7.75% Sr. Nts., 5/15/99 1,000,000 1,033,717
--------------------------------------------------------------------------------------------------------------
PHH Corp., 6.50% Nts., 2/1/00 500,000 501,017
--------------------------------------------------------------------------------------------------------------
Smith Barney Holdings, Inc. (New), 7.50% Nts., 5/1/02 750,000 772,693
--------------------------------------------------------------------------------------------------------------
U.S. Leasing International, Inc.:
7% Nts., 11/1/97 750,000 756,631
6.625% Sr. Nts., 5/15/03 750,000 740,557
-----------
11,119,017
- ------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.3%
--------------------------------------------------------------------------------------------------------------
Aetna Services, Inc., 7.125% Nts., 8/15/06 1,000,000 1,005,660
--------------------------------------------------------------------------------------------------------------
SunAmerica, Inc., 9% Sr. Nts., 1/15/99 196,000 205,105
----------
1,210,765
- ------------------------------------------------------------------------------------------------------------------
MANUFACTURING - 0.4%
- ------------------------------------------------------------------------------------------------------------------
AEROSPACE/ELECTRONICS/COMPUTERS - 0.2%
--------------------------------------------------------------------------------------------------------------
British Aerospace plc, 8% Debs., 5/27/97 1,000,000 1,008,125
- ------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE - 0.2%
--------------------------------------------------------------------------------------------------------------
Chrysler Corp., 10.95% Debs., 8/1/17 800,000 861,408
- ------------------------------------------------------------------------------------------------------------------
MEDIA - 2.5%
- -----------------------------------------------------------------------------------------------------------------
CABLE TELEVISION - 1.3%
-------------------------------------------------------------------------------------------------------------
Cablevision Industries Corp., 9.25% Sr. Debs., Series B, 4/1/08 3,000,000 3,185,535
-------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 2,200,000 2,380,455
---------
5,565,990
- -----------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA - 0.8%
--------------------------------------------------------------------------------------------------------------
GSPI Corp., 10.15% First Mtg. Bonds, 6/24/10 (11) 1,132,126 1,065,229
--------------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 10.125% Sr. Gtd. Debs., 10/15/12 500,000 576,731
--------------------------------------------------------------------------------------------------------------
Time Warner Entertainment LP/Time Warner, Inc., 8.375% Sr. Debs., 3/15/23 1,850,000 1,885,505
---------
3,527,465
- -----------------------------------------------------------------------------------------------------------------
ENTERTAINMENT/FILM - 0.1%
--------------------------------------------------------------------------------------------------------------
Columbia Pictures Entertainment, Inc., 9.875% Sr. Sub. Nts., 2/1/98 500,000 519,416
- -----------------------------------------------------------------------------------------------------------------
PUBLISHING/PRINTING - 0.3%
--------------------------------------------------------------------------------------------------------------
Reed Elsevier, Inc., 6.625% Nts., 10/15/23 (11) 600,000 536,664
--------------------------------------------------------------------------------------------------------------
Reed Publishing (USA), Inc.:
7.24% Gtd. Medium-Term Nts., 2/10/97 500,000 500,720
7.66% Medium-Term Nts., 2/19/99 500,000 514,000
---------
1,551,384
</TABLE>
24
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OTHER - 0.8%
- ------------------------------------------------------------------------------------------------------------------
CONGLOMERATES - 0.3%
--------------------------------------------------------------------------------------------------------------
Tenneco, Inc. (New):
10.20% Exchangeable Debs., 3/15/08 $ 400,000 $ 481,083
8.075% Nts., 10/1/02 650,000 691,313
----------
1,172,396
- -----------------------------------------------------------------------------------------------------------------
SERVICES - 0.5%
--------------------------------------------------------------------------------------------------------------
Archer Daniels Midland Co., 7.125% Debs., 3/1/13 750,000 747,339
--------------------------------------------------------------------------------------------------------------
Johnson Controls, Inc., 7.70% Debs., 3/1/15 500,000 526,784
--------------------------------------------------------------------------------------------------------------
Laidlaw, Inc., 7.70% Debs., 8/15/02 500,000 519,856
--------------------------------------------------------------------------------------------------------------
Philip Morris Cos., 8.25% Debs., 10/15/03 500,000 531,468
----------
2,325,447
- -----------------------------------------------------------------------------------------------------------------
RETAIL - 0.1%
- -----------------------------------------------------------------------------------------------------------------
Hook-SupeRx, Inc., 10.125% Sr. Nts., 6/1/02 600,000 637,279
- -----------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 0.3%
- -----------------------------------------------------------------------------------------------------------------
Kansas City Southern Industries, Inc., 6.625% Nts., 3/1/05 750,000 729,815
--------------------------------------------------------------------------------------------------------------
Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 400,000 436,784
----------
1,166,599
- -----------------------------------------------------------------------------------------------------------------
UTILITIES - 2.7%
- -----------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.1%
--------------------------------------------------------------------------------------------------------------
Consolidated Natural Gas Co., 6.625% Debs., 12/1/13 1,000,000 952,257
--------------------------------------------------------------------------------------------------------------
Long Island Lighting Co., 7% Nts., 3/1/04 150,000 144,488
--------------------------------------------------------------------------------------------------------------
Midwest Power Systems, Inc., 7% General Mtg. Bonds, 2/15/05 500,000 501,363
--------------------------------------------------------------------------------------------------------------
National Fuel Gas Co., 7.75% Debs., 2/1/04 500,000 520,030
--------------------------------------------------------------------------------------------------------------
Public Service Co. of Colorado, 8.75% First Mtg. Bonds, 3/1/22 750,000 810,742
--------------------------------------------------------------------------------------------------------------
South Carolina Electric & Gas Co., 9% Mtg. Bonds, 7/15/06 500,000 564,942
--------------------------------------------------------------------------------------------------------------
Texas Gas Transmission Corp., 8.625% Nts., 4/1/04 500,000 546,702
--------------------------------------------------------------------------------------------------------------
Washington Gas Light Co., 8.75% First Mtg. Bonds, 7/1/19 500,000 527,895
----------
4,568,419
- -----------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.6%
--------------------------------------------------------------------------------------------------------------
360 Communications Co.:
7.125% Sr. Nts., 3/1/03 1,450,000 1,435,278
7.50% Sr. Nts., 3/1/06 2,000,000 1,987,418
--------------------------------------------------------------------------------------------------------------
Alltel Corp., 6.50% Debs., 11/1/13 1,000,000 918,925
--------------------------------------------------------------------------------------------------------------
GTE Corp.:
8.85% Debs., 3/1/98 750,000 772,672
9.375% Debs., 12/1/00 500,000 549,396
--------------------------------------------------------------------------------------------------------------
Northern Telecom Ltd., 6.875% Nts., 10/1/02 500,000 506,280
--------------------------------------------------------------------------------------------------------------
United Telephone Co. (Pennsylvania), 7.375% First Mtg. Nts., Series Y, 12/1/02 500,000 511,806
----------
6,681,775
----------
Total Corporate Bonds and Notes (Cost $77,541,108) 77,783,268
</TABLE>
25
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE1)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS - 1.0%
Allstate Financing I, 7.95% Gtd. Quarterly Income Preferred
Securities, Series A 120,000 $ 3,000,000
-------------------------------------------------------------------------------------------------------------
BankAmerica Corp., 8.375%, Series K 45,400 1,146,350
-----------
Total Preferred Stocks (Cost $4,177,404) 4,146,350
Principal
Amount(1)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
STRUCTURED INSTRUMENTS - 2.8%
- -----------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, New York Branch,
6.28% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97 $ 150,000 149,475
--------------------------------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce, New York Branch,
13.50% Greek Drachma/Swiss Franc Linked Nts., 2/5/97 250,000 253,025
--------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, New York Branch, Czech Koruna Linked
Nts., Zero Coupon Debs., 12.548%, 2/3/97 (7)CZK 11,000,000 399,905
--------------------------------------------------------------------------------------------------------------
ING (U.S.) Financial Holdings Corp., Zero Coupon:
Chilean Peso Linked Nts., with Chilean Sovereign Risk,
9.05%, 3/12/97 (7) 768,639 748,040
Korean Won/U.S. Dollar Linked Nts., 10.87%, 6/9/97 (7) 500,000 464,900
Nts. Linked to the Greek Drachma/Swiss Franc Exchange Rate:
14.829%, 12/4/97 (7) 1,000,000 848,400
14.437%, 12/10/97 (7) 1,150,000 980,720
--------------------------------------------------------------------------------------------------------------
Internationale Nederlanden (U.S.) Capital Holdings Corp.,
Zero Coupon Chilean Peso Linked Nts.:
11.813%, 6/23/97 (7) 900,000 823,860
11.741%, 6/24/97 (7) 900,000 823,590
--------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings:
U.S. Dollar Nts. Linked to Czech Koruna/Swiss Franc, 15%,
12/21/98 500,000 499,600
Zero Coupon Greek Drachma/Swiss Franc Linked Nts., 16.93%, 1/13/97 (7) 800,000 815,600
Zero Coupon U.S. Dollar Nts. Linked to: (7) 1,000,000 1,001,800
Czech Koruna/Swiss Franc, 15.411%, 12/29/97
Greek Drachma/Swiss Franc:
15.639%, 12/23/97 (7) 500,000 498,300
15.453%, 12/26/97 (7) 500,000 499,300
15.323%, 12/30/97 (7) 1,000,000 1,000,000
-------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Units, 9.75%, 6/15/99
(representing debt of Chemical Banking Corp.,
sub. capital nts., and equity of Citicorp,
7.75% preferred, series 22) (5)(12) 1,000,000 1,188,000
-------------------------------------------------------------------------------------------------------------
Swiss Bank Corp., New York Branch, 6.05% CD, 6/20/97
(indexed to the closing Nikkei 225 Index on 1/23/97, 5 yr. &
3 mos. Japanese Yen Swap rate & New Zealand Dollar) 800,000 816,400
----------
Total Structured Instruments (Cost $11,812,162) 11,810,915
</TABLE>
26
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
DATE STRIKE CONTRACTS
(NOTE 1)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------
<S> <C> <C> <C>
<C>
PUT OPTIONS PURCHASED - 0.0%
- ----------------------------------------------------------------------------------------------------------------
- ---------------
Australian Dollar Put Opt. 1/97 1.28AUD 1,675,000
$ 2,261
- ----------------------------------------------------------------------------------------------------------------
- -----------
Australian Dollar Put Opt. 2/97 1.282AUD 1,670,000
4,425
- ----------------------------------------------------------------------------------------------------------------
- -----------
Deutsche Mark Put Opt. 2/97 1.545DEM 17,350,000
95,356
- ----------------------------------------------------------------------------------------------------------------
- -----------
Italy (Republic of) Treasury Bonds,
Buoni del Tesoro Poliennali, 9.50%, 2/1/06 Put Opt. 7/97 99.96%ITL 1,700
1,190
- ----------------------------------------------------------------------------------------------------------------
- -----------
Japanese Yen Put Opt. 3/97 115JPY 437,500,000
60,375
- ----------------------------------------------------------------------------------------------------------------
- -----------
New Zealand Dollar Put Opt. 3/97 1.4286NZD 1,414,500
8,544
- ----------------------------------------------------------------------------------------------------------------
- -----------
New Zealand Dollar Put Opt. 3/97 1.44NZD 226,300
824
- ----------------------------------------------------------------------------------------------------------------
- -----------
New Zealand Dollar Put Opt. 3/97 1.453NZD 100,500
231
--------
Total Put Options Purchased (Cost $294,450)
173,206
PRINCIPAL
AMOUNT(1)
- ----------------------------------------------------------------------------------------------------------------
- ---------------
- ----------------------------------------------------------------------------------------------------------------
- ---------------
REPURCHASE AGREEMENT - 3.3%
- ----------------------------------------------------------------------------------------------------------------
- ---------------
Repurchase agreement with Goldman, Sachs & Co.,
6.52%, dated 12/31/96, to be repurchased at $14,005,071
on 1/2/97, collateralized by U.S. Treasury Nts.,
5.50%-7.50%, 7/15/99-8/15/05, with a value of $14,320,992
(Cost $14,000,000) $ 14,000,000
14,000,000
- ----------------------------------------------------------------------------------------------------------------
- -----------
TOTAL INVESTMENTS, AT VALUE (COST $449,692,946) 106.6%
454,375,154
- ----------------------------------------------------------------------------------------------------------------
- -----------
LIABILITIES IN EXCESS OF OTHER ASSETS (6.6)
(27,936,209)
- -------------------------------
NET ASSETS 100.0%
$ 426,438,945
- -------------------------------
- -------------------------------
1. Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies:
AUD - Australian Dollar MXP - Mexican Peso
CAD - Canadian Dollar MYR - Malaysian Ringgit
CZK - Czech Koruna NLG - Netherlands Guilder
DEM - German Deutsche Mark NOK - Norwegian Krone
DKK - Danish Krone NZD - New Zealand Dollar
GBP - British Pound Sterling PTE - Portuguese Escudo
IDR - Indonesian Rupiah SEK - Swedish Krona
ITL - Italian Lira ZAR - South African Rand
JPY - Japanese Yen
2. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying
pool of mortgage loans. These securities typically decline in price as interest rates decline. Most
other fixed income securities increase in price when interest rates decline. The principal amount
of the underlying pool represents the notional amount on which current interest is calculated. The
price of these securities is typically more sensitive to changes in prepayment rates than traditional
mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed
represent current yields based upon the current cost basis and estimated timing and amount of
future cash flows.
3. When-issued security to be delivered and settled after December 31, 1996.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid - See applicable note of Notes to Financial Statements.
</TABLE>
27
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
6. Principal-Only Strips represent the right to receive the monthly
principal payments on an underlying pool of mortgage loans. The value
of these 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.
Interest rates disclosed represent current yields based upon the current
cost basis and estimated timing of future cash flows.
7. For zero coupon bonds, the interest rate shown is the effective yield
on the date of purchase.
8. Securities with an aggregate market value of $3,105,003 are held in
collateralized accounts to cover initial margin requirements on open
futures sales contracts. See applicable note of Notes to Financial
Statements.
9. A sufficient amount of securities has been designated to cover
outstanding written call options, as follows:
<TABLE>
CONTRACTS
SUBJECT EXPIRATION EXERCISE PREMIUM MARKET
VALUE
TO CALL DATE PRICE RECEIVED (NOTE
1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call option on Australian Dollar 1,363,450 1/97 1.2285AUD $ 8,794 $
136
Call option on British Pound Sterling 495,000 1/97 1.632GBP 11,147
39,550
Call option on British Pound Sterling 1,800,000 3/97 1.69GBP 33,120
60,012
Call option on British Pound Sterling 800,000 3/97 1.71GBP 15,624
24,880
Call option on New Zealand Dollar 1,414,500 3/97 1.4124NZD 9,336
8,303
Call option on New Zealand Dollar 226,300 3/97 1.4194NZD 1,460
1,632
Call option on New Zealand Dollar 100,500 3/97 1.4276NZD 703
952
----------
- ---------
$ 80,184 $
135,465
----------
- ---------
----------
- ---------
10. A sufficient amount of securities has been designated to cover outstanding forward foreign
currency exchange contracts. See applicable note of Notes to Financial Statements.
11. Represents securities sold under Rule 144A, which are exempt from registration under the
Securities Act of 1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees. These securities amount to $14,420,487
or 3.38% of the Fund's net assets, at December 31, 1996.
12. Units may be comprised of several components, such as debt and equity and/or warrants to
purchase equity at some point in the future. For units which represent debt securities, principal amount
disclosed represents total underlying principal.
</TABLE>
See accompanying Notes to Financial Statements.
28
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS AND NOTES - 0.7%
- ----------------------------------------------------------------------------------------------------------
Danka Business Systems plc, 6.75% Cv. Sub. Nts., 4/1/02 (1) $ 800,000 $ 1,083,000
------------------------------------------------------------------------------------------------------
Southern Pacific Funding Corp., 6.75% Cv. Sub. Nts., 10/15/06 1,000,000 1,068,750
------------------------------------------------------------------------------------------------------
United Waste Systems, Inc., 4.50% Cv. Sub. Nts., 6/1/01 (2) 2,000,000 2,392,500
-----------
Total Convertible Corporate Bonds and Notes (Cost $3,800,000) 4,544,250
SHARES
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
COMMON STOCKS - 78.1%
- ----------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 14.1%
- ----------------------------------------------------------------------------------------------------------
AUTOS & HOUSING - 0.3%
------------------------------------------------------------------------------------------------------
Alrenco, Inc. (3) 42,000 446,250
------------------------------------------------------------------------------------------------------
NHP, Inc. (3) 75,000 1,162,500
-----------
1,608,750
- ----------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 4.8%
- ----------------------------------------------------------------------------------------------------------
Applebee's International, Inc. 120,000 3,300,000
------------------------------------------------------------------------------------------------------
CKE Restaurants, Inc. 230,000 8,280,000
------------------------------------------------------------------------------------------------------
HFS, Inc. (3) 80,000 4,780,000
------------------------------------------------------------------------------------------------------
International Game Technology 220,000 4,015,000
------------------------------------------------------------------------------------------------------
Landry's Seafood Restaurants, Inc. (3) 200,000 4,275,000
------------------------------------------------------------------------------------------------------
Rainforest Cafe, Inc. (3) 75,000 1,762,500
------------------------------------------------------------------------------------------------------
Regal Cinemas, Inc. (3) 99,900 3,071,925
-----------
29,484,425
- ----------------------------------------------------------------------------------------------------------
MEDIA - 1.6%
------------------------------------------------------------------------------------------------------
Chancellor Broadcasting Co., Cl. A (3) 58,900 1,398,875
------------------------------------------------------------------------------------------------------
Evergreen Media Corp., Cl. A (3) 50,000 1,250,000
------------------------------------------------------------------------------------------------------
Getty Communications plc, ADR (3) 130,000 1,950,000
------------------------------------------------------------------------------------------------------
Infinity Broadcasting Corp., Cl. A (3) 60,000 2,017,500
------------------------------------------------------------------------------------------------------
Raster Graphics, Inc. (3) 220,000 2,612,500
------------------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., Cl. A (3) 23,200 690,200
-----------
9,919,075
- ----------------------------------------------------------------------------------------------------------
RETAIL: GENERAL - 3.1%
------------------------------------------------------------------------------------------------------
Fila Holding SpA, Sponsored ADR 40,000 2,325,000
------------------------------------------------------------------------------------------------------
Meyer (Fred), Inc. (3) 97,000 3,443,500
------------------------------------------------------------------------------------------------------
Nautica Enterprises, Inc. (3) 105,000 2,651,250
------------------------------------------------------------------------------------------------------
North Face, Inc. (The) (3) 115,000 2,213,750
------------------------------------------------------------------------------------------------------
Vans, Inc. (3) 350,000 4,375,000
------------------------------------------------------------------------------------------------------
Wolverine World Wide, Inc. 133,500 3,871,500
-----------
18,880,000
- ----------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 4.3%
------------------------------------------------------------------------------------------------------
Abercrombie & Fitch Co., Cl. A (3) 24,800 409,200
------------------------------------------------------------------------------------------------------
Central Garden & Pet Co. (3) 230,000 4,844,375
------------------------------------------------------------------------------------------------------
Corporate Express, Inc. (3) 62,500 1,839,844
------------------------------------------------------------------------------------------------------
CUC International, Inc. (3) 300,000 7,125,000
------------------------------------------------------------------------------------------------------
Linens 'N Things, Inc. (3) 200,500 3,934,812
------------------------------------------------------------------------------------------------------
Petco Animal Supplies, Inc. (3) 135,000 2,801,250
------------------------------------------------------------------------------------------------------
Staples, Inc. (3) 61,250 1,106,328
</TABLE>
29
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
RETAIL: SPECIALTY (CONTINUED)
TJX Cos., Inc. 90,000 $ 4,263,750
-----------
26,324,559
- ----------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS - 21.9%
- ----------------------------------------------------------------------------------------------------------
FOOD - 1.6%
------------------------------------------------------------------------------------------------------
Richfood Holdings, Inc. 150,000 3,637,500
------------------------------------------------------------------------------------------------------
Safeway, Inc. (3) 150,000 6,412,500
-----------
10,050,000
- ----------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 7.3%
------------------------------------------------------------------------------------------------------
Agouron Pharmaceuticals, Inc. (3) 30,000 2,032,500
------------------------------------------------------------------------------------------------------
Alpha-Beta Technology, Inc. (3) 126,900 1,340,381
------------------------------------------------------------------------------------------------------
BioChem Pharma, Inc. (3) 165,000 8,291,250
------------------------------------------------------------------------------------------------------
Biogen, Inc. (3) 200,000 7,750,000
------------------------------------------------------------------------------------------------------
Dura Pharmaceuticals, Inc. (3) 180,000 8,595,000
------------------------------------------------------------------------------------------------------
Incyte Pharmaceuticals, Inc. (3) 80,000 4,120,000
------------------------------------------------------------------------------------------------------
Millennium Pharmaceuticals, Inc. (3) 100,000 1,737,500
------------------------------------------------------------------------------------------------------
Nuerocrine Biosciences, Inc. (3) 105,000 1,050,000
------------------------------------------------------------------------------------------------------
Physician Support Systems, Inc. (3) 220,000 4,235,000
------------------------------------------------------------------------------------------------------
SangStat Medical Corp. (3) 220,000 5,830,000
-----------
44,981,631
- ----------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 11.1%
------------------------------------------------------------------------------------------------------
AmeriSource Health Corp., Cl. A (3) 165,500 7,985,375
------------------------------------------------------------------------------------------------------
Apache Medical Systems, Inc. (3) 50,000 534,375
------------------------------------------------------------------------------------------------------
Biosource International, Inc. (3) 7,500 51,562
------------------------------------------------------------------------------------------------------
Capstone Pharmacy Services, Inc. (3) 190,000 2,161,250
------------------------------------------------------------------------------------------------------
Cardinal Health, Inc. 97,500 5,679,375
------------------------------------------------------------------------------------------------------
Cardiovascular Dynamics, Inc. (3) 139,700 1,816,100
------------------------------------------------------------------------------------------------------
ESC Medical Systems Ltd. (3) 107,100 2,731,050
------------------------------------------------------------------------------------------------------
FPA Medical Management, Inc. (3) 230,000 5,146,250
------------------------------------------------------------------------------------------------------
HEALTHSOUTH Corp. (3) 170,000 6,566,250
------------------------------------------------------------------------------------------------------
Hologic, Inc. (3) 50,000 1,237,500
------------------------------------------------------------------------------------------------------
IMPATH, Inc. (3) 135,000 2,531,250
------------------------------------------------------------------------------------------------------
Integ, Inc. (3) 126,500 1,233,375
------------------------------------------------------------------------------------------------------
MedPartners, Inc. (3) 150,000 3,150,000
------------------------------------------------------------------------------------------------------
OccuSystems, Inc. (3) 45,000 1,215,000
------------------------------------------------------------------------------------------------------
Omnicare, Inc. 153,600 4,934,400
------------------------------------------------------------------------------------------------------
Orthodontic Centers of America, Inc. (3) 120,000 1,920,000
------------------------------------------------------------------------------------------------------
Pediatrix Medical Group, Inc. (3) 127,500 4,701,562
------------------------------------------------------------------------------------------------------
PhyCor, Inc. (3) 97,500 2,766,562
------------------------------------------------------------------------------------------------------
Renal Treatment Centers, Inc. (3) 200,000 5,100,000
------------------------------------------------------------------------------------------------------
Total Renal Care Holdings, Inc. (3) 197,600 7,163,000
-----------
68,624,236
- ----------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS - 1.3%
------------------------------------------------------------------------------------------------------
Blyth Industries, Inc. (3) 170,000 7,756,250
------------------------------------------------------------------------------------------------------
Nu Skin Asia Pacific, Inc., Cl. A (3) 7,500 231,562
-----------
7,987,812
- ----------------------------------------------------------------------------------------------------------
TOBACCO - 0.6%
------------------------------------------------------------------------------------------------------
Swisher International Group, Inc., Cl. A (3) 225,000 3,571,875
</TABLE>
30
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY - 2.8%
- ----------------------------------------------------------------------------------------------------------
Calpine Corp. (3) 225,000 $ 4,500,000
------------------------------------------------------------------------------------------------------
Diamond Offshore Drilling, Inc. (3) 76,900 4,383,300
------------------------------------------------------------------------------------------------------
Energy Ventures, Inc. (3) 100,200 5,097,675
------------------------------------------------------------------------------------------------------
Nabors Industries, Inc. (3) 150,000 2,887,500
------------------------------------------------------------------------------------------------------
NUMAR Corp. (3) 51,000 698,063
--------------
17,566,538
- ----------------------------------------------------------------------------------------------------------
FINANCIAL - 5.3%
- ----------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 2.8%
------------------------------------------------------------------------------------------------------
Associates First Capital Corp., Cl. A 161,000 7,104,125
------------------------------------------------------------------------------------------------------
Concord EFS, Inc. (3) 100,000 2,825,000
------------------------------------------------------------------------------------------------------
Green Tree Financial Corp. 85,000 3,283,125
------------------------------------------------------------------------------------------------------
Southern Pacific Funding Corp. (3) 130,000 4,046,250
--------------
17,258,500
- ----------------------------------------------------------------------------------------------------------
INSURANCE - 2.5%
------------------------------------------------------------------------------------------------------
Berkley (W.R.) Corp. 30,000 1,522,500
------------------------------------------------------------------------------------------------------
CapMAC Holdings, Inc. 100,600 3,332,375
------------------------------------------------------------------------------------------------------
Conseco, Inc. 100,000 6,375,000
------------------------------------------------------------------------------------------------------
Executive Risk, Inc. 120,000 4,440,000
--------------
15,669,875
- ----------------------------------------------------------------------------------------------------------
INDUSTRIAL - 8.8%
- ----------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.4%
------------------------------------------------------------------------------------------------------
Honeywell, Inc. 40,000 2,630,000
- ----------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 6.3%
------------------------------------------------------------------------------------------------------
Abacus Direct Corp. (3) 80,000 1,500,000
------------------------------------------------------------------------------------------------------
Affiliated Computer Services, Inc., Cl. A (3) 160,000 4,760,000
------------------------------------------------------------------------------------------------------
CIBER, Inc. (3) 63,000 1,890,000
------------------------------------------------------------------------------------------------------
Corrections Corp. of America (3) 100,000 3,062,500
------------------------------------------------------------------------------------------------------
CORT Business Services Corp. (3) 106,800 2,202,750
------------------------------------------------------------------------------------------------------
Danka Business Systems plc, Sponsored ADR 70,000 2,476,250
------------------------------------------------------------------------------------------------------
May & Speh, Inc. (3) 34,900 427,525
------------------------------------------------------------------------------------------------------
Precision Response Corp. (3) 85,000 2,985,625
------------------------------------------------------------------------------------------------------
SITEL Corp. (3) 152,200 2,168,850
------------------------------------------------------------------------------------------------------
Tetra Technologies, Inc. (3) 125,000 3,156,250
------------------------------------------------------------------------------------------------------
Transaction Systems Architects, Inc., Cl. A (3) 92,000 3,059,000
------------------------------------------------------------------------------------------------------
United Waste Systems, Inc. (3) 94,000 3,231,250
------------------------------------------------------------------------------------------------------
USA Waste Services, Inc. (3) 171,300 5,460,188
------------------------------------------------------------------------------------------------------
Whittman-Hart, Inc. (3) 110,000 2,818,750
--------------
39,198,938
- ----------------------------------------------------------------------------------------------------------
MANUFACTURING - 2.1%
------------------------------------------------------------------------------------------------------
PRI Automation, Inc. (3) 70,000 3,185,000
------------------------------------------------------------------------------------------------------
RockShox, Inc. (3) 200,000 2,900,000
------------------------------------------------------------------------------------------------------
U.S. Filter Corp. (3) 208,600 6,623,050
--------------
12,708,050
- ----------------------------------------------------------------------------------------------------------
TECHNOLOGY - 24.0%
- ----------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 0.5%
------------------------------------------------------------------------------------------------------
Cascade Communications Corp. (3) 60,000 3,307,500
</TABLE>
31
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE - 10.7%
------------------------------------------------------------------------------------------------------
Adobe Systems, Inc. 50,000 $ 1,868,750
------------------------------------------------------------------------------------------------------
Aspen Technologies, Inc. (3) 70,000 5,617,500
------------------------------------------------------------------------------------------------------
Centennial Technologies, Inc. (3) 55,000 2,860,000
------------------------------------------------------------------------------------------------------
Computer Associates International, Inc. 135,000 6,716,250
------------------------------------------------------------------------------------------------------
CyberMedia, Inc. (3) 100,300 1,579,725
------------------------------------------------------------------------------------------------------
Eidos plc, Sponsored ADR (3) 100,000 1,200,000
------------------------------------------------------------------------------------------------------
First Data Corp. 67,576 2,466,524
------------------------------------------------------------------------------------------------------
HBO & Co. 70,000 4,156,250
------------------------------------------------------------------------------------------------------
Indus Group, Inc. (The) (3) 75,000 1,931,250
------------------------------------------------------------------------------------------------------
Informix Corp. (3) 50,000 1,018,750
------------------------------------------------------------------------------------------------------
Legato Systems, Inc. (3) 60,000 1,957,500
------------------------------------------------------------------------------------------------------
Mecon, Inc. (3) 55,000 364,375
------------------------------------------------------------------------------------------------------
Oracle Corp. (3) 67,500 2,818,125
------------------------------------------------------------------------------------------------------
Pure Atria Corp. (3) 51,400 1,272,150
------------------------------------------------------------------------------------------------------
Rational Software Corp. (3) 87,500 3,461,719
------------------------------------------------------------------------------------------------------
Rogue Wave Software, Inc. (3) 200,000 3,150,000
------------------------------------------------------------------------------------------------------
SELECT Software Tools Ltd., ADR (3) 220,000 4,015,000
------------------------------------------------------------------------------------------------------
Sunquest Information Systems, Inc. (3) 50,000 712,500
------------------------------------------------------------------------------------------------------
Systemsoft Corp. (3) 100,000 1,487,500
------------------------------------------------------------------------------------------------------
Transition Systems, Inc. (3) 40,000 565,000
------------------------------------------------------------------------------------------------------
Vantive Corp. (3) 70,000 2,187,500
------------------------------------------------------------------------------------------------------
Verilink Corp. (3) 175,000 5,818,750
------------------------------------------------------------------------------------------------------
Versant Object Technology Corp. (3) 200,000 3,725,000
------------------------------------------------------------------------------------------------------
Visigenic Software, Inc. (3) 235,000 3,583,750
------------------------------------------------------------------------------------------------------
White Pine Software, Inc. (3) 183,000 1,326,750
---------------
65,860,618
- ----------------------------------------------------------------------------------------------------------
ELECTRONICS - 4.0%
------------------------------------------------------------------------------------------------------
Altera Corp. (3) 50,000 3,634,375
------------------------------------------------------------------------------------------------------
ESS Technology, Inc. (3) 175,000 4,921,875
------------------------------------------------------------------------------------------------------
Nokia Corp., A Shares, Sponsored ADR 85,000 4,898,125
------------------------------------------------------------------------------------------------------
Sawtek, Inc. (3) 95,100 3,768,338
------------------------------------------------------------------------------------------------------
SDL, Inc. (3) 165,000 4,331,250
------------------------------------------------------------------------------------------------------
Waters Corp. (3) 100,000 3,037,500
---------------
24,591,463
- ----------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 8.8%
------------------------------------------------------------------------------------------------------
Ascend Communications, Inc. (3) 40,000 2,485,000
------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (3) 115,000 7,316,875
------------------------------------------------------------------------------------------------------
Comverse Technology, Inc. (3) 170,000 6,428,125
------------------------------------------------------------------------------------------------------
Davox Corp. (3) 60,000 2,475,000
------------------------------------------------------------------------------------------------------
LCI International, Inc. (3) 120,600 2,592,900
------------------------------------------------------------------------------------------------------
Newbridge Networks Corp. (3) 130,000 3,672,500
------------------------------------------------------------------------------------------------------
PageMart Wireless, Inc., Cl. A (3) 103,100 683,038
------------------------------------------------------------------------------------------------------
Periphonics Corp. (3) 205,800 6,019,650
------------------------------------------------------------------------------------------------------
Sterling Commerce, Inc. (3) 45,500 1,603,875
------------------------------------------------------------------------------------------------------
Tel-Save Holdings, Inc. (3) 100,000 2,900,000
------------------------------------------------------------------------------------------------------
Teledata Communications Ltd. (3) 240,000 5,520,000
------------------------------------------------------------------------------------------------------
Tellabs, Inc. (3) 160,000 6,020,000
</TABLE>
32
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS-TECHNOLOGY (CONTINUED)
------------------------------------------------------------------------------------------------------
U.S. Robotics Corp. (3) 95,000 $ 6,840,000
---------------
54,556,963
- ----------------------------------------------------------------------------------------------------------
UTILITIES - 1.2%
- ----------------------------------------------------------------------------------------------------------
ACC Corp. (3) 58,200 1,760,550
------------------------------------------------------------------------------------------------------
Advanced Fibre Communications, Inc. (3) 45,000 2,503,125
------------------------------------------------------------------------------------------------------
West TeleServices Corp. (3) 125,200 2,848,300
---------------
7,111,975
---------------
Total Common Stocks (Cost $377,931,267) 481,892,783
UNITS
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES - 0.0%
- ----------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc. Wts., Exp. 9/03 (Cost $0) 961 --
PRINCIPAL
z AMOUNT
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 22.3%
- ----------------------------------------------------------------------------------------------------------
Repurchase agreement with PaineWebber, Inc., 6.50%,
dated 12/31/96, to be repurchased at $15,905,742 on
1/2/97, collateralized by U.S. Treasury Nts., 5.75%-8.75%,
9/30/97-8/31/00, with a value of $16,394,610 $ 15,900,000 15,900,000
------------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co.,
6.52%, dated 12/31/96, to be repurchased at
$122,144,227 on 1/2/97, collateralized by U.S. Treasury
Nts., 5.50%-7.50%, 7/15/99-8/15/05, with a value of
$124,899,505 122,100,000 122,100,000
---------------
Total Repurchase Agreements (Cost $138,000,000) 138,000,000
------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $519,731,267) 101.1% 624,437,033
------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.1) (7,044,761)
-------------- -------------
NET ASSETS 100.0% $617,392,272
-------------- -------------
-------------- -------------
</TABLE>
1. Identifies issues considered to be illiquid - See applicable note 6
of Notes to Financial Statements.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These
securities have been determined to be liquid under guidelines
established by the Board of Trustees. These securities amount to
$2,392,500 or 0.39% of the Fund's net assets, at December 31, 1996.
3. Non-income producing security.
See accompanying Notes to Financial Statements.
33
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT (NOTE 1)
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM NOTES - 2.4%
- -----------------------------------------------------------------------------------------------------
CIESCO L.P., 5.52%, 1/2/97 $ 3,850,000 $ 3,849,409
--------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 5.62%, 1/2/97 3,000,000 2,999,532
-------------
Total Short-Term Notes (Cost $6,848,941) 6,848,941
SHARES
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
COMMON STOCKS - 70.9%
- -----------------------------------------------------------------------------------------------------
BASIC MATERIALS - 3.0%
- -----------------------------------------------------------------------------------------------------
CHEMICALS - 2.2%
- -----------------------------------------------------------------------------------------------------
FMC Corp. (1) 2,200 154,275
--------------------------------------------------------------------------------------------------
IMC Global, Inc. 19,000 743,375
--------------------------------------------------------------------------------------------------
Morton International, Inc. 29,000 1,181,750
--------------------------------------------------------------------------------------------------
Potash Corp. of Saskatchewan, Inc. 10,000 850,000
--------------------------------------------------------------------------------------------------
Praxair, Inc. 36,600 1,688,175
--------------------------------------------------------------------------------------------------
Terra Industries, Inc. 46,000 678,500
--------------------------------------------------------------------------------------------------
Union Carbide Corp. 22,000 899,250
-------------
6,195,325
- -----------------------------------------------------------------------------------------------------
METALS - 0.6%
--------------------------------------------------------------------------------------------------
Oregon Steel Mills, Inc. 58,000 971,500
--------------------------------------------------------------------------------------------------
USX-U.S. Steel Group, Inc. 25,000 784,375
-------------
1,755,875
- -----------------------------------------------------------------------------------------------------
PAPER - 0.2%
--------------------------------------------------------------------------------------------------
Bowater, Inc. 11,000 413,875
--------------------------------------------------------------------------------------------------
Sonoco Products Co. 8,400 217,350
-------------
631,225
- -----------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 9.8%
- -----------------------------------------------------------------------------------------------------
AUTOS & HOUSING - 1.2%
--------------------------------------------------------------------------------------------------
Arvin Industries, Inc. 24,900 616,275
--------------------------------------------------------------------------------------------------
Champion Enterprises, Inc. (1) 64,000 1,248,000
--------------------------------------------------------------------------------------------------
Pulte Corp. 22,000 676,500
--------------------------------------------------------------------------------------------------
Toll Brothers, Inc. (1) 46,000 897,000
-------------
3,437,775
- -----------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 1.8%
--------------------------------------------------------------------------------------------------
AMR Corp. (1) 3,000 264,375
--------------------------------------------------------------------------------------------------
Applebee's International, Inc. 19,500 536,250
--------------------------------------------------------------------------------------------------
Callaway Golf Co. 41,200 1,184,500
--------------------------------------------------------------------------------------------------
Carmike Cinemas, Inc., Cl. A (1) 1,500 38,062
--------------------------------------------------------------------------------------------------
CKE Restaurants, Inc. 17,800 640,800
--------------------------------------------------------------------------------------------------
Disney (Walt) Co. 13,000 905,125
--------------------------------------------------------------------------------------------------
ITT Corp. (New) (1) 12,000 520,500
--------------------------------------------------------------------------------------------------
McDonald's Corp. 4,000 181,000
--------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. (1) 10,000 267,500
--------------------------------------------------------------------------------------------------
Wendy's International, Inc. 35,800 733,900
-------------
5,272,012
- -----------------------------------------------------------------------------------------------------
MEDIA - 0.3%
--------------------------------------------------------------------------------------------------
American Greetings Corp., Cl. A 30,000 851,250
34
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------
RETAIL: GENERAL - 3.4%
--------------------------------------------------------------------------------------------------
Donna Karan International, Inc. (1) 51,100 $ 721,787
--------------------------------------------------------------------------------------------------
Federated Department Stores, Inc. (1) 60,000 2,047,500
--------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., Cl. A (1) 30,000 1,136,250
--------------------------------------------------------------------------------------------------
Jones Apparel Group, Inc. (1) 28,200 1,053,975
--------------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 11,000 424,875
--------------------------------------------------------------------------------------------------
Mac Frugal's Bargains-Close-Outs, Inc. (1) 43,500 1,136,437
--------------------------------------------------------------------------------------------------
Nautica Enterprises, Inc. (1) 17,000 429,250
--------------------------------------------------------------------------------------------------
Neiman-Marcus Group, Inc. (1) 34,000 867,000
--------------------------------------------------------------------------------------------------
Tommy Hilfiger Corp. (1) 23,800 1,142,400
--------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 37,000 846,375
-------------
9,805,849
- -----------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 3.1%
--------------------------------------------------------------------------------------------------
American Pad & Paper Co. (1) 42,500 961,562
--------------------------------------------------------------------------------------------------
AnnTaylor Stores Corp. (1) 37,000 647,500
--------------------------------------------------------------------------------------------------
Bed Bath & Beyond, Inc. (1) 18,000 436,500
--------------------------------------------------------------------------------------------------
Brown Group, Inc. 45,000 826,875
--------------------------------------------------------------------------------------------------
Claire's Stores, Inc. 27,000 351,000
--------------------------------------------------------------------------------------------------
Consolidated Stores Corp. (1) 25,000 803,125
--------------------------------------------------------------------------------------------------
Gap, Inc. (The) 33,000 994,125
--------------------------------------------------------------------------------------------------
Home Depot, Inc. 22,000 1,102,750
--------------------------------------------------------------------------------------------------
Nine West Group, Inc. (1) 41,000 1,901,375
--------------------------------------------------------------------------------------------------
Stride Rite Corp. 40,000 400,000
--------------------------------------------------------------------------------------------------
Tiffany & Co. 15,000 549,375
------------
8,974,187
- -----------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS - 12.6%
- -----------------------------------------------------------------------------------------------------
BEVERAGES - 0.5%
--------------------------------------------------------------------------------------------------
Boston Beer Co., Inc., Cl. A (1) 13,000 133,250
--------------------------------------------------------------------------------------------------
Coca-Cola Co. (The) 21,000 1,105,125
--------------------------------------------------------------------------------------------------
Cott Corp. 35,000 253,750
-------------
1,492,125
- -----------------------------------------------------------------------------------------------------
EDUCATION - 0.2%
--------------------------------------------------------------------------------------------------
National Education Corp. (1) 32,000 488,000
- -----------------------------------------------------------------------------------------------------
FOOD - 2.8%
--------------------------------------------------------------------------------------------------
American Stores Co. 17,000 694,875
--------------------------------------------------------------------------------------------------
Hershey Foods Corp. 22,000 962,500
--------------------------------------------------------------------------------------------------
JP Foodservice, Inc. (1) 25,600 713,600
--------------------------------------------------------------------------------------------------
Kroger Co. (1) 23,000 1,069,500
--------------------------------------------------------------------------------------------------
Richfood Holdings, Inc. 52,500 1,273,125
--------------------------------------------------------------------------------------------------
Safeway, Inc. (1) 35,000 1,496,250
--------------------------------------------------------------------------------------------------
Sara Lee Corp. 45,000 1,676,250
-------------
7,886,100
- -----------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 3.9%
--------------------------------------------------------------------------------------------------
Abbott Laboratories 4,000 203,000
--------------------------------------------------------------------------------------------------
Amgen, Inc. (1) 8,000 435,000
--------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 6,500 706,875
--------------------------------------------------------------------------------------------------
Incyte Pharmaceuticals, Inc. (1) 12,600 648,900
--------------------------------------------------------------------------------------------------
Johnson & Johnson 55,516 2,761,921
--------------------------------------------------------------------------------------------------
Lilly (Eli) & Co. 32,090 2,342,570
35
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS (Continued)
--------------------------------------------------------------------------------------------------
Merck & Co., Inc. 6,000 $ 475,500
--------------------------------------------------------------------------------------------------
Pfizer, Inc. 24,500 2,030,437
--------------------------------------------------------------------------------------------------
Schering-Plough Corp. 25,400 1,644,650
-------------
11,248,853
--------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 3.6%
--------------------------------------------------------------------------------------------------
Baxter International, Inc. 10,000 410,000
--------------------------------------------------------------------------------------------------
Boston Scientific Corp. (1) 17,000 1,020,000
--------------------------------------------------------------------------------------------------
Guidant Corp. 27,916 1,591,212
--------------------------------------------------------------------------------------------------
HealthCare COMPARE Corp. (1) 35,900 1,521,262
--------------------------------------------------------------------------------------------------
HEALTHSOUTH Corp. (1) 40,000 1,545,000
--------------------------------------------------------------------------------------------------
Medtronic, Inc. 21,000 1,428,000
--------------------------------------------------------------------------------------------------
Nellcor Puritan Bennett, Inc. (1) 31,600 691,250
--------------------------------------------------------------------------------------------------
Oxford Health Plans, Inc. (1) 23,000 1,346,937
--------------------------------------------------------------------------------------------------
Sofamor Danek Group, Inc. (1) 19,000 579,500
--------------------------------------------------------------------------------------------------
VISX, Inc. (1) 11,000 243,375
-------------
10,376,536
- -----------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS - 0.4%
--------------------------------------------------------------------------------------------------
Procter & Gamble Co. 10,000 1,075,000
- -----------------------------------------------------------------------------------------------------
TOBACCO - 1.2%
--------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 23,000 2,590,375
--------------------------------------------------------------------------------------------------
UST, Inc. 23,000 744,625
-------------
3,335,000
- -----------------------------------------------------------------------------------------------------
ENERGY - 6.0%
- -----------------------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 1.5%
--------------------------------------------------------------------------------------------------
BJ Services Co. (1) 20,000 1,020,000
--------------------------------------------------------------------------------------------------
Global Marine, Inc. (1) 60,000 1,237,500
--------------------------------------------------------------------------------------------------
Tidewater, Inc. 10,000 452,500
--------------------------------------------------------------------------------------------------
Transocean Offshore, Inc. 25,000 1,565,625
-------------
4,275,625
- -----------------------------------------------------------------------------------------------------
OIL-INTEGRATED - 4.5%
--------------------------------------------------------------------------------------------------
Amerada Hess Corp. 15,500 897,062
--------------------------------------------------------------------------------------------------
Amoco Corp. 15,600 1,255,800
--------------------------------------------------------------------------------------------------
Atlantic Richfield Co. 13,600 1,802,000
--------------------------------------------------------------------------------------------------
Mobil Corp. 16,100 1,968,225
--------------------------------------------------------------------------------------------------
Pennzoil Co. 13,000 734,500
--------------------------------------------------------------------------------------------------
Phillips Petroleum Co. 33,000 1,460,250
--------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co. 13,000 2,219,750
--------------------------------------------------------------------------------------------------
Unocal Corp. 40,000 1,625,000
--------------------------------------------------------------------------------------------------
USX-Marathon Group 41,000 978,875
-------------
12,941,462
- -----------------------------------------------------------------------------------------------------
FINANCIAL - 14.2%
- -----------------------------------------------------------------------------------------------------
BANKS - 3.5%
--------------------------------------------------------------------------------------------------
Bank of Boston Corp. 23,000 1,477,750
--------------------------------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 28,800 972,000
--------------------------------------------------------------------------------------------------
BankAmerica Corp. 7,500 748,125
--------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 22,640 2,020,620
--------------------------------------------------------------------------------------------------
Citicorp 20,600 2,121,800
--------------------------------------------------------------------------------------------------
Mellon Bank Corp. 18,000 1,278,000
36
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------
BANKS (Continued)
- -----------------------------------------------------------------------------------------------------
State Street Boston Corp. 21,600 $ 1,393,200
-------------
10,011,495
- -----------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 7.0%
--------------------------------------------------------------------------------------------------
Advanta Corp., Cl. A 20,000 855,000
--------------------------------------------------------------------------------------------------
Associates First Capital Corp., Cl. A 22,000 970,750
--------------------------------------------------------------------------------------------------
Countrywide Credit Industries, Inc. 28,000 801,500
--------------------------------------------------------------------------------------------------
Everen Capital Corp. 22,000 492,250
--------------------------------------------------------------------------------------------------
Fannie Mae 32,000 1,192,000
--------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 16,000 1,762,000
--------------------------------------------------------------------------------------------------
Finova Group, Inc. 23,000 1,477,750
--------------------------------------------------------------------------------------------------
First USA, Inc. 86,000 2,977,750
--------------------------------------------------------------------------------------------------
Franklin Resources, Inc. 15,400 1,052,975
--------------------------------------------------------------------------------------------------
Green Tree Financial Corp. 54,000 2,085,750
--------------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc. 7,000 399,875
--------------------------------------------------------------------------------------------------
Price (T. Rowe) Associates 29,200 1,270,200
--------------------------------------------------------------------------------------------------
Salomon, Inc. 24,000 1,131,000
--------------------------------------------------------------------------------------------------
Schwab (Charles) Corp. (New) 25,000 800,000
--------------------------------------------------------------------------------------------------
Travelers Group, Inc. 60,666 2,752,720
-------------
20,021,520
- -----------------------------------------------------------------------------------------------------
INSURANCE - 3.7%
--------------------------------------------------------------------------------------------------
AFLAC, Inc. 19,400 829,350
--------------------------------------------------------------------------------------------------
Allstate Corp. 40,500 2,343,937
--------------------------------------------------------------------------------------------------
American International Group, Inc. 3,000 324,750
--------------------------------------------------------------------------------------------------
Cigna Corp. 10,600 1,448,225
--------------------------------------------------------------------------------------------------
Equitable Cos., Inc. 54,000 1,329,750
--------------------------------------------------------------------------------------------------
ITT Hartford Group, Inc. 5,000 337,500
--------------------------------------------------------------------------------------------------
Loews Corp. 11,000 1,036,750
--------------------------------------------------------------------------------------------------
MGIC Investment Corp. 12,100 919,600
--------------------------------------------------------------------------------------------------
SunAmerica, Inc. 44,000 1,952,500
-------------
10,522,362
- -----------------------------------------------------------------------------------------------------
INDUSTRIAL - 6.1%
- -----------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.1%
--------------------------------------------------------------------------------------------------
Emerson Electric Co. 23,000 2,225,250
--------------------------------------------------------------------------------------------------
General Electric Co. 28,000 2,768,500
--------------------------------------------------------------------------------------------------
Honeywell, Inc. 15,300 1,005,975
------------
5,999,725
- -----------------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS - 1.0%
--------------------------------------------------------------------------------------------------
Centex Corp 34,000 1,279,250
--------------------------------------------------------------------------------------------------
Fluor Corp. 6,000 376,500
--------------------------------------------------------------------------------------------------
Rayonier, Inc. 28,400 1,089,850
-------------
2,745,600
- -----------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 0.3%
--------------------------------------------------------------------------------------------------
Kent Electronics Corp. (1) 16,400 422,300
--------------------------------------------------------------------------------------------------
Manpower, Inc. 10,000 325,000
-------------
747,300
- -----------------------------------------------------------------------------------------------------
MANUFACTURING - 1.6%
--------------------------------------------------------------------------------------------------
AGCO Corp. 25,200 721,350
--------------------------------------------------------------------------------------------------
AlliedSignal, Inc. 14,000 938,000
37
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
MANUFACTURING (Continued)
--------------------------------------------------------------------------------------------------
Deere & Co. 10,000 $ 406,250
--------------------------------------------------------------------------------------------------
Sealed Air Corp. (1) 33,000 1,373,625
--------------------------------------------------------------------------------------------------
U.S. Filter Corp. (1) 40,300 1,279,525
-------------
4,718,750
TRANSPORTATION - 1.1%
--------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 7,000 604,625
--------------------------------------------------------------------------------------------------
Canadian Pacific Ltd. (New) 78,000 2,067,000
--------------------------------------------------------------------------------------------------
Illinois Central Corp. 15,000 480,000
-------------
3,151,625
- -----------------------------------------------------------------------------------------------------
TECHNOLOGY - 16.8%
--------------------------------------------------------------------------------------------------
Aerospace/Defense - 0.6%
--------------------------------------------------------------------------------------------------
Goodrich (B.F.) Co. 24,000 972,000
--------------------------------------------------------------------------------------------------
Lockheed Martin Corp. 8,707 796,691
-------------
1,768,691
- -----------------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 4.1%
--------------------------------------------------------------------------------------------------
Adaptec, Inc. (1) 26,000 1,040,000
--------------------------------------------------------------------------------------------------
Cabletron Systems, Inc. (1) 44,000 1,463,000
--------------------------------------------------------------------------------------------------
Cascade Communications Corp. (1) 43,500 2,397,938
--------------------------------------------------------------------------------------------------
EMC Corp. (1) 36,000 1,192,500
--------------------------------------------------------------------------------------------------
Gateway 2000, Inc. (1) 30,800 1,649,725
--------------------------------------------------------------------------------------------------
International Business Machines Corp. 8,000 1,208,000
--------------------------------------------------------------------------------------------------
Quantum Corp. (1) 22,000 629,750
--------------------------------------------------------------------------------------------------
Seagate Technology (1) 30,000 1,185,000
--------------------------------------------------------------------------------------------------
Sun Microsystems, Inc. (1) 35,000 899,063
-------------
11,664,976
- -----------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 4.9%
--------------------------------------------------------------------------------------------------
Automatic Data Processing, Inc. 7,000 300,125
--------------------------------------------------------------------------------------------------
BMC Software, Inc. (1) 42,000 1,737,750
--------------------------------------------------------------------------------------------------
Computer Associates International, Inc. 9,000 447,750
--------------------------------------------------------------------------------------------------
First Data Corp. 29,000 1,058,500
--------------------------------------------------------------------------------------------------
HBO & Co. 30,000 1,781,250
--------------------------------------------------------------------------------------------------
Microsoft Corp. (1) 50,000 4,131,250
--------------------------------------------------------------------------------------------------
Oracle Corp. (1) 40,400 1,686,700
--------------------------------------------------------------------------------------------------
PLATINUM Technology, Inc. (1) 33,000 449,625
--------------------------------------------------------------------------------------------------
SAP AG, Preference (1) 5,000 687,172
--------------------------------------------------------------------------------------------------
Shiva Corp. (1) 20,000 697,500
--------------------------------------------------------------------------------------------------
Sungard Data Systems, Inc. (1) 23,000 908,500
-------------
13,886,122
- -----------------------------------------------------------------------------------------------------
ELECTRONICS - 2.8%
--------------------------------------------------------------------------------------------------
Altera Corp. (1) 6,000 436,125
--------------------------------------------------------------------------------------------------
Analog Devices, Inc. (1) 25,000 846,875
--------------------------------------------------------------------------------------------------
Applied Materials, Inc. (1) 32,000 1,150,000
--------------------------------------------------------------------------------------------------
Intel Corp. 20,000 2,618,750
--------------------------------------------------------------------------------------------------
LSI Logic Corp. (1) 4,000 107,000
--------------------------------------------------------------------------------------------------
Novellus Systems, Inc. (1) 16,200 877,838
--------------------------------------------------------------------------------------------------
SCI Systems, Inc. (1) 25,200 1,124,550
--------------------------------------------------------------------------------------------------
Varian Associates, Inc. 15,300 778,388
-------------
7,939,526
38
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 4.4%
--------------------------------------------------------------------------------------------------
3Com Corp. (1) 13,000 $ 953,875
--------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (1) 47,000 2,990,375
--------------------------------------------------------------------------------------------------
Hong Kong Telecommunications Ltd., Sponsored ADR 21,572 350,545
--------------------------------------------------------------------------------------------------
Newbridge Networks Corp. (1) 35,000 988,750
--------------------------------------------------------------------------------------------------
Sprint Corp. 26,500 1,056,688
--------------------------------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd., Sponsored ADR 7,000 567,000
--------------------------------------------------------------------------------------------------
Tellabs, Inc. (1) 90,600 3,408,825
--------------------------------------------------------------------------------------------------
WorldCom, Inc. (1) 85,000 2,215,313
------------
12,531,371
- -----------------------------------------------------------------------------------------------------
UTILITIES - 2.4%
- -----------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.0%
--------------------------------------------------------------------------------------------------
American Electric Power Co., Inc. 11,550 474,994
--------------------------------------------------------------------------------------------------
CMS Energy Corp. 16,200 544,725
--------------------------------------------------------------------------------------------------
FPL Group, Inc. 13,600 625,600
--------------------------------------------------------------------------------------------------
Peco Energy Co. 8,300 209,575
--------------------------------------------------------------------------------------------------
Pinnacle West Capital Corp. 32,000 1,016,000
------------
2,870,894
- -----------------------------------------------------------------------------------------------------
GAS UTILITIES - 0.5%
--------------------------------------------------------------------------------------------------
Questar Corp. 14,000 514,500
--------------------------------------------------------------------------------------------------
Sonat, Inc. 18,000 927,000
-------------
1,441,500
- -----------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES - 0.9%
--------------------------------------------------------------------------------------------------
Bell Atlantic Corp. 6,300 407,925
--------------------------------------------------------------------------------------------------
BellSouth Corp. 14,600 589,475
--------------------------------------------------------------------------------------------------
Century Telephone Enterprises, Inc. 14,000 432,250
--------------------------------------------------------------------------------------------------
Cincinnati Bell, Inc. 11,800 727,175
--------------------------------------------------------------------------------------------------
SBC Communications, Inc. 6,400 331,200
-------------
2,488,025
-------------
Total Common Stocks (Cost $145,462,807) 202,551,681
- -----------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 0.0%
- -----------------------------------------------------------------------------------------------------
TCI Communications, Inc., $2.125 Cum. Cv., Series A
(Cost $150,000) 3,000 116,625
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 25.5%
- -----------------------------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities, Inc.,
6.50%, dated 12/31/96, to be repurchased at $23,008,306
on 1/2/97, collateralized by U.S. Treasury Bonds,
7.875%-12%, 5/15/09-2/15/21, with a value of $18,981,947
and U.S. Treasury Nts., 4.75%-6%, 8/31/98-9/30/98, with
a value of $4,712,989 $23,000,000 23,000,000
39
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
PRINCIPAL MARKET VALUE
AMOUNT (NOTE 1)
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Repurchase Agreements (Continued)
- -----------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co.,
6.52%, dated 12/31/96, to be repurchased at $50,018,111
on 1/2/97, collateralized by U.S. Treasury Nts.,
5.50%-7.50%, 7/15/99-8/15/05, with a value of $51,146,398 $ 50,000,000 $ 50,000,000
-------------
Total Repurchase Agreements (Cost $73,000,000) 73,000,000
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $225,461,748) 98.8% 282,517,247
--------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.2 3,402,903
----- -------------
NET ASSETS 100.0% $285,920,150
----- -------------
----- -------------
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
40
<PAGE>
<TABLE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS - 2.4%
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
7.50%, 1/15/27 (2) $ 3,000,000 $ 2,998,140
8.50%, 1/15/27 (2) 3,000,000 3,109,680
-----------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
8%, 4/15/23 3,215,702 3,300,726
8%, 7/15/22 1,439,933 1,480,712
-----------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1994-C2, Cl. E, 8%, 4/25/25 708,271 706,280
------------
Total Mortgage-Backed Obligations (Cost $11,581,318) 11,595,538
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 7.5%
- ---------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
STRIPS, Zero Coupon, 7.101%, 11/15/18 (3) 24,500,000 5,511,248
STRIPS, Zero Coupon, 7.313%, 8/15/19 (3) 26,800,000 5,714,563
-----------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
6.375%, 8/15/02 5,000,000 5,034,380
6.75%, 5/31/97 10,300,000 10,345,072
9.25%, 8/15/98 9,000,000 9,455,633
------------
Total U.S. Government Obligations (Cost $35,122,095) 36,060,896
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS - 16.2%
- ---------------------------------------------------------------------------------------------------------------
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas, Series I, 5.375%, 4/1/01 (4)(5) 2,478,092 2,340,150
Par Bonds, 5.25%, 3/31/23 (6) 24,000,000 15,150,000
Past Due Interest Bonds, Series L, 6.625%, 3/31/05 (4) 8,820,000 7,678,912
-----------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Par Bonds, 5%, 4/15/24 (6) 8,000,000 5,020,000
-----------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds:
8.50%, 4/1/02 CAD 1,500,000 1,237,184
8.75%, 12/1/05 CAD 12,200,000 10,376,451
9.75%, 12/1/01 CAD 3,000,000 2,584,352
9.75%, 6/1/01 CAD 2,000,000 1,707,551
-----------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds, 8%, 3/15/06 DKK 32,100,000 5,985,855
-----------------------------------------------------------------------------------------------------------
Eskom Depositary Receipts, Series E168, 11%, 6/1/08 ZAR 12,570,000 1,967,471
-----------------------------------------------------------------------------------------------------------
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 1,110,000 2,176,463
-----------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali,
8.50%, 8/1/99 ITL 2,700,000,000 1,860,455
-----------------------------------------------------------------------------------------------------------
New Zealand (Government of) Bonds, 8%, 2/15/01 NZD 10,440,000 7,630,155
-----------------------------------------------------------------------------------------------------------
Poland (Republic of) Treasury Bills, Zero Coupon, 20.70%, 1/8/97 (3) PLZ 3,150,000 1,097,181
-----------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Exchangeable Gtd. Nts., 10.50%, 5/15/03 AUD 1,800,000 1,661,406
-----------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03 AUD 3,000,000 2,497,435
41
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------
United Kingdom Treasury:
Bonds, 6.75%, 11/26/04 GBP 2,680,000 $ 4,410,077
Nts., 13%, 7/14/00 GBP 1,590,000 3,204,569
------------
Total Foreign Government Obligations (Cost $71,329,300) 78,585,667
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES - 13.7%
- ---------------------------------------------------------------------------------------------------------------
BASIC MATERIALS - 1.6%
- ---------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.3%
-----------------------------------------------------------------------------------------------------------
NL Industries, Inc., 0%/13% Sr. Sec. Disc. Nts., 10/15/05 (7) 800,000 694,000
-----------------------------------------------------------------------------------------------------------
Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03 500,000 543,418
------------
1,237,418
- ---------------------------------------------------------------------------------------------------------------
GOLD - 0.3%
-----------------------------------------------------------------------------------------------------------
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06 1,250,000 1,275,000
- ---------------------------------------------------------------------------------------------------------------
METALS - 0.5%
-----------------------------------------------------------------------------------------------------------
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 (8) 1,250,000 1,284,375
-----------------------------------------------------------------------------------------------------------
Armco, Inc., 8.50% Sinking Fund Debs., 9/1/01 178,000 179,335
-----------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 1,000,000 1,072,500
------------
2,536,210
- ---------------------------------------------------------------------------------------------------------------
PAPER - 0.5%
-----------------------------------------------------------------------------------------------------------
APP International Finance Co. BV, 11.75% Gtd. Sec. Nts., 10/1/05 500,000 535,625
-----------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.875% Second Priority Sr. Nts., 5/1/06 1,000,000 1,012,500
-----------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., Series B, 12/15/04 750,000 813,750
------------
2,361,875
- ---------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 4.5%
- ---------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING - 0.7%
-----------------------------------------------------------------------------------------------------------
Chrysler Financial Corp., 13.25% Nts., 10/15/99 500,000 585,946
-----------------------------------------------------------------------------------------------------------
Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts., 4/15/06 600,000 656,250
-----------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 500,000 545,000
-----------------------------------------------------------------------------------------------------------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 525,000 509,250
-----------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec.
Nts., Series B, 4/1/02 950,000 1,026,000
------------
3,322,446
- ---------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 0.4%
-----------------------------------------------------------------------------------------------------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 450,000 459,000
9.75% Sr. Sub. Nts., 6/1/02 350,000 357,875
-----------------------------------------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 500,000 507,500
-----------------------------------------------------------------------------------------------------------
Imax Corp., 7% Sr. Nts., 3/1/01 (6) 600,000 615,000
------------
1,939,375
- ---------------------------------------------------------------------------------------------------------------
MEDIA - 2.9%
-----------------------------------------------------------------------------------------------------------
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04 (7) 749,948 311,228
42
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
MEDIA (CONTINUED)
-----------------------------------------------------------------------------------------------------------
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs.,
Series B, 3/1/05 (7) $ 1,000,000 $ 732,500
-----------------------------------------------------------------------------------------------------------
Bell Cablemedia plc, 0%/11.95% Sr. Disc. Nts., 7/15/04 (7) 900,000 792,000
-----------------------------------------------------------------------------------------------------------
Cablevision Industries Corp., 9.25% Sr. Debs., Series B, 4/1/08 500,000 530,922
-----------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 9.875% Sr. Sub. Nts., 5/15/06 250,000 257,813
-----------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04 (7) 900,000 749,250
-----------------------------------------------------------------------------------------------------------
Helicon Group LP/Helicon Capital Corp., 11% Sr. Sec. Nts.,
Series B, 11/1/03 (4) 650,000 666,250
-----------------------------------------------------------------------------------------------------------
International CableTel, Inc., 0%/10.875% Sr. Deferred Coupon
Nts., 10/15/03 (7) 500,000 426,250
-----------------------------------------------------------------------------------------------------------
Outlet Broadcasting, Inc., 10.875% Sr. Sub. Nts., 7/15/03 1,000,000 1,104,535
-----------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp.:
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03 (7) 1,000,000 932,500
9.75% Sr. Sec. Nts., 8/1/00 500,000 532,500
-----------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07 1,000,000 1,060,000
-----------------------------------------------------------------------------------------------------------
SCI Television, Inc., 11% Sr. Sec. Nts., 6/30/05 500,000 537,500
-----------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 500,000 511,875
-----------------------------------------------------------------------------------------------------------
TeleWest plc:
0%/11% Sr. Disc. Debs., 10/1/07 (7) 1,250,000 875,000
9.625% Sr. Debs., 10/1/06 500,000 515,000
-----------------------------------------------------------------------------------------------------------
Time Warner Entertainment LP/Time Warner, Inc.:
10.15% Sr. Nts., 5/1/12 500,000 602,999
8.375% Sr. Debs., 3/15/23 500,000 509,596
-----------------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.125% Debs., 1/15/13 500,000 542,930
-----------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,000,000 1,082,025
-----------------------------------------------------------------------------------------------------------
Universal Outdoor, Inc., 9.75% Sr. Sub. Nts., 10/15/06 (8) 500,000 516,250
------------
13,788,923
- ---------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL - 0.1%
-----------------------------------------------------------------------------------------------------------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 600,000 664,500
- ---------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 0.4%
-----------------------------------------------------------------------------------------------------------
Cole National Group, Inc., 11.25% Sr. Nts., 10/1/01 1,000,000 1,107,500
-----------------------------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 750,000 787,500
------------
1,895,000
- ---------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS - 2.3%
- ---------------------------------------------------------------------------------------------------------------
FOOD - 0.6%
-----------------------------------------------------------------------------------------------------------
Grand Union Co., 12% Sr. Nts., 9/1/04 1,500,000 1,597,500
-----------------------------------------------------------------------------------------------------------
Ralph's Grocery Co., 10.45% Sr. Nts., 6/15/04 600,000 640,500
-----------------------------------------------------------------------------------------------------------
RJR Nabisco, Inc., 8.625% Medium-Term Nts., 12/1/02 500,000 504,814
------------
2,742,814
- ---------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 0.8%
-----------------------------------------------------------------------------------------------------------
Genesis Health Ventures, Inc., 9.25% Sr. Sub. Nts., 10/1/06 (8) 1,900,000 1,961,750
-----------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc., 13% Sr. Sub. Nts., 7/15/02 1,000,000 1,130,000
-----------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts.,
Series A, 4/15/04 500,000 557,500
------------
3,649,250
43
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS - 0.9%
-----------------------------------------------------------------------------------------------------------
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 11.404%, 5/27/98 (3) $ 1,500,000 $ 1,258,125
-----------------------------------------------------------------------------------------------------------
Harman International Industries, Inc., 12% Sr. Sub. Nts., 8/1/02 1,000,000 1,095,000
-----------------------------------------------------------------------------------------------------------
Repap New Brunswick, Inc., 10.625% Second Priority Sr. Sec. Nts., 4/15/05 1,000,000 1,050,000
-----------------------------------------------------------------------------------------------------------
Revlon Worldwide Corp., Zero Coupon Sr. Sec. Disc. Nts., Series B,
13.169%, 3/15/98 (3) 500,000 436,250
-----------------------------------------------------------------------------------------------------------
Samsonite Corp., 11.125% Sr. Sub. Nts., 7/15/05 500,000 552,500
------------
4,391,875
- ---------------------------------------------------------------------------------------------------------------
ENERGY - 1.3%
-----------------------------------------------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 750,000 789,375
-----------------------------------------------------------------------------------------------------------
Mesa Operating Co., 10.625% Gtd. Sr. Sub. Nts., 7/1/06 1,500,000 1,631,250
-----------------------------------------------------------------------------------------------------------
OPI International, Inc., 12.875% Sr. Gtd. Nts., 7/15/02 (9) 1,000,000 1,097,500
-----------------------------------------------------------------------------------------------------------
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02 1,350,000 1,466,438
-----------------------------------------------------------------------------------------------------------
Triton Energy Corp., 0%/9.75% Sr. Sub. Disc. Nts., 12/15/00 1,000,000 1,050,000
------------
6,034,563
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL - 0.3%
- ---------------------------------------------------------------------------------------------------------------
BANKS - 0.1%
-----------------------------------------------------------------------------------------------------------
First Chicago Corp.:
11.25% Sub. Nts., 2/20/01 250,000 290,585
9% Sub. Nts., 6/15/99 250,000 265,040
------------
555,625
- ---------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 0.2%
-----------------------------------------------------------------------------------------------------------
GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98 1,000,000 1,022,500
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 1.3%
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS - 0.6%
-----------------------------------------------------------------------------------------------------------
American Standard, Inc., 10.875% Sr. Nts., 5/15/99 500,000 535,000
-----------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc.:
10% Sr. Sub. Nts., 8/1/02 500,000 525,000
11% Sr. Debs., 12/1/03 500,000 558,750
-----------------------------------------------------------------------------------------------------------
Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03 425,000 433,500
-----------------------------------------------------------------------------------------------------------
Triangle Pacific Corp., 10.50% Sr. Nts., 8/1/03 850,000 911,625
------------
2,963,875
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 0.4%
-----------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 10.25% Sr. Sub. Nts., 12/1/06 (8) 285,000 300,319
-----------------------------------------------------------------------------------------------------------
EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 750,000 708,750
-----------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 10.125% Sr. Sub. Nts., 10/1/06 1,000,000 1,065,000
------------
2,074,069
- ---------------------------------------------------------------------------------------------------------------
MANUFACTURING - 0.3%
-----------------------------------------------------------------------------------------------------------
Mettler Toledo, Inc., 9.75% Gtd. Sr. Sub. Nts., 10/1/06 500,000 527,500
-----------------------------------------------------------------------------------------------------------
Terex Corp., 13.25% Sr. Sec. Nts., 5/15/02 1,000,000 1,080,000
------------
1,607,500
- ---------------------------------------------------------------------------------------------------------------
TECHNOLOGY - 1.7%
- ---------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.1%
-----------------------------------------------------------------------------------------------------------
Unisys Corp., 15% Credit Sensitive Nts., 7/1/97 (4) 650,000 685,750
44
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 1.6%
-----------------------------------------------------------------------------------------------------------
360 Communications Co., 7.50% Sr. Nts., 3/1/06 $ 500,000 $ 496,854
-----------------------------------------------------------------------------------------------------------
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts., 12/1/04 (7) 800,000 660,000
-----------------------------------------------------------------------------------------------------------
IntelCom Group (USA), Inc., 0%/13.50% Sr. Disc. Nts., 9/15/05 (7) 900,000 643,500
-----------------------------------------------------------------------------------------------------------
MFS Communications Co., Inc., 0%/9.375% Sr. Disc. Nts., 1/15/04 (7) 1,850,000 1,618,750
-----------------------------------------------------------------------------------------------------------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06 1,000,000 1,045,000
-----------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts., 11/15/01 (7) 1,000,000 977,500
-----------------------------------------------------------------------------------------------------------
Teleport Communications Group, Inc.:
0%/11.125% Sr. Disc. Nts., 7/1/07 (7) 1,600,000 1,104,000
9.875% Sr. Nts., 7/1/06 400,000 430,000
-----------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 9.50% Sr. Nts., 2/1/04 1,000,000 955,000
------------
7,930,604
- ---------------------------------------------------------------------------------------------------------------
UTILITIES - 0.7%
- ---------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.5%
-----------------------------------------------------------------------------------------------------------
Calfornia Energy, Inc., 0%/10.25% Sr. Disc. Nts., 1/15/04 (7) 750,000 796,875
-----------------------------------------------------------------------------------------------------------
Calpine Corp., 10.50% Sr. Nts., 5/15/06 800,000 851,000
-----------------------------------------------------------------------------------------------------------
First PV Funding Corp., 10.15% Lease Obligation Bonds, Series
1986B, 1/15/16 770,000 821,013
------------
2,468,888
- ---------------------------------------------------------------------------------------------------------------
GAS UTILITIES - 0.2%
-----------------------------------------------------------------------------------------------------------
Beaver Valley II Funding Corp., 9% Second Lease Obligation Bonds, 6/1/17 989,000 951,913
------------
Total Non-Convertible Corporate Bonds and Notes (Cost $63,199,248) 66,099,973
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES - 0.2%
-----------------------------------------------------------------------------------------------------------
Castorama Dubois Investissements SA, 3.15% Cv. Bonds, 1/1/03 FRF 165,000 38,530
-----------------------------------------------------------------------------------------------------------
MEDIQ, Inc., 7.50% Exchangeable Sub. Debs., 7/15/03 1,000,000 930,000
------------
Total Convertible Corporate Bonds and Notes (Cost $971,148) 968,530
SHARES
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 45.6%
- ---------------------------------------------------------------------------------------------------------------
BASIC MATERIALS - 2.9%
- ---------------------------------------------------------------------------------------------------------------
CHEMICALS - 1.6%
-----------------------------------------------------------------------------------------------------------
Agrium, Inc. 141,000 1,938,750
-----------------------------------------------------------------------------------------------------------
Bayer AG, Sponsored ADR 56,000 2,281,989
-----------------------------------------------------------------------------------------------------------
Dow Chemical Co. (11) 8,000 627,000
-----------------------------------------------------------------------------------------------------------
Georgia Gulf Corp. 29,000 779,375
-----------------------------------------------------------------------------------------------------------
Great Lakes Chemical Corp. 16,500 771,375
-----------------------------------------------------------------------------------------------------------
Monsanto Co. (11) 18,000 699,750
-----------------------------------------------------------------------------------------------------------
Sybron Chemical Industries, Inc. (10) 48,000 768,000
------------
7,866,239
45
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
METALS - 0.8%
-----------------------------------------------------------------------------------------------------------
Alumax, Inc. (10) 32,918 $ 1,098,638
-----------------------------------------------------------------------------------------------------------
Brush Wellman, Inc. 83,500 1,367,312
-----------------------------------------------------------------------------------------------------------
Custom Chrome, Inc. (10) 45,000 905,625
-----------------------------------------------------------------------------------------------------------
Inco Ltd. 15,200 484,500
------------
3,856,075
- ---------------------------------------------------------------------------------------------------------------
PAPER - 0.5%
-----------------------------------------------------------------------------------------------------------
Aracruz Celulose SA, Sponsored ADR, Cl. B 139,000 1,146,750
-----------------------------------------------------------------------------------------------------------
MacMillan Bloedel Ltd. 91,830 1,202,601
-----------------------------------------------------------------------------------------------------------
MacMillan Bloedel Ltd. 4,200 54,600
------------
2,403,951
- ---------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 10.0%
- ---------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING - 1.3%
-----------------------------------------------------------------------------------------------------------
AutoZone, Inc. (10) 38,500 1,058,750
-----------------------------------------------------------------------------------------------------------
Black & Decker Corp. 20,000 602,500
-----------------------------------------------------------------------------------------------------------
Chromcraft Revington, Inc. (10) 7,400 205,350
-----------------------------------------------------------------------------------------------------------
Duracell International, Inc. 20,000 1,397,500
-----------------------------------------------------------------------------------------------------------
Eaton Corp. (11) 16,000 1,116,000
-----------------------------------------------------------------------------------------------------------
General Motors Corp. (11) 25,000 1,393,750
-----------------------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA 214,506 688,685
------------
6,462,535
- ---------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 4.7%
-----------------------------------------------------------------------------------------------------------
Alaska Air Group, Inc. (10) 45,000 945,000
-----------------------------------------------------------------------------------------------------------
AMR Corp. (10)(11) 25,500 2,247,187
-----------------------------------------------------------------------------------------------------------
Brinker International, Inc. (10) 58,800 940,800
-----------------------------------------------------------------------------------------------------------
Carnival Corp., Cl. A 34,100 1,125,300
-----------------------------------------------------------------------------------------------------------
Cheesecake Factory (The) (10) 30,000 543,750
-----------------------------------------------------------------------------------------------------------
Choice Hotels International, Inc. (10) 24,985 440,361
-----------------------------------------------------------------------------------------------------------
Circus Circus Enterprises, Inc. (10) 25,500 876,562
-----------------------------------------------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 70,000 1,776,250
-----------------------------------------------------------------------------------------------------------
Disney (Walt) Co. (11) 20,793 1,447,713
-----------------------------------------------------------------------------------------------------------
Eastman Kodak Co. (11) 20,000 1,605,000
-----------------------------------------------------------------------------------------------------------
Gaylord Entertainment Co., Cl. A 50,000 1,143,750
-----------------------------------------------------------------------------------------------------------
International Game Technology 88,000 1,606,000
-----------------------------------------------------------------------------------------------------------
King World Productions, Inc. (10)(11) 31,000 1,143,125
-----------------------------------------------------------------------------------------------------------
Mattel, Inc. (11) 39,296 1,090,471
-----------------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 32,000 2,285,517
-----------------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc. (10)(11) 14,600 390,550
-----------------------------------------------------------------------------------------------------------
Primadonna Resorts, Inc. (10)(11) 55,000 935,000
-----------------------------------------------------------------------------------------------------------
Shangri-La Asia Ltd. 725,000 1,073,207
-----------------------------------------------------------------------------------------------------------
Shimano, Inc. 70,000 1,188,076
------------
22,803,619
- ---------------------------------------------------------------------------------------------------------------
MEDIA - 1.3%
-----------------------------------------------------------------------------------------------------------
Comcast Corp., Cl. A Special 93,000 1,656,562
-----------------------------------------------------------------------------------------------------------
Dow Jones & Co., Inc. 36,000 1,219,500
-----------------------------------------------------------------------------------------------------------
South China Morning Post Holdings Ltd. 1,800,000 1,489,335
-----------------------------------------------------------------------------------------------------------
Time Warner, Inc. 16,500 618,750
-----------------------------------------------------------------------------------------------------------
U S West Media Group (10) 75,000 1,387,500
------------
6,371,647
46
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL - 1.0%
-----------------------------------------------------------------------------------------------------------
Cone Mills Corp. (10) 196,300 $ 1,545,862
-----------------------------------------------------------------------------------------------------------
Donna Karan International, Inc. (10) 71,500 1,009,937
-----------------------------------------------------------------------------------------------------------
Price/Costco, Inc. (10)(11) 58,900 1,479,862
-----------------------------------------------------------------------------------------------------------
Starter Corp. (10) 100,000 575,000
------------
4,610,661
- ---------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 1.7%
-----------------------------------------------------------------------------------------------------------
Books-A-Million, Inc. (10) 120,000 825,000
-----------------------------------------------------------------------------------------------------------
Burlington Coat Factory Warehouse Corp. (10) 62,000 806,000
-----------------------------------------------------------------------------------------------------------
Castorama Dubois Investissements SA 4,131 709,592
-----------------------------------------------------------------------------------------------------------
General Nutrition Cos., Inc. (10) 68,000 1,147,500
-----------------------------------------------------------------------------------------------------------
Gymboree Corp. (10)(11) 61,900 1,415,962
-----------------------------------------------------------------------------------------------------------
Movie Gallery, Inc. (10) 50,000 650,000
-----------------------------------------------------------------------------------------------------------
Toys 'R' Us, Inc. (10)(11) 60,500 1,815,000
-----------------------------------------------------------------------------------------------------------
Tractor Supply Co. (10) 46,300 954,937
------------
8,323,991
- ---------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS - 7.8%
- ---------------------------------------------------------------------------------------------------------------
BEVERAGES - 0.3%
-----------------------------------------------------------------------------------------------------------
Guinness plc 100,000 783,698
-----------------------------------------------------------------------------------------------------------
PepsiCo, Inc. 27,000 789,750
------------
1,573,448
- ---------------------------------------------------------------------------------------------------------------
FOOD - 0.9%
-----------------------------------------------------------------------------------------------------------
Chiquita Brands International, Inc. 69,080 880,770
-----------------------------------------------------------------------------------------------------------
Grand Union Co. (10) 6,185 30,925
-----------------------------------------------------------------------------------------------------------
Groupe Danone 6,513 905,777
-----------------------------------------------------------------------------------------------------------
Nestle SA, Sponsored ADR 12,000 642,128
-----------------------------------------------------------------------------------------------------------
Sara Lee Corp. 48,000 1,788,000
------------
4,247,600
- ---------------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 2.9%
-----------------------------------------------------------------------------------------------------------
Abbott Laboratories 22,000 1,116,500
-----------------------------------------------------------------------------------------------------------
Agouron Pharmaceuticals, Inc. (10)(11) 11,400 772,350
-----------------------------------------------------------------------------------------------------------
American Home Products Corp. 19,000 1,113,875
-----------------------------------------------------------------------------------------------------------
Astra AB Free, Series A 14,500 715,653
-----------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. (11) 18,800 2,044,500
-----------------------------------------------------------------------------------------------------------
Genzyme Corp. (10) 55,000 1,196,250
-----------------------------------------------------------------------------------------------------------
Johnson & Johnson 29,800 1,482,550
-----------------------------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 84,000 1,407,000
-----------------------------------------------------------------------------------------------------------
Novartis AG (10) 2,346 2,678,455
-----------------------------------------------------------------------------------------------------------
SmithKline Beecham plc, ADR 24,400 1,659,200
------------
14,186,333
- ---------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 2.5%
-----------------------------------------------------------------------------------------------------------
Alternative Living Services, Inc. (10) 73,000 1,058,500
-----------------------------------------------------------------------------------------------------------
Biomet, Inc. 50,000 756,250
-----------------------------------------------------------------------------------------------------------
Datascope Corp. (10) 35,000 700,000
-----------------------------------------------------------------------------------------------------------
Heartport, Inc. (10) 26,000 594,750
-----------------------------------------------------------------------------------------------------------
HemaSure, Inc. (10) 128,000 800,000
-----------------------------------------------------------------------------------------------------------
Innovasive Devices, Inc. (10) 85,000 658,750
-----------------------------------------------------------------------------------------------------------
Integrated Health Services, Inc. 32,500 792,187
-----------------------------------------------------------------------------------------------------------
Manor Care, Inc. (11) 24,985 674,595
47
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES (CONTINUED)
-----------------------------------------------------------------------------------------------------------
Medtronic, Inc. (11) 15,700 $ 1,067,600
-----------------------------------------------------------------------------------------------------------
Nellcor Puritan Bennett, Inc. (10) 68,400 1,496,250
-----------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc. (10) 440 3,053
-----------------------------------------------------------------------------------------------------------
Sofamor Danek Group, Inc. (10)(11) 30,000 915,000
-----------------------------------------------------------------------------------------------------------
United Healthcare Corp. (11) 22,000 990,000
-----------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc. (10)(11) 49,981 1,718,097
------------
12,225,032
- ---------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS - 0.7%
-----------------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. (11) 13,100 1,247,775
-----------------------------------------------------------------------------------------------------------
Procter & Gamble Co. (11) 13,200 1,419,000
-----------------------------------------------------------------------------------------------------------
Scott's Liquid Gold, Inc. (10) 57,200 92,950
-----------------------------------------------------------------------------------------------------------
Wella AG 1,550 819,702
------------
3,579,427
- ---------------------------------------------------------------------------------------------------------------
TOBACCO - 0.5%
-----------------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. (11) 21,300 2,398,913
- ---------------------------------------------------------------------------------------------------------------
ENERGY - 3.2%
- ---------------------------------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.7%
-----------------------------------------------------------------------------------------------------------
Kerr-McGee Corp. (11) 12,000 864,000
-----------------------------------------------------------------------------------------------------------
Weatherford Enterra, Inc. (10) 29,000 870,000
-----------------------------------------------------------------------------------------------------------
Western Atlas, Inc. (10)(11) 22,000 1,559,250
------------
3,293,250
- ---------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED - 2.5%
-----------------------------------------------------------------------------------------------------------
Atlantic Richfield Co. (11) 14,300 1,894,750
-----------------------------------------------------------------------------------------------------------
Elan Energy, Inc. (10) 121,000 1,059,349
-----------------------------------------------------------------------------------------------------------
Enterprise Oil plc 118,000 1,305,786
-----------------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co. 31,000 1,662,375
-----------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co. (11) 9,500 1,622,125
-----------------------------------------------------------------------------------------------------------
Talisman Energy, Inc. (10) 19,000 632,108
-----------------------------------------------------------------------------------------------------------
Total SA, Sponsored ADR 21,701 873,465
-----------------------------------------------------------------------------------------------------------
Unocal Corp. 36,000 1,462,500
-----------------------------------------------------------------------------------------------------------
YPF SA, Cl. D, ADR 52,000 1,313,000
------------
11,825,458
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL - 5.5%
- ---------------------------------------------------------------------------------------------------------------
BANKS - 3.0%
-----------------------------------------------------------------------------------------------------------
Akbank T.A.S. 2,660,750 359,742
-----------------------------------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA 100,050 935,632
-----------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) (11) 61,000 5,444,250
-----------------------------------------------------------------------------------------------------------
Citicorp (11) 13,000 1,339,000
-----------------------------------------------------------------------------------------------------------
Deutsche Bank, Sponsored ADR 13,250 618,175
-----------------------------------------------------------------------------------------------------------
NationsBank Corp. (11) 49,600 4,848,400
-----------------------------------------------------------------------------------------------------------
PNC Bank Corp. 29,000 1,091,125
------------
14,636,324
- ---------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 1.2%
-----------------------------------------------------------------------------------------------------------
American Express Co. (11) 38,000 2,147,000
-----------------------------------------------------------------------------------------------------------
Dean Witter, Discover & Co. (11) 23,000 1,523,750
-----------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. (11) 9,700 1,068,213
-----------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 10,500 855,750
------------
5,594,713
48
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
INSURANCE - 1.3%
-----------------------------------------------------------------------------------------------------------
ACE Ltd. 27,000 $ 1,623,375
-----------------------------------------------------------------------------------------------------------
American International Group, Inc. (11) 12,600 1,363,950
-----------------------------------------------------------------------------------------------------------
Equitable Cos., Inc. 35,000 861,875
-----------------------------------------------------------------------------------------------------------
Skandia Forsakrings AB 40,000 1,130,634
-----------------------------------------------------------------------------------------------------------
UNUM Corp. 21,000 1,517,250
------------
6,497,084
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 4.5%
- ---------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.5%
-----------------------------------------------------------------------------------------------------------
Core Industries, Inc. 50,000 825,000
-----------------------------------------------------------------------------------------------------------
General Electric Co. (11) 14,400 1,423,800
------------
2,248,800
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS - 0.8%
-----------------------------------------------------------------------------------------------------------
Owens Corning 33,000 1,406,625
-----------------------------------------------------------------------------------------------------------
Rubbermaid, Inc. 33,000 750,750
-----------------------------------------------------------------------------------------------------------
Wolverine Tube, Inc. (10) 51,000 1,797,750
------------
3,955,125
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 0.4%
-----------------------------------------------------------------------------------------------------------
Calgon Carbon Corp. 84,500 1,035,125
-----------------------------------------------------------------------------------------------------------
Ecolab, Inc. 23,400 880,425
------------
1,915,550
- ---------------------------------------------------------------------------------------------------------------
MANUFACTURING - 1.6%
-----------------------------------------------------------------------------------------------------------
AGCO Corp. 39,600 1,133,550
-----------------------------------------------------------------------------------------------------------
Citic Pacific Ltd. 162,000 940,375
-----------------------------------------------------------------------------------------------------------
Cognex Corp. (10) 40,000 740,000
-----------------------------------------------------------------------------------------------------------
Hutchison Whampoa Ltd. 128,000 1,005,301
-----------------------------------------------------------------------------------------------------------
Mannesmann AG 2,100 902,350
-----------------------------------------------------------------------------------------------------------
Tenneco, Inc. (New) (11) 28,500 1,286,063
-----------------------------------------------------------------------------------------------------------
Trinity Industries, Inc. 23,000 862,500
-----------------------------------------------------------------------------------------------------------
Westinghouse Air Brake Co. 71,200 898,900
------------
7,769,039
- ---------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 1.2%
-----------------------------------------------------------------------------------------------------------
Airborne Freight Corp. 32,000 748,000
-----------------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 15,600 1,347,450
-----------------------------------------------------------------------------------------------------------
Canadian National Railway Co. 30,000 1,140,332
-----------------------------------------------------------------------------------------------------------
Newport News Shipbuilding, Inc. (10) 5,700 85,500
-----------------------------------------------------------------------------------------------------------
Spartan Motors, Inc. 108,000 729,000
-----------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA 66,100 1,247,638
-----------------------------------------------------------------------------------------------------------
Stolt-Nielsen SA, Sponsored ADR 22,050 413,438
------------
5,711,358
- ---------------------------------------------------------------------------------------------------------------
TECHNOLOGY - 10.3%
- ---------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.3%
-----------------------------------------------------------------------------------------------------------
Boeing Co. 1,008 107,226
-----------------------------------------------------------------------------------------------------------
Rockwell International Corp. 24,000 1,461,000
------------
1,568,226
- ---------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 2.0%
-----------------------------------------------------------------------------------------------------------
International Business Machines Corp. (11) 19,200 2,899,200
-----------------------------------------------------------------------------------------------------------
Komag, Inc. (10) 25,000 678,125
-----------------------------------------------------------------------------------------------------------
Moore Corp. Ltd. 65,600 1,336,600
49
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE (CONTINUED)
-----------------------------------------------------------------------------------------------------------
Optical Data Systems, Inc. (10) 58,700 $ 704,400
-----------------------------------------------------------------------------------------------------------
Seagate Technology (10)(11) 28,000 1,106,000
-----------------------------------------------------------------------------------------------------------
Xerox Corp. (11) 51,000 2,683,875
------------
9,408,200
- ---------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 2.5%
-----------------------------------------------------------------------------------------------------------
America Online, Inc. (10) 32,540 1,081,955
-----------------------------------------------------------------------------------------------------------
American Software, Inc. (10) 100,000 637,500
-----------------------------------------------------------------------------------------------------------
Arbor Software Corp. (10) 7,000 169,750
-----------------------------------------------------------------------------------------------------------
Astea International, Inc. (10) 50,000 284,375
-----------------------------------------------------------------------------------------------------------
Business Objects SA, Sponsored ADR (10) 45,000 607,500
-----------------------------------------------------------------------------------------------------------
Computer Associates International, Inc. (11) 45,975 2,287,256
-----------------------------------------------------------------------------------------------------------
Electronic Arts, Inc. (10)(11) 37,200 1,113,675
-----------------------------------------------------------------------------------------------------------
Inference Corp., Cl. A (10) 112,500 815,625
-----------------------------------------------------------------------------------------------------------
Microsoft Corp. (10)(11) 9,800 809,725
-----------------------------------------------------------------------------------------------------------
Novell, Inc. (10) 158,000 1,496,063
-----------------------------------------------------------------------------------------------------------
Sabre Group Holdings, Inc. (10) 22,000 613,250
-----------------------------------------------------------------------------------------------------------
Structural Dynamics Research Corp. (10)(11) 31,000 620,000
-----------------------------------------------------------------------------------------------------------
Symantec Corp. (10)(11) 110,364 1,600,278
------------
12,136,952
- ---------------------------------------------------------------------------------------------------------------
ELECTRONICS - 3.7%
-----------------------------------------------------------------------------------------------------------
CAE, Inc. 75,433 569,606
-----------------------------------------------------------------------------------------------------------
Cypress Semiconductor Corp. (10) 75,000 1,059,375
-----------------------------------------------------------------------------------------------------------
General Motors Corp., Cl. H 17,000 956,250
-----------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 31,500 1,582,875
-----------------------------------------------------------------------------------------------------------
Input/Output, Inc. (10) 53,000 980,500
-----------------------------------------------------------------------------------------------------------
Intel Corp. (11) 55,400 7,253,938
-----------------------------------------------------------------------------------------------------------
Kyocera Corp. 14,000 870,854
-----------------------------------------------------------------------------------------------------------
LSI Logic Corp. (10)(11) 37,800 1,011,150
-----------------------------------------------------------------------------------------------------------
Nokia Corp., A Shares, Sponsored ADR (11) 23,000 1,325,375
-----------------------------------------------------------------------------------------------------------
Novellus Systems, Inc. (10)(11) 15,000 812,813
-----------------------------------------------------------------------------------------------------------
Proxima Corp. (10) 56,000 721,000
-----------------------------------------------------------------------------------------------------------
Xilinx, Inc. (10)(11) 18,200 669,988
------------
17,813,724
- ---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 1.8%
-----------------------------------------------------------------------------------------------------------
Airtouch Communications, Inc. (10) 72,000 1,818,000
-----------------------------------------------------------------------------------------------------------
Bay Networks, Inc. (10) 16,607 346,671
-----------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (10) 13,500 858,938
-----------------------------------------------------------------------------------------------------------
ECI Telecommunications Ltd. (11) 70,000 1,487,500
-----------------------------------------------------------------------------------------------------------
Kinnevik Investments AB Free, Series B 24,500 674,573
-----------------------------------------------------------------------------------------------------------
MCI Communications Corp. (11) 57,000 1,863,188
-----------------------------------------------------------------------------------------------------------
Newbridge Networks Corp. (10) 31,000 875,750
-----------------------------------------------------------------------------------------------------------
Tellabs, Inc. (10)(11) 19,200 722,400
------------
8,647,020
- ---------------------------------------------------------------------------------------------------------------
UTILITIES - 1.4%
- ---------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.3%
-----------------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 52,000 1,417,000
50
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
GAS UTILITIES - 0.3%
-----------------------------------------------------------------------------------------------------------
El Paso Natural Gas Co. 2,651 $ 133,876
-----------------------------------------------------------------------------------------------------------
Southwestern Energy Co. 92,000 1,391,500
------------
1,525,376
- ---------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES - 0.8%
-----------------------------------------------------------------------------------------------------------
BCE, Inc. (11) 28,000 1,337,000
-----------------------------------------------------------------------------------------------------------
SBC Communications, Inc. 16,000 828,000
-----------------------------------------------------------------------------------------------------------
U S West Communications Group 55,000 1,773,750
------------
3,938,750
------------
Total Common Stocks (Cost $165,892,959) 220,811,420
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 0.5%
-----------------------------------------------------------------------------------------------------------
Cyprus Amax Minerals Co., $4.00 Cv., Series A 24,000 1,287,000
-----------------------------------------------------------------------------------------------------------
K-III Communications Corp., Sr. Exchangeable, Series A 20,000 537,500
-----------------------------------------------------------------------------------------------------------
Pantry Pride, Inc., $14.875 Exchangeable, Series B 8,000 804,000
-----------------------------------------------------------------------------------------------------------
Time Warner, Inc., 10.25% Preferred, Series M (5) 1 1,090
------------
Total Preferred Stocks (Cost $2,661,833) 2,629,590
UNITS
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES - 0.0%
-----------------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts., Exp. 6/99 6,000 10,500
-----------------------------------------------------------------------------------------------------------
Gaylord Container Corp. Wts., Exp. 11/02 9,232 56,546
-----------------------------------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. Wts., Exp. 9/97 29,376 16,331
-----------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc. Wts., Exp. 11/99 (9) 1,000 50,000
-----------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc. Wts., Exp. 9/03 249 --
-----------------------------------------------------------------------------------------------------------
Terex Corp. Rts., Exp. 5/02 (9) 4,000 9,000
------------
Total Rights, Warrants and Certificates (Cost $28,557) 142,377
PRINCIPAL
AMOUNT(1)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 15.2%
-----------------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co.,
6.52%, dated 12/31/96, to be repurchased at $73,626,660
on 1/2/97, collateralized by U.S. Treasury Nts., 5.50%-
7.50%, 7/15/99-8/15/05, with a value of $75,287,498
(Cost $73,600,000) $ 73,600,000 73,600,000
-----------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $424,386,458) 101.3% 490,493,991
-----------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.3) (6,208,511)
------------ ------------
Net Assets 100.0% $484,285,480
------------ ------------
------------ ------------
</TABLE>
51
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
1. Principal amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
AUD - Australian Dollar IEP - Irish Punt
CAD - Canadian Dollar ITL - Italian Lira
DKK - Danish Krone NZD - New Zealand Dollar
FRF - French Franc PLZ - Polish Zloty
GBP - British Pound Sterling ZAR - South African Rand
HKD - Hong Kong Dollar
2. When-issued security to be delivered and settled after December 31, 1996.
3. For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
4. Represents the current interest rate for a variable rate security.
5. Interest or dividend is paid in kind.
6. Represents the current interest rate for an increasing rate security.
7. Denotes a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
8. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $4,062,694 or 0.84% of the Fund's
net assets, at December 31, 1996.
9. Identifies issues considered to be illiquid - See applicable note of
Notes to Financial Statements.
10. Non-income producing security.
11. A sufficient amount of securities has been designated to cover
outstanding written call options, as follows:
<TABLE>
SHARES
SUBJECT EXPIRATION EXERCISE PREMIUM MARKET VALUE
TO CALL DATE PRICE RECEIVED (NOTE 1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AMR Corp. 4,400 1/97 $ 95.00 $ 11,417 $ 2,750
Agouron Pharmaceuticals, Inc. 11,400 2/97 45.00 38,131 267,900
American Express Co. 7,600 7/97 60.00 11,646 25,650
American International Group, Inc. 2,400 2/97 100.00 8,6272 3,700
Atlantic Richfield Co. 2,800 7/97 145.00 6,040 6,475
BCE, Inc. 5,600 6/97 50.00 5,781 10,150
Bristol-Myers Squibb Co. 4,600 3/97 120.00 9,061 9,200
Chase Manhattan Corp. (New) 11,600 3/97 80.00 44,600 139,200
Citicorp 2,600 1/97 90.00 12,271 38,675
Citicorp 2,600 4/97 115.00 7,071 6,663
Computer Associates International, Inc. 9,000 1/97 55.00 28,979 5,063
Computer Associates International, Inc. 9,000 1/97 60.00 42,479 1,688
Dean Witter, Discover & Co. 4,600 4/97 70.00 9,975 12,938
Dean Witter, Discover & Co. 4,600 7/97 70.00 14,812 20,700
Disney (Walt) Co. 4,000 7/97 80.00 9,880 7,500
Dow Chemical Co. 2,000 3/97 90.00 3,815 750
ECI Telecommunications Ltd. 10,800 2/97 25.00 19,925 5,400
Eastman Kodak Co. 8,000 7/97 90.00 24,259 18,000
Eaton Corp. 3,200 7/97 75.00 5,504 7,000
Electronic Arts, Inc. 9,000 3/97 30.00 32,354 29,250
Electronic Arts, Inc. 11,900 6/97 40.00 26,417 19,338
Electronic Arts, Inc. 5,400 6/97 45.00 15,131 5,738
Federal Home Loan Mortgage Corp. 1,800 4/97 28.75 7,821 9,900
Federal Home Loan Mortgage Corp. 1,800 7/97 30.00 10,521 13,050
General Electric Co. 2,800 3/97 110.00 8,666 4,550
</TABLE>
52
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
11. Outstanding written call options (continued)
<TABLE>
SHARES
SUBJECT EXPIRATION EXERCISE PREMIUM MARKET VALUE
TO CALL DATE PRICE RECEIVED (NOTE 1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
General Motors Corp. 5,000 3/97 $ 60.00 $ 7,350 $ 4,688
Gymboree Corp. 10,000 1/97 35.00 13,450 --
Intel Corp. 11,000 1/97 90.00 34,044 457,875
Intel Corp. 11,000 4/97 135.00 56,043 126,500
International Business Machines Corp. 3,800 4/97 175.00 21,735 13,300
Kerr-McGee Corp. 2,400 7/97 75.00 4,728 6,900
Kimberly-Clark Corp. 2,600 7/97 100.00 12,597 12,350
King World Productions, Inc. 6,200 5/97 40.00 9,114 8,138
LSI Logic Corp. 7,400 7/97 35.00 20,127 12,950
MCI Communications Corp. 11,400 7/97 32.50 23,882 31,350
Manor Care, Inc. 4,800 4/97 40.00 6,456 27,600
Mattel, Inc. 6,400 7/97 35.00 6,608 4,800
Medtronic, Inc. 3,000 2/97 55.00 9,660 43,125
Medtronic, Inc. 3,000 7/97 70.00 11,910 12,000
Microsoft Corp. 9,800 1/97 62.50 43,952 198,450
Monsanto Co. 3,600 7/97 45.00 7,092 6,750
NationsBank Corp. 9,800 2/97 90.00 51,154 94,325
Nokia Corp., A Shares, Sponsored ADR 4,600 4/97 45.00 12,512 60,375
Nokia Corp., A Shares, Sponsored ADR 4,600 4/97 60.00 15,961 16,100
Novellus Systems, Inc. 3,000 7/97 65.00 18,284 12,000
Outback Steakhouse, Inc. 14,600 5/97 30.00 28,761 18,250
Philip Morris Cos., Inc. 4,200 6/97 110.00 18,773 41,474
Price/Costco, Inc. 11,600 4/97 25.00 14,152 23,925
Primadonna Resorts, Inc. 11,000 4/97 22.50 11,357 6,875
Procter & Gamble Co. 2,600 7/97 115.00 8,372 11,700
Royal Dutch Petroleum Co. 1,800 7/97 175.00 11,421 14,625
Seagate Technology 14,000 1/97 25.00 39,164 204,750
Seagate Technology 14,000 6/97 42.50 44,414 57,750
Sofamor Danek Group, Inc. 2,600 3/97 30.00 11,947 9,100
Structural Dynamics Research Corp. 30,100 2/97 22.50 54,576 22,574
Symantec Corp. 22,000 4/97 17.50 24,089 24,750
Tellabs, Inc. 5,200 6/97 45.00 30,146 16,250
Tenneco, Inc. (New) 5,500 8/97 50.00 8,772 8,936
Toys 'R' Us, Inc. 10,000 3/97 35.00 10,325 3,750
Toys 'R' Us, Inc. 9,800 6/97 40.00 15,018 4,900
United Healthcare Corp. 4,400 3/97 47.50 9,768 9,900
WellPoint Health Networks, Inc. 10,000 7/97 35.00 34,699 36,250
Western Atlas, Inc. 4,400 6/97 70.00 23,517 25,850
Xerox Corp. 5,000 1/97 55.00 10,615 2,187
Xilinx, Inc. 3,600 6/97 45.00 15,641 10,800
Xilinx, Inc. 3,600 6/97 50.00 7,767 6,750
---------- ----------
$1,235,136 $2,402,150
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Financial Statements.
53
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT(1) (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS - 0.9%
- ----------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion,
Zero Coupon, 36.92%, 4/3/97 (Cost $5,151,307) (2) MXP 41,760,000 $ 4,978,611
SHARES
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
COMMON STOCKS - 88.1%
- ----------------------------------------------------------------------------------------------------------
BASIC MATERIALS - 2.4%
- ----------------------------------------------------------------------------------------------------------
CHEMICALS - 0.7%
-----------------------------------------------------------------------------------------------------
Minerals Technologies, Inc. 100,000 4,100,000
- ----------------------------------------------------------------------------------------------------------
GOLD - 0.9%
-----------------------------------------------------------------------------------------------------
Newmont Mining Corp. 120,500 5,392,375
- ----------------------------------------------------------------------------------------------------------
METALS - 0.8%
-----------------------------------------------------------------------------------------------------
Cia de Minas Buenaventura SA, Sponsored ADR 46,000 787,750
-----------------------------------------------------------------------------------------------------
Cia Vale Do Rio Doce, Preference 31,000 596,674
-----------------------------------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold, Inc., Cl. B 107,000 3,196,625
--------------
4,581,049
- ----------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 12.6%
- ----------------------------------------------------------------------------------------------------------
AUTOS & HOUSING - 2.9%
-----------------------------------------------------------------------------------------------------
Brazil Realty SA, GDR (3)(4) 60,000 1,140,000
-----------------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA 1,028,807 3,303,052
-----------------------------------------------------------------------------------------------------
Mahindra & Mahindra Ltd., GDR (4) 200,000 2,350,000
-----------------------------------------------------------------------------------------------------
Porsche AG, Preference (3) 9,750 8,699,093
-----------------------------------------------------------------------------------------------------
Solidere, GDR (3) 100,000 1,145,000
--------------
16,637,145
- ----------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 4.0%
-----------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 275,000 19,641,164
-----------------------------------------------------------------------------------------------------
Resorts World Berhad 770,000 3,506,228
--------------
23,147,392
- ----------------------------------------------------------------------------------------------------------
MEDIA - 0.8%
-----------------------------------------------------------------------------------------------------
News Corp. Ltd., ADR 150,000 3,131,250
-----------------------------------------------------------------------------------------------------
Reuters Holdings plc, Series B, ADR 20,000 1,530,000
--------------
4,661,250
- ----------------------------------------------------------------------------------------------------------
RETAIL: GENERAL - 0.2%
-----------------------------------------------------------------------------------------------------
PT Matahari Putra Prima 1,000,000 1,164,021
- ----------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 4.7%
-----------------------------------------------------------------------------------------------------
adidas AG 25,000 2,157,537
-----------------------------------------------------------------------------------------------------
Giordano International Ltd. 2,100,000 1,791,856
-----------------------------------------------------------------------------------------------------
Jusco Co. 85,000 2,878,005
-----------------------------------------------------------------------------------------------------
Reebok International Ltd. 80,000 3,360,000
-----------------------------------------------------------------------------------------------------
Wella AG 24,305 12,932,310
-----------------------------------------------------------------------------------------------------
Wolford AG 33,600 4,060,690
--------------
27,180,398
- ----------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS - 15.5%
- ----------------------------------------------------------------------------------------------------------
BEVERAGES - 2.3%
-----------------------------------------------------------------------------------------------------
Allied Domecq plc 344,400 2,702,005
-----------------------------------------------------------------------------------------------------
Hellenic Bottling Co., SA 35,000 1,121,458
-----------------------------------------------------------------------------------------------------
Panamerican Beverages, Inc., Cl. A 100,000 4,687,500
</TABLE>
54
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BEVERAGES (CONTINUED)
-----------------------------------------------------------------------------------------------------
South African Breweries Ltd. 178,900 $ 4,532,265
---------------
13,043,228
- ----------------------------------------------------------------------------------------------------------
FOOD - 0.6%
-----------------------------------------------------------------------------------------------------
Dairy Farm International Holdings Ltd. 1,186,000 954,730
-----------------------------------------------------------------------------------------------------
Disco SA, Sponsored ADR (3) 93,200 2,632,900
---------------
3,587,630
- ----------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 8.2%
-----------------------------------------------------------------------------------------------------
Amgen, Inc. (3) 100,000 5,437,500
-----------------------------------------------------------------------------------------------------
Astra AB Free, Series A 100,000 4,935,541
-----------------------------------------------------------------------------------------------------
BioChem Pharma, Inc. (3) 125,000 6,281,250
-----------------------------------------------------------------------------------------------------
Genzyme Corp. (3) 220,800 4,802,400
-----------------------------------------------------------------------------------------------------
Gilead Sciences, Inc. (3) 72,700 1,817,500
-----------------------------------------------------------------------------------------------------
Glaxo Wellcome plc, Sponsored ADR 400,000 12,700,000
-----------------------------------------------------------------------------------------------------
Johnson & Johnson 23,000 1,144,250
-----------------------------------------------------------------------------------------------------
Novartis AG (3) 4,266 4,870,541
-----------------------------------------------------------------------------------------------------
Sanofi SA 60,000 5,955,293
---------------
47,944,275
- ----------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 3.0%
-----------------------------------------------------------------------------------------------------
Gehe AG 69,990 4,489,307
-----------------------------------------------------------------------------------------------------
Rhoen-Klinikum AG, Preference, Non-vtg. 4,820 476,962
-----------------------------------------------------------------------------------------------------
United States Surgical Corp. 315,500 12,422,812
---------------
17,389,081
- ----------------------------------------------------------------------------------------------------------
TOBACCO - 1.4%
-----------------------------------------------------------------------------------------------------
B.A.T. Industries plc 600,000 4,979,692
-----------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 20,000 2,252,500
-----------------------------------------------------------------------------------------------------
PT Gudang Garam (3) 79,500 343,238
-----------------------------------------------------------------------------------------------------
PT Hanjaya Mandala Sampoerna (3) 100,000 533,333
---------------
8,108,763
- ----------------------------------------------------------------------------------------------------------
ENERGY - 6.4%
- ----------------------------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 2.9%
-----------------------------------------------------------------------------------------------------
Coflexip SA, Sponsored ADR (3) 105,000 2,756,250
-----------------------------------------------------------------------------------------------------
Global Marine, Inc. (3) 117,500 2,423,437
-----------------------------------------------------------------------------------------------------
Transocean Offshore, Inc. 135,459 8,483,120
-----------------------------------------------------------------------------------------------------
Western Atlas, Inc. (3) 49,300 3,494,138
---------------
17,156,945
- ----------------------------------------------------------------------------------------------------------
OIL-INTEGRATED - 3.5%
-----------------------------------------------------------------------------------------------------
British Petroleum Co. plc, ADR 25,442 3,596,863
-----------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd. (3) 565,600 4,126,500
-----------------------------------------------------------------------------------------------------
Lukoil Oil Co., Sponsored ADR 66,900 3,005,502
-----------------------------------------------------------------------------------------------------
Petroleo Brasileiro SA, Preference 34,132,000 5,436,324
-----------------------------------------------------------------------------------------------------
Renaissance Energy Ltd. (3) 45,800 1,558,797
-----------------------------------------------------------------------------------------------------
Unocal Corp. 64,000 2,600,000
---------------
20,323,986
- ----------------------------------------------------------------------------------------------------------
FINANCIAL - 17.1%
- ----------------------------------------------------------------------------------------------------------
BANKS - 11.6%
-----------------------------------------------------------------------------------------------------
ABN Amro Holding NV 70,000 4,548,668
-----------------------------------------------------------------------------------------------------
Banco Bradesco SA, Preference 455,260,951 3,299,142
-----------------------------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA, Sponsored ADR 63,250 1,739,375
</TABLE>
55
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BANKS (CONTINUED)
-----------------------------------------------------------------------------------------------------
Banco Latinoamericano de Exportaciones SA, Cl. E 80,000 $ 4,060,000
-----------------------------------------------------------------------------------------------------
Banque Libanaise Pour Le Comm SAL, GDR, Cl. B (3) 50,000 607,500
-----------------------------------------------------------------------------------------------------
Barclays plc 300,414 5,148,666
-----------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 52,000 4,641,000
-----------------------------------------------------------------------------------------------------
Cie Financiere de Paribas, Series A 180,000 12,149,489
-----------------------------------------------------------------------------------------------------
Citicorp 45,000 4,635,000
-----------------------------------------------------------------------------------------------------
HSBC Holdings plc 154,836 3,312,912
-----------------------------------------------------------------------------------------------------
Industrial Credit & Investment Corp. of India Ltd.
(The), GDR (3)(4) 162,500 1,584,375
-----------------------------------------------------------------------------------------------------
Industrial Finance Corp. 758,100 2,054,909
-----------------------------------------------------------------------------------------------------
Merita Ltd., Cl. A (3) 2,000,000 6,205,237
-----------------------------------------------------------------------------------------------------
Northern Trust Corp. 37,400 1,355,750
-----------------------------------------------------------------------------------------------------
PT Panin Bank 387,000 442,286
-----------------------------------------------------------------------------------------------------
Societe Generale 110,000 11,870,191
-------------
67,654,500
- ----------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 2.9%
-----------------------------------------------------------------------------------------------------
American Express Co. 24,500 1,384,250
-----------------------------------------------------------------------------------------------------
First NIS Regional Fund (5) 180,000 2,115,000
-----------------------------------------------------------------------------------------------------
ING Groep NV 90,432 3,251,865
-----------------------------------------------------------------------------------------------------
MBNA Corp. 55,000 2,282,500
-----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 30,000 2,445,000
-----------------------------------------------------------------------------------------------------
Promise Co. Ltd. (3) 40,000 1,964,332
-----------------------------------------------------------------------------------------------------
Takefuji Corp. (3) 50,000 3,596,967
-------------
17,039,914
- ----------------------------------------------------------------------------------------------------------
INSURANCE - 2.6%
-----------------------------------------------------------------------------------------------------
American International Group, Inc. 35,000 3,788,750
-----------------------------------------------------------------------------------------------------
National Mutual Asia Ltd. 2,634,000 2,502,897
-----------------------------------------------------------------------------------------------------
Reinsurance Australia Corp. Ltd. 2,283,000 8,885,089
-------------
15,176,736
- ----------------------------------------------------------------------------------------------------------
INDUSTRIAL - 11.3%
- ----------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.4%
-----------------------------------------------------------------------------------------------------
FORE Systems, Inc. (3) 38,000 1,249,250
-----------------------------------------------------------------------------------------------------
Ushio, Inc. 100,000 1,085,552
-------------
2,334,802
- ----------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 5.6%
- ----------------------------------------------------------------------------------------------------------
Adecco SA 17,000 4,254,048
-----------------------------------------------------------------------------------------------------
Boskalis Westminster 150,000 3,035,143
-----------------------------------------------------------------------------------------------------
IHC Caland NV 45,000 2,567,731
-----------------------------------------------------------------------------------------------------
PT Citra Marga Nusaphala Persada 2,331,000 1,825,333
-----------------------------------------------------------------------------------------------------
Rentokil Group plc 700,000 5,276,041
-----------------------------------------------------------------------------------------------------
VBH Holding AG 247,000 5,489,391
-----------------------------------------------------------------------------------------------------
WPP Group plc 2,290,100 9,964,274
-------------
32,411,961
- ----------------------------------------------------------------------------------------------------------
MANUFACTURING - 4.1%
-----------------------------------------------------------------------------------------------------
Bic Corp. 24,200 3,621,572
-----------------------------------------------------------------------------------------------------
Bobst Bearers AG 2,000 2,696,018
-----------------------------------------------------------------------------------------------------
Bombardier, Inc., Cl. B 250,000 4,614,589
-----------------------------------------------------------------------------------------------------
Hutchison Whampoa Ltd. 751,000 5,898,290
</TABLE>
56
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MANUFACTURING (CONTINUED)
Powerscreen International plc 730,100 $ 7,066,238
------------
23,896,707
- ----------------------------------------------------------------------------------------------------------
TRANSPORTATION - 1.2%
-----------------------------------------------------------------------------------------------------
Brambles Industries Ltd. 180,000 3,509,811
-----------------------------------------------------------------------------------------------------
Guangshen Railway Co. Ltd., Sponsored ADR (3) 180,000 3,712,500
------------
7,222,311
- ----------------------------------------------------------------------------------------------------------
TECHNOLOGY - 16.4%
- ----------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 1.7%
-----------------------------------------------------------------------------------------------------
Rolls-Royce plc 2,210,075 9,729,659
- ----------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 6.4%
-----------------------------------------------------------------------------------------------------
Cap Gemini SA (3) 205,000 9,893,653
-----------------------------------------------------------------------------------------------------
Computer Associates International, Inc. 60,000 2,985,000
-----------------------------------------------------------------------------------------------------
First Data Corp. 174,236 6,359,614
-----------------------------------------------------------------------------------------------------
Ines Corp. 42,000 611,528
-----------------------------------------------------------------------------------------------------
Microsoft Corp. (3) 70,000 5,783,750
-----------------------------------------------------------------------------------------------------
Misys plc 201,600 3,836,737
-----------------------------------------------------------------------------------------------------
Oracle Corp. (3) 117,900 4,922,325
-----------------------------------------------------------------------------------------------------
SAP AG, Preference 20,000 2,748,670
------------
37,141,277
- ----------------------------------------------------------------------------------------------------------
ELECTRONICS - 3.7%
-----------------------------------------------------------------------------------------------------
Advanced Semiconductor Engineering, Inc., GDR 102,420 1,003,716
-----------------------------------------------------------------------------------------------------
Intel Corp. 20,000 2,618,750
-----------------------------------------------------------------------------------------------------
Keyence Corp. 25,000 3,080,038
-----------------------------------------------------------------------------------------------------
SGS-Thomson Microelectronics NV (3) 200,000 14,000,000
-----------------------------------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. (3)(5) 512,000 1,051,926
------------
21,754,430
- ----------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 4.6%
-----------------------------------------------------------------------------------------------------
Ascend Communications, Inc. (3) 18,800 1,167,950
-----------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (3) 74,600 4,746,425
-----------------------------------------------------------------------------------------------------
Korea Mobile Telecommunications Corp. 3,000 3,029,734
-----------------------------------------------------------------------------------------------------
Millicom International Cellular SA (3) 90,000 2,891,250
-----------------------------------------------------------------------------------------------------
Millicom, Inc. (3) 25,000 --
-----------------------------------------------------------------------------------------------------
QUALCOMM, Inc. (3) 130,700 5,211,663
-----------------------------------------------------------------------------------------------------
Telecom Italia Mobile SpA 1,819,700 4,600,230
-----------------------------------------------------------------------------------------------------
Telecom Italia SpA 2,000,000 5,194,463
------------
26,841,715
- ----------------------------------------------------------------------------------------------------------
UTILITIES - 6.4%
- ----------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.7%
-----------------------------------------------------------------------------------------------------
Empresa Nacional de Electricidad SA 60,000 4,269,542
- ----------------------------------------------------------------------------------------------------------
GAS UTILITIES - 0.3%
-----------------------------------------------------------------------------------------------------
Gazprom, ADR (3)(4) 110,000 1,933,250
- ----------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES - 5.4%
-----------------------------------------------------------------------------------------------------
CPT Telefonica del Peru SA, Cl. B 3,400,031 6,362,708
-----------------------------------------------------------------------------------------------------
PLD Telekom, Inc. (3) 159,900 979,388
-----------------------------------------------------------------------------------------------------
Portugal Telecom SA 144,000 4,099,709
-----------------------------------------------------------------------------------------------------
SBC Communications, Inc. 128,500 6,649,875
</TABLE>
57
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKLET VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELEPHONE UTILITIES (CONTINUED)
-----------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA, Preference 172,548,000 $ 13,284,509
-------------
31,376,189
-------------
Total Common Stocks (Cost $436,933,605) 513,200,531
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 1.7%
- ----------------------------------------------------------------------------------------------------------
Marschollek, Lautenschlaeger und Partner-VO,
Non-vtg. Preferred Stock (Cost $5,017,476) 70,257 9,755,960
UNITS
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES - 0.0%
- ----------------------------------------------------------------------------------------------------------
American Satellite Network, Inc. Wts., Exp. 6/99
(Cost $0) 6,250 --
PRINCIPAL
AMOUNT(1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 10.4%
- ----------------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co.,
6.52%, dated 12/31/96, to be repurchased at $60,521,914
on 1/2/97, collateralized by U.S. Treasury Nts., 5.50%-7.50%,
7/15/99-8/15/05, with a value of $61,887,142
(Cost $60,500,000) $ 60,500,000 60,500,000
-----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $507,602,388) 101.1% 588,435,102
-----------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.1) (6,354,913)
------------- --------------
NET ASSETS 100.0% $ 582,080,189
------------- --------------
------------- --------------
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those
denoted in the following currency - MXP - Mexican Peso
2. For zero coupon bonds, the interest rate shown is the effective
yield on the date of purchase.
3. Non-income producing security.
4. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These
securities have been determined to be liquid under guidelines
established by the Board of Trustees. These securities amount to
$7,007,625 or 1.21% of the Fund's net assets, at December 31, 1996.
5. Identifies issues considered to be illiquid - See applicable note
of Notes to Financial Statements.
Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended December
31, 1996. There were no affiliate securities held as of December 31,
1996. Transactions during the period in which the the issuer was an
affiliate are as follows:
<TABLE>
BALANCE BALANCE
DECEMBER 31, 1995 GROSS ADDITIONS GROSS REDUCTIONS DECEMBER 31, 1996 DIVIDEND
- ----------------------------------------------------------------------------------------------------------
SHARES COST SHARES COST SHARES COST SHARES COST INCOME
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmavit GDS 114,000 $1,401,000 -- $ -- 114,000 $1,401,000 -- $ -- $ --
</TABLE>
58
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
Distribution of investments by country of issue, as a percentage of
total investments at value, is as follows:
COUNTRY MARKET VALUE PERCENT
----------------------------------------------------------
United States $ 186,544,759 31.7%
----------------------------------------------------------
Great Britain 66,530,176 11.3
----------------------------------------------------------
France 60,246,448 10.2
----------------------------------------------------------
Germany 46,749,230 7.9
----------------------------------------------------------
Japan 32,857,584 5.6
----------------------------------------------------------
Brazil 23,756,648 4.0
----------------------------------------------------------
Canada 16,581,137 2.8
----------------------------------------------------------
Australia 15,526,150 2.6
----------------------------------------------------------
Hong Kong 14,460,685 2.5
----------------------------------------------------------
The Netherlands 13,403,408 2.3
----------------------------------------------------------
Switzerland 11,820,607 2.0
----------------------------------------------------------
Italy 9,794,693 1.7
----------------------------------------------------------
Mexico 9,666,111 1.6
----------------------------------------------------------
Russia 8,033,140 1.4
----------------------------------------------------------
Argentina 7,675,327 1.3
----------------------------------------------------------
Peru 7,150,458 1.2
----------------------------------------------------------
Finland 6,205,237 1.1
----------------------------------------------------------
Sweden 4,935,541 0.8
----------------------------------------------------------
South Africa 4,532,265 0.8
----------------------------------------------------------
Indonesia 4,308,211 0.7
----------------------------------------------------------
Spain 4,269,542 0.7
----------------------------------------------------------
Portugal 4,099,709 0.7
----------------------------------------------------------
Austria 4,060,690 0.7
----------------------------------------------------------
Panama 4,060,000 0.7
----------------------------------------------------------
India 3,934,375 0.7
----------------------------------------------------------
China 3,712,500 0.6
----------------------------------------------------------
Malaysia 3,506,228 0.6
----------------------------------------------------------
Korea, Republic of (South) 3,029,734 0.5
----------------------------------------------------------
Taiwan 2,055,642 0.4
----------------------------------------------------------
Thailand 2,054,909 0.4
----------------------------------------------------------
Lebanon 1,752,500 0.3
----------------------------------------------------------
Greece 1,121,458 0.2
------------- -------
Total $ 588,435,102 100.0%
------------- -------
------------- -------
See accompanying Notes to Financial Statements.
59
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 21.2%
- ----------------------------------------------------------------------------------------------------------------
- ---------
GOVERNMENT AGENCY - 18.4%
- ----------------------------------------------------------------------------------------------------------------
- ---------
FHLMC/FNMA/SPONSORED - 9.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Federal Home Loan Mortgage Corp., Collateralized Mtg.
Obligations, Gtd. Multiclass Mtg. Participation Certificates,
Series 176, Cl. F, 8.95%, 3/15/20 $ 9,579 $
9,582
- ----------------------------------------------------------------------------------------------------------------
- -------
Federal National Mortgage Assn.:
7.50%, 1/15/27 (2) 10,000,000
9,993,800
7.50%, 8/1/25 1,056,334
1,057,296
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Trust 1992-103, Cl. JB, 10.50%, 11/25/20 130,000
146,128
Series 1994-83, Cl. Z, 7.50%, 6/25/24 192,884
179,803
- ------------
11,386,609
- ----------------------------------------------------------------------------------------------------------------
- ---------
GNMA/GUARANTEED - 8.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
Government National Mortgage Assn.:
6%, 11/20/25 709,161
725,117
7.50%, 8/15/25 4,821,287
4,820,371
8%, 11/15/25 2,956,081
3,020,376
8%, 5/15/26 1,912,554
1,952,374
- ------------
10,518,238
- ----------------------------------------------------------------------------------------------------------------
- ---------
PRIVATE - 2.8%
- ----------------------------------------------------------------------------------------------------------------
- ---------
COMMERCIAL - 1.3%
- ----------------------------------------------------------------------------------------------------------------
- -------
Criimi Mae Financial Corp., Collateralized Mtg.
Obligations, Trust I, Cl. A-2, 7.56%, 8/30/05 (3) 100,000
99,813
- ----------------------------------------------------------------------------------------------------------------
- -------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-
Through Certificates, Series 1994-C1, Cl. 2-G, 8.70%, 9/25/25 (4) 153,594
156,906
- ----------------------------------------------------------------------------------------------------------------
- -------
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through
Certificates, Series 1995-C2, Cl. D, 7.989%, 6/15/21 (3) 449,587
456,050
- ----------------------------------------------------------------------------------------------------------------
- -------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-
Through Certificates, Series 1996-C1, Cl. F, 7.51%, 2/15/28 (4) 162,744
109,445
-----------------------------------------------------------------------------------------------------------------------
NationsCommercial Corp., NB Commercial Mtg. Pass-
Through Certificates, Series-DMC, Cl. C, 8.921%, 8/12/11 (4) 200,000
203,625
- ----------------------------------------------------------------------------------------------------------------
- -------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 123,327
124,561
Series 1993-C1, Cl. D, 9.45%, 5/25/24 91,000
93,624
Series 1994-C2, Cl. E, 8%, 4/25/25 221,334
220,713
- ----------------------------------------------------------------------------------------------------------------
- -------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1995-C4, Cl. E, 8.791%, 6/25/26 (3)(4) 46,290
39,318
- ------------
1,504,055
- ----------------------------------------------------------------------------------------------------------------
- ---------
MULTI-FAMILY - 1.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
Mortgage Capital Funding, Inc., Multifamily Mtg. Pass-
Through Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06 (4) 800,000
648,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1991-M6, Cl. B4, 7.012%, 6/25/21 (3) 31,767
31,306
</TABLE>
60
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
MULTI-FAMILY (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
- -------
Salomon Brothers Mortgage Securities VII, Series 1996-CL,
Cl. F, 9.185%, 1/20/28 (3) $ 1,000,000 $
746,250
- ------------
1,426,056
- ----------------------------------------------------------------------------------------------------------------
- ---------
RESIDENTIAL - 0.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
Salomon Brothers Mortgage Securities VII, Series 1996-B,
Cl. 1, 7.136%, 4/25/26 397,643
238,089
- ----------------------------------------------------------------------------------------------------------------
- ---------
OTHER - 0.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
Nomura Asset Securities Corp., Series 1994-MD1, Cl. B2,
8.421%, 3/15/18 (3)(5) 100,000
87,734
- ------------
Total Mortgage-Backed Obligations (Cost $24,954,103)
25,160,781
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
U.S. GOVERNMENT OBLIGATIONS - 21.7%
- ----------------------------------------------------------------------------------------------------------------
- -------
U.S. Treasury Bonds:
11.625%, 11/15/02 (6) 4,300,000
5,422,033
13.125%, 5/15/01 2,800,000
3,535,877
6.875%, 8/15/25 (7) 1,200,000
1,223,251
8.125%, 8/15/19 (7) 163,000
188,418
- ----------------------------------------------------------------------------------------------------------------
- -------
U.S. Treasury Nts.:
6%, 2/15/26 (6) 1,330,000
1,210,301
6.25%, 10/31/01 (6) 12,955,000
12,967,151
6.25%, 2/15/03 1,250,000
1,249,220
- -----------
Total U.S. Government Obligations (Cost $26,071,407)
25,796,251
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
FOREIGN GOVERNMENT OBLIGATIONS - 32.4%
- ----------------------------------------------------------------------------------------------------------------
- ---------
ARGENTINA - 2.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Duedas, Series I, 3.414%, 4/1/01 (3)(8) ARP 109,529
94,595
Bonds, Bonos de Consolidacion de Deudas, Series I, 5.375%, 4/1/01 (3)(8) 1,121,663
1,059,226
Discount Bonds, 6.375%, 3/31/23 (3) 1,180,000
908,600
Par Bonds, 5.25%, 3/31/23 (9) 1,260,000
795,375
- ----------------------------------------------------------------------------------------------------------------
- -------
Banco Hipotecario Nacional (Argentina) Medium-Term Nts., 10.625%, 8/7/06 (6) 400,000
415,000
- ------------
3,272,796
- ----------------------------------------------------------------------------------------------------------------
- ---------
AUSTRALIA - 3.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Australia (Commonwealth of) Bonds:
9.50%, 8/15/03 AUD 920,000
817,925
Series 399, 6.25%, 3/15/99 AUD 1,550,000
1,226,958
- ----------------------------------------------------------------------------------------------------------------
- -------
Queensland Treasury Corp.:
Exchangeable Gtd. Nts., 8%, 8/14/01 AUD 603,000
496,896
Gtd. Nts., 10.50%, 5/15/03 AUD 175,000
161,526
- ----------------------------------------------------------------------------------------------------------------
- -------
Treasury Corp. of Victoria Gtd. Bonds, 12.50%, 10/15/03 AUD 510,000
515,654
- ----------------------------------------------------------------------------------------------------------------
- -------
Western Australia Treasury Corp. Gtd. Bonds, 10%, 7/15/05 AUD 1,120,000
1,026,616
- ------------
4,245,575
</TABLE>
61
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
BRAZIL - 1.4%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Banco Estado Minas Gerais, 8.25%, 2/10/00 $ 250,000 $
241,406
- ----------------------------------------------------------------------------------------------------------------
- -------
Brazil (Federal Republic of) Eligible Interest Bonds, 6.50%, 4/15/06 (3) 1,650,000
1,439,625
- ----------------------------------------------------------------------------------------------------------------
- -------
Telecomunicacoes Brasileiras SA Medium-Term Nts., 11.30%, 12/9/99 (3) 10,000
10,500
- ------------
1,691,531
- ----------------------------------------------------------------------------------------------------------------
- ---------
BULGARIA - 0.1%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/8/12 (9) 305,000
117,234
Interest Arrears Bonds, 6.688%, 7/28/11 (3) 20,000
10,350
- ------------
127,584
- ----------------------------------------------------------------------------------------------------------------
- ---------
CANADA - 6.3%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Canada (Government of) Bonds:
11.75%, 2/1/03 CAD 910,000
863,876
7%, 12/1/06 CAD 1,620,000
1,235,696
8.75%, 12/1/05 CAD 640,000
544,338
9.75%, 12/1/01 CAD 540,000
465,183
9.75%, 6/1/01 CAD 2,905,000
2,480,218
Series A-33, 11.50%, 9/1/00 CAD 260,000
229,674
Series A-76, 9%, 6/1/25 CAD 1,200,000
1,080,168
- ----------------------------------------------------------------------------------------------------------------
- -------
Ontario, Canada (Province of) Bonds, 8.25%, 12/1/05 CAD 700,000
570,279
- ------------
7,469,432
- ----------------------------------------------------------------------------------------------------------------
- ---------
COLOMBIA - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Financiera Energetica Nacional SA Nts., 9.375%, 6/15/06 500,000
533,563
- ----------------------------------------------------------------------------------------------------------------
- ---------
DENMARK - 1.1%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK 4,000,000
752,682
8%, 3/15/06 DKK 2,705,000
504,416
- ------------
1,257,098
- ----------------------------------------------------------------------------------------------------------------
- ---------
FINLAND - 0.2%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Finland (Republic of) Bonds, 7.25%, 4/18/06 FIM 1,000,000
232,709
- ----------------------------------------------------------------------------------------------------------------
- ---------
GERMANY - 2.7%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Germany (Republic of) Bonds, Series 94, 6.25%, 1/4/24 DEM 5,190,000
3,196,289
- ----------------------------------------------------------------------------------------------------------------
- ---------
GREAT BRITAIN - 1.7%
- ----------------------------------------------------------------------------------------------------------------
- ---------
United Kingdom Treasury:
Bonds, 10%, 9/8/03 GBP 500,000
971,592
Nts.:
12.50%, 11/21/05 GBP 158,000
342,885
13%, 7/14/00 GBP 200,000
403,090
8%, 6/10/03 GBP 185,000
327,006
- ------------
2,044,573
- ----------------------------------------------------------------------------------------------------------------
- ---------
INDONESIA - 0.3%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Wijaya Karya, Zero Coupon Negotiable Promissory Nts., 14.788%, 12/9/97 (10) IDR 1,000,000,000
370,636
- ----------------------------------------------------------------------------------------------------------------
- ---------
IRELAND - 0.2%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 100,000
196,078
</TABLE>
62
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
ITALY - 0.9%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 10.50%:
4/1/00 ITL 550,000,000 $
403,527
7/15/00 ITL 560,000,000
413,521
7/15/98 ITL 380,000,000
264,722
- ------------
1,081,770
- ----------------------------------------------------------------------------------------------------------------
- ---------
JORDAN - 0.3%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Hashemite Kingdom of Jordan Disc. Bonds, 6.50%,
12/23/23 (3) 500,000
386,875
- ----------------------------------------------------------------------------------------------------------------
- ---------
MALAYSIA - 0.2%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Petronas Carigali, Zero Coupon Nts., 7.146%, 5/12/97 (10) MYR 500,000
193,032
- ----------------------------------------------------------------------------------------------------------------
- ---------
MEXICO - 2.5%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Banco Nacional de Comercio Exterior SNC International
Finance BV:
Gtd. Bonds, 10.629%, 6/23/97 (3)(5) 250,000
255,938
Gtd. Registered Bonds, 11.25%, 5/30/06 275,000
300,094
- ----------------------------------------------------------------------------------------------------------------
- -------
Bonos de la Tesoreria de la Federacion, Zero Coupon:
28.333%, 1/30/97 (10) MXP 1,300,000
161,822
30.061%, 2/13/97 (10) MXP 12,358,200
1,521,614
- ----------------------------------------------------------------------------------------------------------------
- -------
United Mexican States Bonds:
10.375%, 1/29/03 DEM 725,000
507,370
16.50%, 9/1/08 (4) GBP 20,000
46,251
Petroleos Mexicanos Gtd. Unsec. Unsub. Nts., 7.875%, 3/2/99 CAD 200,000
149,746
- ------------
2,942,835
- ----------------------------------------------------------------------------------------------------------------
- ---------
NEW ZEALAND - 2.1%
- ----------------------------------------------------------------------------------------------------------------
- ---------
New Zealand (Government of):
Bonds, 10%, 7/15/97 NZD 2,593,000
1,856,002
Bonds, 8%, 11/15/06 NZD 670,000
499,798
Index Linked Bonds, 4.60%, 2/15/16 (3) NZD 140,000
96,914
- ------------
2,452,714
- ----------------------------------------------------------------------------------------------------------------
- ---------
PANAMA - 0.1%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Panama (Republic of) Interest Reduction Bonds, 3.50%, 7/17/14 (9) 270,000
187,904
- ----------------------------------------------------------------------------------------------------------------
- ---------
SPAIN - 2.0%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado:
10.30%, 6/15/02 ESP 59,100,000
536,178
10.50%, 10/30/03 ESP 59,550,000
557,527
11.45%, 8/30/98 ESP 12,000,000
100,524
12.25%, 3/25/00 ESP 131,000,000
1,197,008
- ------------
2,391,237
- ----------------------------------------------------------------------------------------------------------------
- ---------
SUPRANATIONAL - 0.2%
- ----------------------------------------------------------------------------------------------------------------
- ---------
International Bank for Reconstruction & Development Bonds, 12.50%, 7/25/97 NZD 325,000
235,508
</TABLE>
63
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
SWEDEN - 1.8%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Sweden (Kingdom of) Bonds:
Series 1030, 13%, 6/15/01 SEK 6,700,000 $
1,265,136
Series 1033, 10.25%, 5/5/03 SEK 3,100,000
552,523
Series 1035, 6%, 2/9/05 SEK 2,100,000
298,046
- ------------
2,115,705
- ----------------------------------------------------------------------------------------------------------------
- ---------
VENEZUELA - 1.5%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Venezuela (Republic of):
Collateralized Par Bonds, Series W-A, 6.75%, 3/31/20 500,000
383,750
Disc. Bonds, Series DL, 6.50%, 12/18/07 (3) 250,000
220,625
Front-Loaded Interest Reduction Bonds, Series A, 6.625%, 3/31/07 (3) 1,100,000
983,125
New Money Bonds, Series A, 6.625%, 12/18/05 (3) 250,000
223,047
- ------------
1,810,547
- ------------
Total Foreign Government Obligations (Cost $37,225,474)
38,435,991
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
LOAN PARTICIPATIONS - 0.7%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Colombia (Republic of) 1989-1990 Integrated Loan Facility
Bonds, 6.563%, 7/1/01 (3)(4) 214,320
204,676
- ----------------------------------------------------------------------------------------------------------------
- -------
Jamaica (Government of) 1990 Refinancing Agreement Nts.:
Tranche A, 5.531%, 10/16/00 (3)(4) 62,500
60,703
Tranche B, 6.312%, 11/15/04 (3)(4) 150,000
129,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Morocco (Kingdom of) Loan Participation Agreement:
Tranche A, 6.437%, 1/1/09 (3) 421,000
343,246
Tranche B, 6.437%, 1/1/04 (3) 44,117
41,181
- ----------------------------------------------------------------------------------------------------------------
- -------
United Mexican States, Combined Facility 3, Loan
Participation Agreement, Tranche A, 6.437%, 9/20/97 (3)(4) 47,680
42,197
- ------------
Total Loan Participations (Cost $766,570)
821,003
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
CORPORATE BONDS AND NOTES - 23.5%
- ----------------------------------------------------------------------------------------------------------------
- ---------
BASIC INDUSTRY - 3.0%
- ----------------------------------------------------------------------------------------------------------------
- ---------
CHEMICALS - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
ISP Holdings, Inc., 9% Sr. Nts., 10/15/03 (5) 150,000
153,000
- ----------------------------------------------------------------------------------------------------------------
- -------
NL Industries, Inc., 0%/13% Sr. Sec. Disc. Nts., 10/15/05 (11) 200,000
173,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Tri Polyta Finance BV, 11.375% Gtd. Sec. Nts., 12/1/03 200,000
209,000
- ------------
535,500
- ----------------------------------------------------------------------------------------------------------------
- ---------
METALS/MINING - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts., 9/1/03 200,000
219,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06 200,000
204,000
- ------------
423,500
- ----------------------------------------------------------------------------------------------------------------
- ---------
PAPER - 1.7%
- ----------------------------------------------------------------------------------------------------------------
- -------
APP International Finance Co. BV, 11.75% Gtd. Sec. Nts., 10/1/05 200,000
214,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Asia Pulp & Paper International Finance Co., Zero Coupon
Asian Currency Nts., 15.146%, 12/4/97 (10) IDR 1,400,000,000
514,126
- ----------------------------------------------------------------------------------------------------------------
- -------
Florida Coast Paper Co. LLC, 12.75% First Mtg. Nts., 6/1/03 130,000
141,375
</TABLE>
64
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
PAPER (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
- ---------
Indah Kiat International Finance Co. BV:
11.875% Sr. Sec. Gtd. Nts., 6/15/02 $ 100,000 $
109,375
12.50% Sr. Sec. Gtd. Nts., Series C, 6/15/06 250,000
276,562
- ----------------------------------------------------------------------------------------------------------------
- -------
Repap New Brunswick, Inc., 10.625% Second Priority Sr. Sec.
Nts., 4/15/05 300,000
315,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Riverwood International Corp., 10.25% Sr. Nts., 4/1/06 200,000
198,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Stone Container Corp., 10.75% First Mtg. Nts., 10/1/02 190,000
200,925
- ------------
1,969,613
- ----------------------------------------------------------------------------------------------------------------
- ---------
STEEL - 0.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 (5) 250,000
256,875
- ----------------------------------------------------------------------------------------------------------------
- -------
Gulf States Steel, Inc. (Alabama), 13.50% First Mtg. Nts.,
Series B, 4/15/03 200,000
190,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Jorgensen (Earle M.) Co., 10.75% Sr. Nts., 3/1/00 50,000
51,250
- ----------------------------------------------------------------------------------------------------------------
- -------
WCI Steel, Inc., 10% Sr. Nts., 12/1/04 (5) 100,000
102,500
- ------------
600,625
- ----------------------------------------------------------------------------------------------------------------
- ---------
CONSUMER RELATED - 3.2%
- ----------------------------------------------------------------------------------------------------------------
- ---------
CONSUMER PRODUCTS - 0.9%
- ----------------------------------------------------------------------------------------------------------------
- -------
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 12.712%, 5/27/98 (10) 150,000
125,812
- ----------------------------------------------------------------------------------------------------------------
- -------
Fletcher Challenge Industries Ltd., 10% Cv. Sub. Unsec. Nts., 4/30/05 NZD 60,000
45,468
- ----------------------------------------------------------------------------------------------------------------
- -------
Fletcher Challenge Ltd., 14.50% Cv. Sub. Nts., 9/30/00 NZD 60,000
50,334
- ----------------------------------------------------------------------------------------------------------------
- -------
Harman International Industries, Inc., 12% Sr. Sub. Nts., 8/1/02 150,000
164,250
- ----------------------------------------------------------------------------------------------------------------
- -------
International Semi-Tech Microelectronics, Inc., 0%/11.50% Sr.
Sec. Disc. Nts., 8/15/03 (11) 400,000
261,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Samsonite Corp., 11.125% Sr. Sub. Nts., 7/15/05 200,000
221,000
- ----------------------------------------------------------------------------------------------------------------
- -------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05 100,000
115,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Williams (J. B.) Holdings, Inc., 12% Sr. Nts., 3/1/04 100,000
102,000
- ------------
1,085,364
- ----------------------------------------------------------------------------------------------------------------
- ---------
FOOD/BEVERAGES/TOBACCO - 0.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
Dr. Pepper Bottling Holdings, Inc., 0%/11.625% Sr. Disc. Nts., 2/15/03 (11) 200,000
188,000
- ----------------------------------------------------------------------------------------------------------------
- -------
HEALTHCARE - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Genesis Health Ventures, Inc., 9.25% Sr. Sub. Nts., 10/1/06 (5) 150,000
154,875
- ----------------------------------------------------------------------------------------------------------------
- -------
Icon Health & Fitness, Inc., 13% Sr. Sub. Nts., 7/15/02 200,000
226,000
- ----------------------------------------------------------------------------------------------------------------
- -------
IHF Holdings, Inc., 0%/15% Sr. Sub. Disc. Nts., Series B, 11/15/04 (4)(11) 200,000
146,534
- ------------
527,409
- ----------------------------------------------------------------------------------------------------------------
- ---------
HOTEL/GAMING - 0.6%
HMC Acquisition Properties, Inc., 9% Sr. Nts., Series B, 12/15/07 150,000
153,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Majestic Star Casino LLC (The), 12.75% Sr. Sec. Nts., 5/15/03 85,000
91,800
- ----------------------------------------------------------------------------------------------------------------
- -------
Mohegan Tribal Gaming Authority, 13.50% Sr. Sec. Nts., Series B, 11/15/02 100,000
132,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Showboat Marina Casino Partnership/Showboat Marina
Finance Corp., 13.50% First Mtg. Nts., Series B, 3/15/03 200,000
221,000
</TABLE>
65
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
HOTEL/GAMING (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
- -------
Trump Atlantic City Associates/Trump Atlantic City Funding,
Inc., 11.25% First Mtg. Nts., 5/1/06 $ 100,000 $
99,500
- ------------
697,800
- ----------------------------------------------------------------------------------------------------------------
- ---------
RESTAURANTS - 0.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 80,000
83,200
- ----------------------------------------------------------------------------------------------------------------
- -------
Carrols Corp., 11.50% Sr. Nts., 8/15/03 100,000
106,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 100,000
102,000
9.75% Sr. Sub. Nts., 6/1/02 300,000
306,750
- ------------
598,200
- ----------------------------------------------------------------------------------------------------------------
- ---------
TEXTILE/APPAREL - 0.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Clark-Schwebel, Inc., 10.50% Sr. Nts., 4/15/06 100,000
107,000
- ----------------------------------------------------------------------------------------------------------------
- -------
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts., 19.348%, 4/29/97 (10) IDR 560,000,000
224,058
- ----------------------------------------------------------------------------------------------------------------
- -------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 100,000
110,750
- ----------------------------------------------------------------------------------------------------------------
- -------
Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03 50,000
51,250
- ----------------------------------------------------------------------------------------------------------------
- -------
William Carter Co., 10.375% Sr. Sub. Nts., 12/1/06 (5) 200,000
208,000
- ------------
701,058
- ----------------------------------------------------------------------------------------------------------------
- ---------
ENERGY - 2.4%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Chesapeake Energy Corp., 10.50% Sr. Nts., 6/1/02 150,000
163,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Falcon Drilling Co., Inc., 8.875% Sr. Nts., Series B, 3/15/03 200,000
205,250
- ----------------------------------------------------------------------------------------------------------------
- -------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 250,000
263,125
- ----------------------------------------------------------------------------------------------------------------
- -------
Mariner Energy, Inc., 10.50% Sr. Sub. Nts., 8/1/06 (5) 200,000
213,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Mesa Operating Co.:
0%/11.625% Gtd. Sr. Sub. Disc. Nts., 7/1/06 (11) 300,000
208,500
10.625% Gtd. Sr. Sub. Nts., 7/1/06 250,000
271,875
- ----------------------------------------------------------------------------------------------------------------
- -------
National Energy Group, Inc., 10.75% Sr. Nts., 11/1/06 (5) 500,000
527,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Parker Drilling Corp., 9.75% Gtd. Sr. Nts., 11/15/06 (5) 100,000
105,750
- ----------------------------------------------------------------------------------------------------------------
- -------
Petroleum Heat & Power Co., Inc.:
12.25% Sub. Debs., 2/1/05 64,000
71,840
9.375% Sub. Debs., 2/1/06 350,000
341,250
- ----------------------------------------------------------------------------------------------------------------
- -------
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02 250,000
271,563
- ----------------------------------------------------------------------------------------------------------------
- -------
United Meridian Corp., 10.375% Sr. Sub. Nts., 10/15/05 200,000
219,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Vintage Petroleum, Inc., 9% Sr. Sub. Nts., 12/15/05 35,000
36,050
- ------------
2,898,203
- ----------------------------------------------------------------------------------------------------------------
- ---------
FINANCIAL SERVICES - 2.4%
- ----------------------------------------------------------------------------------------------------------------
- ---------
BANKS & THRIFTS - 1.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Alliance & Leicester Building Society, 8.75% Sub. Unsec. Nts., 12/7/06 GBP 80,000
139,952
- ----------------------------------------------------------------------------------------------------------------
- -------
Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99 (4) 200,000
186,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Bank Dagang Nasional Indonesia, Zero Coupon Negotiable
CD, 14.91%, 11/21/97 (10) IDR 400,000,000
149,711
- ----------------------------------------------------------------------------------------------------------------
- -------
Bank of America Malaysia, Zero Coupon Nts., 7.202%, 4/25/97 (10) MYR 150,000
58,118
- ----------------------------------------------------------------------------------------------------------------
- -------
First Nationwide Escrow Corp., 10.625% Sr. Sub. Nts., 10/1/03 (5) 50,000
54,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Ocwen Financial Corp., 11.875% Nts., 10/1/03 100,000
109,500
</TABLE>
66
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
BANKS & THRIFTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
- -------
PT Hutama Karya, Zero Coupon Medium-Term Nts., 17.514%, 3/19/97 (10) IDR 400,000,000 $
164,100
- ----------------------------------------------------------------------------------------------------------------
- -------
PT Inti Indorayon Utama, Zero Coupon Promissory Nts., 17.242%, 2/12/97 (10) IDR 1,400,000,000
582,466
- ----------------------------------------------------------------------------------------------------------------
- -------
Transpower Finance Ltd., 8% Gtd. Unsec. Unsub. Bonds:
2/15/01 (4) NZD 125,000
90,235
3/15/02 NZD 125,000
90,211
- ------------
1,624,543
- ----------------------------------------------------------------------------------------------------------------
- ---------
DIVERSIFIED FINANCIAL - 0.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
Aames Financial Corp., 9.125% Sr. Nts., 11/1/03 100,000
102,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Banco del Atlantico SA, 7.875% Eurobonds, 11/5/98 370,000
367,225
- ----------------------------------------------------------------------------------------------------------------
- -------
GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98 300,000
306,750
- ----------------------------------------------------------------------------------------------------------------
- -------
Olympic Financial Ltd., 13% Sr. Nts., 5/1/00 100,000
111,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Wilshire Financial Services Group, Inc., 13% Nts., 1/1/04 100,000
101,000
- ------------
988,725
- ----------------------------------------------------------------------------------------------------------------
- ---------
INSURANCE - 0.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
Terra Nova Insurance (UK) Holdings plc, 10.75% Sr. Nts., 7/1/05 100,000
112,826
- ----------------------------------------------------------------------------------------------------------------
- -------
Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 (5) 100,000
101,500
- ------------
214,326
- ----------------------------------------------------------------------------------------------------------------
- ---------
HOUSING RELATED - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- ---------
BUILDING MATERIALS - 0.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
Building Materials Corp. of America, 8.625% Sr. Nts., 12/15/06 (5) 50,000
49,875
- ----------------------------------------------------------------------------------------------------------------
- -------
Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03 100,000
102,000
- ------------
151,875
- ----------------------------------------------------------------------------------------------------------------
- ---------
HOMEBUILDERS/REAL ESTATE - 0.3%
- ----------------------------------------------------------------------------------------------------------------
- -------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec.
Nts., Series B, 4/1/02 100,000
108,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11 (5) 250,000
209,531
- ------------
317,531
- ----------------------------------------------------------------------------------------------------------------
- ---------
MANUFACTURING - 1.1%
- ----------------------------------------------------------------------------------------------------------------
- ---------
AEROSPACE/ELECTRONICS/COMPUTERS - 0.5%
- ----------------------------------------------------------------------------------------------------------------
- -------
Communications & Power Industries, Inc., 12% Sr. Sub. Nts., Series B, 8/1/05 200,000
223,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Rohr, Inc., 11.625% Sr. Nts., 5/15/03 100,000
112,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Unisys Corp.:
11.75% Sr. Nts., 10/15/04 150,000
160,688
15% Credit Sensitive Nts., 7/1/97 (3) 50,000
52,750
- ------------
549,438
- ----------------------------------------------------------------------------------------------------------------
- ---------
AUTOMOTIVE - 0.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts., 4/15/06 150,000
164,063
- ----------------------------------------------------------------------------------------------------------------
- -------
Foamex LP/Foamex Capital Corp., 11.25% Sr. Nts., 10/1/02 100,000
107,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 150,000
163,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Lear Corp., 9.50% Sub. Nts., 7/15/06 200,000
214,000
</TABLE>
67
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
AUTOMOTIVE (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
- -------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 $ 100,000 $
97,000
- ------------
745,563
- ----------------------------------------------------------------------------------------------------------------
- ---------
CAPITAL GOODS - 0.0%
- ----------------------------------------------------------------------------------------------------------------
- -------
Mettler Toledo, Inc., 9.75% Gtd. Sr. Sub. Nts., 10/1/06 50,000
52,750
- ----------------------------------------------------------------------------------------------------------------
- ---------
MEDIA - 3.5%
- ----------------------------------------------------------------------------------------------------------------
- ---------
BROADCASTING - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Argyle Television, Inc., 9.75% Sr. Sub. Nts., 11/1/05 100,000
101,500
- ----------------------------------------------------------------------------------------------------------------
- -------
New City Communications, Inc., 11.375% Sr. Sub. Nts., 11/1/03 (4) 50,000
54,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02 160,000
168,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Young Broadcasting, Inc., 9% Sr. Sub. Nts., Series B, 1/15/06 100,000
97,750
- ------------
421,250
- ----------------------------------------------------------------------------------------------------------------
- ---------
CABLE TELEVISION - 2.3%
- ----------------------------------------------------------------------------------------------------------------
- -------
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04 (11) 222,316
92,261
- ----------------------------------------------------------------------------------------------------------------
- -------
Bell Cablemedia plc:
0%/11.875% Sr. Disc. Nts., 9/15/05 (11) 100,000
81,250
0%/11.95% Sr. Disc. Nts., 7/15/04 (11) 300,000
264,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Cablevision Systems Corp.:
10.75% Sr. Sub. Debs., 4/1/04 100,000
104,250
9.875% Sr. Sub. Nts., 5/15/06 150,000
154,688
- ----------------------------------------------------------------------------------------------------------------
- -------
Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs., 11/15/07 (11) 300,000
215,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts., 12/15/05 (11) 525,000
376,031
- ----------------------------------------------------------------------------------------------------------------
- -------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04 (11) 150,000
124,875
- ----------------------------------------------------------------------------------------------------------------
- -------
Fundy Cable Ltd./Ltee, 11% Sr. Sec. Second Priority Nts., 11/15/05 (4) 100,000
106,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Helicon Group LP/Helicon Capital Corp., 11% Sr. Sec. Nts.,
Series B, 11/1/03 (3) 175,000
179,375
- ----------------------------------------------------------------------------------------------------------------
- -------
International CableTel, Inc., 0%/11.50% Sr. Deferred Coupon
Nts., Series B, 2/1/06 (11) 360,000
246,600
- ----------------------------------------------------------------------------------------------------------------
- -------
Marcus Cable Operating Co. LP/Marcus Cable Capital Corp.,
0%/13.50% Sr. Sub. Gtd. Disc. Nts., Series II, 8/1/04 (11) 200,000
164,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07 200,000
212,000
- ----------------------------------------------------------------------------------------------------------------
- -------
TeleWest plc, 0%/11% Sr. Disc. Debs., 10/1/07 (11) 500,000
350,000
- ----------------------------------------------------------------------------------------------------------------
- -------
United International Holdings, Inc., Zero Coupon Sr. Sec.
Disc. Nts., 12.544%, 11/15/99 (10) 75,000
53,625
- ------------
2,725,205
- ----------------------------------------------------------------------------------------------------------------
- ---------
DIVERSIFIED MEDIA - 0.6%
- ----------------------------------------------------------------------------------------------------------------
- -------
Ackerley Communications, Inc., 10.75% Sr. Sec. Nts., Series A, 10/1/03 200,000
213,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Katz Media Corp., 10.50% Sr. Sub. Nts., 1/15/07 (5) 100,000
102,375
- ----------------------------------------------------------------------------------------------------------------
- -------
Lamar Advertising Co., 9.625% Sr. Sub. Nts., 12/1/06 50,000
52,000
</TABLE>
68
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
DIVERSIFIED MEDIA (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
- -------
Panamsat LP/Panamsat Capital Corp., 9.75% Sr. Sec. Nts., 8/1/00 $ 25,000 $
26,625
- ----------------------------------------------------------------------------------------------------------------
- -------
Time Warner Entertainment LP/Time Warner, Inc., 8.375% Sr. Debs., 3/15/23 200,000
203,838
- ----------------------------------------------------------------------------------------------------------------
- -------
Universal Outdoor, Inc.:
9.75% Sr. Sub. Nts., 10/15/06 80,000
82,800
9.75% Sr. Sub. Nts., 10/15/06 (5) 70,000
72,275
- ------------
752,913
- ----------------------------------------------------------------------------------------------------------------
- ---------
ENTERTAINMENT/FILM - 0.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
Imax Corp., 7% Sr. Nts., 3/1/01 (9) 200,000
205,000
- ----------------------------------------------------------------------------------------------------------------
- ---------
OTHER - 0.6%
- ----------------------------------------------------------------------------------------------------------------
- ---------
CONGLOMERATES - 0.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
MacAndrews & Forbes Holdings, Inc., 13% Sub. Debs., 3/1/99 (4) 175,000
175,875
- ----------------------------------------------------------------------------------------------------------------
- ---------
ENVIRONMENTAL - 0.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
Allied Waste North America, Inc., 10.25% Sr. Sub. Nts., 12/1/06 (5) 85,000
89,569
- ----------------------------------------------------------------------------------------------------------------
- ---------
SERVICES - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Borg-Warner Security Corp., 9.125% Sr. Sub. Nts., 5/1/03 100,000
100,375
- ----------------------------------------------------------------------------------------------------------------
- -------
Coinstar, Inc., Units (each unit consists of $1,000 principal
amount of 0%/13% sr. sub. disc. nts., 10/1/06 and one warrant
to purchase seven ordinary shares) (4)(11)(12) 100,000
70,200
- ----------------------------------------------------------------------------------------------------------------
- -------
Empresas ICA Sociedad Controladora SA de CV, 11.875% Nts., 5/30/01 60,000
63,900
- ----------------------------------------------------------------------------------------------------------------
- -------
Iron Mountain, Inc., 10.125% Sr. Sub. Nts., 10/1/06 100,000
106,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Mechala Group Jamaica Ltd., 12.75% Bonds, 12/30/99 (4) 85,000
85,531
- ----------------------------------------------------------------------------------------------------------------
- -------
Protection One Alarm Monitoring, Inc., 6.75% Cv. Gtd. Sr.
Sub. Nts., 9/15/03 75,000
69,000
- ------------
495,506
- ----------------------------------------------------------------------------------------------------------------
- ---------
RETAIL - 0.6%
- ----------------------------------------------------------------------------------------------------------------
- ---------
SPECIALTY RETAILING - 0.2%
- ----------------------------------------------------------------------------------------------------------------
- -------
Eye Care Centers of America, Inc., 12% Sr. Nts., 10/1/03 70,000
75,950
- ----------------------------------------------------------------------------------------------------------------
- -------
Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 100,000
105,000
- ------------
180,950
- ----------------------------------------------------------------------------------------------------------------
- ---------
SUPERMARKETS - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- -------
Grand Union Co., 12% Sr. Nts., 9/1/04 200,000
213,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04 100,000
106,750
10.45% Sr. Nts., 6/15/04 200,000
213,500
- ------------
533,250
- ----------------------------------------------------------------------------------------------------------------
- ---------
TRANSPORTATION - 0.4%
- ----------------------------------------------------------------------------------------------------------------
- ---------
AIR TRANSPORTATION - 0.3%
- ----------------------------------------------------------------------------------------------------------------
- -------
American International Group, Inc., 11.70% Unsec. Unsub.
Bonds, 12/4/01 ITL 90,000,000
70,748
- ----------------------------------------------------------------------------------------------------------------
- -------
Atlas Air, Inc., 12.25% Pass-Through Certificates, 12/1/02 250,000
278,750
- ------------
349,498
</TABLE>
69
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
RAILROADS - 0.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr.
Disc. Nts., Series B, 12/15/03 (11) $ 200,000 $
161,000
- ----------------------------------------------------------------------------------------------------------------
- ---------
UTILITIES - 5.9%
- ----------------------------------------------------------------------------------------------------------------
- ---------
ELECTRIC UTILITIES - 1.1%
- ----------------------------------------------------------------------------------------------------------------
- -------
Beaver Valley II Funding Corp., 9% Second Lease Obligation
Bonds, 6/1/17 199,000
191,538
- ----------------------------------------------------------------------------------------------------------------
- -------
California Energy, Inc., 0%/10.25% Sr. Disc. Nts., 1/15/04 (11) 150,000
159,375
- ----------------------------------------------------------------------------------------------------------------
- -------
Calpine Corp., 10.50% Sr. Nts., 5/15/06 100,000
106,375
- ----------------------------------------------------------------------------------------------------------------
- -------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 250,000
268,750
- ----------------------------------------------------------------------------------------------------------------
- -------
First PV Funding Corp., 10.30% Lease Obligation Bonds,
Series 1986A, 1/15/14 158,000
168,468
- ----------------------------------------------------------------------------------------------------------------
- -------
New Zealand Electric Corp., 10% Debs., 10/15/01 NZD 535,000
413,610
- ------------
1,308,116
- ----------------------------------------------------------------------------------------------------------------
- ---------
TELECOMMUNICATIONS - 4.8%
- ----------------------------------------------------------------------------------------------------------------
- -------
American Communications Services, Inc., 0%/12.75% Sr.
Disc. Nts., 4/1/06 (11) 300,000
167,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Arch Communications Group, Inc., 0%/10.875% Sr. Disc.
Nts., 3/15/08 (11) 100,000
57,625
- ----------------------------------------------------------------------------------------------------------------
- -------
Brooks Fiber Properties, Inc., 0%/11.875% Sr. Disc. Nts., 11/1/06 (5)(11) 450,000
289,125
- ----------------------------------------------------------------------------------------------------------------
- -------
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts., 12/1/04 (11) 200,000
165,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04 (4)(11) 150,000
125,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Cellular Communications International, Inc., Zero Coupon Sr.
Disc. Nts., 11.409%, 8/15/00 (10) 600,000
418,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03 (11) 50,000
45,750
- ----------------------------------------------------------------------------------------------------------------
- -------
Central Temica Guemes, 12% Bonds, 11/26/01 (4) 100,000
101,500
- ----------------------------------------------------------------------------------------------------------------
- -------
Colt Telecom Group plc, Units (each unit consists of $1,000
principal amount of 0%/12% sr. disc. nts., 12/15/06 and one
warrant to purchase 7.8 ordinary shares) (11)(12) 200,000
121,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon
Bonds, 11/15/03 (11) 200,000
133,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Geotek Communications, Inc.:
0%/15% Sr. Sec. Disc. Nts., 7/15/05 (11) 250,000
158,750
12% Cv. Sr. Sub. Nts., 2/15/01 250,000
256,250
- ----------------------------------------------------------------------------------------------------------------
- -------
GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub.
Disc. Nts., 12/15/05 (5)(11) 25,000
16,250
- ----------------------------------------------------------------------------------------------------------------
- -------
GST USA, Inc., 0%/13.875% Bonds, 12/15/05 (11) 200,000
123,000
-----------------------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts.,
Series B, 4/15/03 (11) 200,000
114,500
- ----------------------------------------------------------------------------------------------------------------
- -------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06 (11) 270,000
177,525
0%/13.50% Sr. Disc. Nts., 9/15/05 (11) 200,000
143,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Metrocall, Inc., 10.375% Sr. Sub. Nts., 10/1/07 125,000
106,875
- ----------------------------------------------------------------------------------------------------------------
- -------
MFS Communications Co., Inc.:
0%/8.875% Sr. Disc. Nts., 1/15/06 (11) 100,000
74,125
0%/9.375% Sr. Disc. Nts., 1/15/04 (11) 300,000
262,500
</TABLE>
70
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
- -------
Occidente y Caribe Celular SA, Units (each unit consists of
$1,000 principal amount of 0%/14% sr. disc. nts., 3/15/04 and
one warrant to purchase 5.709 ordinary shares) (5)(11)(12) $ 200,000 $
121,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06 300,000
313,500
- ----------------------------------------------------------------------------------------------------------------
- -------
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 (5) 160,000
162,800
- ----------------------------------------------------------------------------------------------------------------
- -------
Petersburg Long Distance, Inc., Units (each unit consists of
$1,000 principal amount of 0%/14% sr. disc. nts., 6/1/04 and
one warrant to purchase 34 ordinary shares) (5)(11)(12) 300,000
247,500
- ----------------------------------------------------------------------------------------------------------------
- -------
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03 (11) 150,000
129,000
0%/14% Sr. Sub. Disc. Nts., 11/15/01 (11) 300,000
293,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Real Time Data, Inc., Units (each unit consists of $1,000
principal amount of 0%/13.50% sub. disc. nts., 8/15/06 and
one warrant to purchase six ordinary shares) (4)(11)(12) 300,000
165,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Sprint Spectrum LP/Sprint Spectrum Finance Corp.,
0%/12.50% Sr. Disc. Nts., 8/15/06 (11) 300,000
203,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Teleport Communications Group, Inc.:
0%/11.125% Sr. Disc. Nts., 7/1/07 (11) 700,000
483,000
9.875% Sr. Nts., 7/1/06 100,000
107,500
- ----------------------------------------------------------------------------------------------------------------
- -------
USA Mobile Communications, Inc. II, 14% Sr. Nts., 11/1/04 150,000
168,750
- ----------------------------------------------------------------------------------------------------------------
- -------
Western Wireless Corp., 10.50% Sr. Sub. Nts., 6/1/06 200,000
210,250
- ------------
5,661,575
- ------------
Total Corporate Bonds and Notes (Cost $26,794,049)
27,929,730
</TABLE>
<TABLE>
SHARES
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
COMMON STOCKS - 0.5%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Celcaribe SA (4)(13) 24,390
41,463
- ----------------------------------------------------------------------------------------------------------------
- -------
El Paso Electric Co. (13) 4,954
32,201
- ----------------------------------------------------------------------------------------------------------------
- -------
Gillett Holdings, Inc. (4)(13) 15,000
540,000
- ----------------------------------------------------------------------------------------------------------------
- -------
MFS Communications, Inc. (13) 14
763
- ------------
Total Common Stocks (Cost $374,238)
614,427
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
PREFERRED STOCKS - 2.4%
- ----------------------------------------------------------------------------------------------------------------
- ---------
BankAmerica Corp., 8.375%, Series K 7,000
176,750
- ----------------------------------------------------------------------------------------------------------------
- -------
BankUnited Capital Trust Preferred Securities (5) 100
100,125
- ----------------------------------------------------------------------------------------------------------------
- -------
Cablevision Systems Corp., 8.50% Cum. Cv., Series I 4,000
82,000
- ----------------------------------------------------------------------------------------------------------------
- -------
California Federal Bank, 10.625% Non-Cum., Series B 2,500
277,500
- ----------------------------------------------------------------------------------------------------------------
- -------
CRIIMI MAE, Inc., 10.875% Cum. Cv. Preferred Stock, Series B 7,000
203,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Earthwatch, Inc., 12% Cv. Sr. Preferred Stock, Series C (4)(8) 10,000
100,000
- ----------------------------------------------------------------------------------------------------------------
- -------
El Paso Electric Co., 11.40% Series A Preferred Stock (8) 1,626
182,112
- ----------------------------------------------------------------------------------------------------------------
- -------
First Nationwide Bank, 11.50% Non-Cum. 1,500
172,125
- ----------------------------------------------------------------------------------------------------------------
- -------
Fresenius Medical Care Trust, 9% Preferred Securities 450,000
459,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Glendale Federal Bank, F.S.B., 8.75% Non-Cum. Cv., Series E 1,000
58,750
</TABLE>
71
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET
VALUE
SHARES (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
PREFERRED STOCKS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
- ---------
Kelley Oil & Gas Corp., $2.625 Cv. (13) 1,000 $
23,875
- ----------------------------------------------------------------------------------------------------------------
- -------
Panamsat Corp., 12.75% Sr. Preferred Exchangeable (4)(8) 350
429,625
- ----------------------------------------------------------------------------------------------------------------
- -------
Prime Retail, Inc., $19.00 Cv., Series B 6,000
130,500
- ----------------------------------------------------------------------------------------------------------------
- -------
SDW Holdings Corp., 15% Cum. Sr. Exchangeable Preferred Stock (4) 3,750
131,250
- ----------------------------------------------------------------------------------------------------------------
- -------
Time Warner, Inc., 10.25% Preferred, Series M (8) 1
1,090
- ----------------------------------------------------------------------------------------------------------------
- -------
Walden Residential Properties, Inc., 9.16% Cv. Preferred Stock, Series B 10,000
288,750
- ------------
Total Preferred Stocks (Cost $2,675,866)
2,816,452
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
OTHER SECURITIES - 0.1%
- ----------------------------------------------------------------------------------------------------------------
- ---------
MFS Communications Co., Inc., 8% Cv. Depositary Shares
each Representing 1/100 Share of Dividend Enhanced
Convertible Stock (Cost $156,459) 2,000
182,500
UNITS
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES - 0.1%
- ----------------------------------------------------------------------------------------------------------------
- ---------
American Telecasting, Inc. Wts., Exp. 6/99 1,500
2,625
- ----------------------------------------------------------------------------------------------------------------
- -------
Cellular Communications International, Inc. Wts., Exp. 8/03 (4) 300
6,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Comunicacion Celular SA Wts., Exp. 11/03 (4) 200
15,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Eye Care Centers of America, Inc. Wts., Exp. 10/03 (4) 70
315
- ----------------------------------------------------------------------------------------------------------------
- -------
Geotek Communications, Inc. Wts., Exp. 7/05 7,500
18,750
- ----------------------------------------------------------------------------------------------------------------
- -------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01 (4) 200
4,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Icon Health & Fitness, Inc. Wts., Exp. 11/99 (4) 200
10,000
- ----------------------------------------------------------------------------------------------------------------
- -------
In-Flight Phone Corp. Wts., Exp. 8/02 200
--
- ----------------------------------------------------------------------------------------------------------------
- -------
IntelCom Group, Inc. Wts., Exp. 9/05 825
7,425
- ----------------------------------------------------------------------------------------------------------------
- -------
SDW Holdings Corp., Cl. B Wts., Exp. 12/06 (4) 375
4,875
- ----------------------------------------------------------------------------------------------------------------
- -------
United International Securities Ltd. Wts., Exp. 11/99 (4) 200
4,000
- ------------
Total Rights, Warrants and Certificates (Cost $10,175)
72,990
Principal
Amount(1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
STRUCTURED INSTRUMENTS - 4.0%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Bayerische Landesbank Girozentrale, New York Branch,
7.15% Deutsche Mark Currency Protected Yield Curve CD,
7/25/97 $ 130,000
129,974
- ----------------------------------------------------------------------------------------------------------------
- -------
Canadian Imperial Bank of Commerce, New York Branch:
13.50% Greek Drachma/Swiss Franc Linked Nts., 2/5/97 150,000
151,815
16.75% CD, 4/16/97 (indexed to the Federation GKO, Zero
Coupon, 4/9/97) (4) 100,000
99,700
17.30% CD, 2/26/97 (indexed to the Federation GKO, Zero
Coupon, 2/19/97) (4) 200,000
199,700
</TABLE>
72
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
PRINCIPAL MARKET
VALUE
AMOUNT(1) (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C>
STRUCTURED INSTRUMENTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------
- ---------
Goldman, Sachs & Co. Argentina Local Market Securities
Trust, 11.30%, 4/1/00 [representing debt of Argentina
(Republic of) Bonos del Tesoro Bonds, Series 10, 5.563%,
4/1/00 and an interest rate swap between Goldman Sachs
and the Trust] (4) $ 182,608 $
188,315
- ----------------------------------------------------------------------------------------------------------------
- -------
ING (U.S.) Financial Holdings Corp. Zero Coupon:
Chilean Peso Linked Nts., with Chilean Sovereign Risk,
9.05%, 3/12/97 (10) 269,522
262,300
Korean Won/U.S. Dollar Linked Nts., 10.87%, 6/9/97 (10) 160,000
148,768
Nts. Linked to the Greek Drachma/Swiss Franc Exchange
Rate, 14.829%, 12/4/97 (10) 650,000
551,460
- ----------------------------------------------------------------------------------------------------------------
- -------
Internationale Nederlanden (U.S.) Capital Holdings Corp. Zero
Coupon Czech Koruna Linked:
Nts., 12.267%, 2/18/97 (10) CZK 14,573,624
527,643
Promissory Nts.:
12.184%, 6/23/97 (10) CZK 4,380,000
152,097
12.285%, 6/20/97 (10) CZK 10,614,246
368,933
- ----------------------------------------------------------------------------------------------------------------
- -------
Lehman Brothers Holdings Zero Coupon:
Greek Drachma/Swiss Franc Linked Nts., 1.361%, 1/13/97 (10) 100,000
101,950
U.S. Dollar Nts. Linked to Greek Drachma/Swiss Franc:
15.639%, 12/23/97 (10) 300,000
298,980
15.453%, 12/26/97 (10) 350,000
349,510
15.499%, 12/30/97 (10) 700,000
700,000
- ----------------------------------------------------------------------------------------------------------------
- -------
Salomon, Inc., Zero Coupon Chilean Peso-Indexed
Enhanced Access Nts.:
9.25%, 3/11/97 (10) 99,713
96,871
10.116%, 6/17/97 (10) 152,868
144,537
- ----------------------------------------------------------------------------------------------------------------
- -------
Swiss Bank Corp., New York Branch, 6.60% CD, 1/30/97
(indexed to the closing Nikkei 225 Index on 1/23/97) NZD 362,428
241,063
- ------------
Total Structured Instruments (Cost $4,728,667)
4,713,616
</TABLE>
<TABLE>
DATE STRIKE CONTRACTS
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED - 0.0%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Deutsche Mark Put Opt. 2/97 1.54DEM 2,720,000
17,410
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 9.50%, 5/1/01 Put Opt. 7/97 102.30% 395
119
- -------------
Total Put Options Purchased (Cost $36,228)
17,529
- ----------------------------------------------------------------------------------------------------------------
- -------
TOTAL INVESTMENTS, AT VALUE (COST $123,793,236) 106.6%
126,561,270
- ----------------------------------------------------------------------------------------------------------------
- -------
LIABILITIES IN EXCESS OF OTHER ASSETS (6.6)
(7,844,860)
---------
- -------------
NET ASSETS 100.0%
$118,716,410
---------
- -------------
---------
- -------------
</TABLE>
73
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
1. Principal amount is reported in U.S. Dollars, except for those denoted
in the following currencies:
ARP - Argentine Peso GBP - British Pound Sterling
AUD - Australian Dollar IDR - Indonesian Rupiah
CAD - Canadian Dollar IEP - Irish Punt
CZK - Czech Koruna ITL - Italian Lira
DEM - German Deutsche Mark MXP - Mexican Peso
DKK - Danish Krone MYR - Malaysian Ringgit
ESP - Spanish Peseta NZD - New Zealand Dollar
FIM - Finnish Markka SEK - Swedish Krona
2. When-issued security to be delivered and settled after December 31, 1996.
3. Represents the current interest rate for a variable rate security.
4. Identifies issues considered to be illiquid - See applicable note of Notes
to Financial Statements.
5. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These
securities have been determined to be liquid under guidelines established
by the Board of Trustees. These securities amount to $3,681,347 or 3.10%
of the Fund's net assets, at December 31, 1996.
6. A sufficient amount of securities has been designated to cover outstanding
written call options, as follows:
<TABLE>
CONTRACTS/
PRINCIPAL
SUBJECT EXPIRATION EXERCISE PREMIUM MARKET
VALUE
TO CALL DATE PRICE RECEIVED (NOTE
1)
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C> <C> <C>
Call option on Australian Dollar 515,968 2/97 1.24AUD $ 5,315 $
1,868
Call option on Australian Dollar 512,384 2/97 1.249AUD 5,124
2,864
Call option on Australian Dollar 1,250,000 3/97 1.25AUD 11,750
6,813
Call option on Australian Dollar 1,280,000 3/97 1.2578AUD 11,776
10,752
Call option on Banco Hipotecario Nacional
(Argentina) Medium-Term Nts., 10.625%, 8/7/06 400,000 8/00 100.00% 3,680
12,000
Call option on British Pound 1,295,000 1/97 1.632GBP 29,163
103,471
Call option on New Zealand Dollar 564,771 2/97 1.3988NZD 4,631
3,106
Call option on New Zealand Dollar 298,830 2/97 1.4055NZD 2,435
1,584
Call option on New Zealand Dollar 440,000 2/97 1.4071NZD 1,122
1,760
Call option on New Zealand Dollar 341,136 2/97 1.4071NZD 2,780
1,910
Call option on New Zealand Dollar 700,000 3/97 1.413NZD 4,760
4,354
Call option on New Zealand Dollar 395,472 3/97 1.416NZD 3,678
2,531
Call option on New Zealand Dollar 685,000 3/97 1.424NZD 4,658
5,617
Call option on New Zealand Dollar 605,000 3/97 1.4288NZD 4,023
5,929
Call option on New Zealand Dollar 490,000 3/97 1.4288NZD 3,259
4,802
Call option on New Zealand Dollar 1,330,000 1/97 91.00% 13,092
13,092
Put option on Germany (Republic of) Bonds,
Series 118, 5.25%, 2/21/01 374,662 7/97 99.57%DEM 8,992
1,011
--------
- --------
$120,238
$183,464
--------
- --------
--------
- --------
</TABLE>
7. Securities with an aggregate market value of $1,411,669 collateralized
accounts to cover initial margin requirements on open futures sales
contracts. See applicable note of Notes to Financial Statements.
8. Interest or dividend is paid in kind.
9. Represents the current interest rate for an increasing rate security.
10. For zero coupon bonds, the interest rate shown is the effective yield
on the date of purchase.
11. Denotes a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
74
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
12. Units may be comprised of several components, such as debt and equity
and/or warrants to purchase equity at some point in the future. For
units which represent debt securities, principal amount disclosed
represents total underlying principal.
13. Non-income producing security.
See accompanying Notes to Financial Statements.
75
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
PRINCIPAL MARKET VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Non-Convertible Corporate Bonds and Notes - 0.3%
- ---------------------------------------------------------------------------------------------------------------
Penn Traffic Co., 11.50% Sr. Nts., 4/15/06 (Cost $154,500) $ 150,000 $ 132,000
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES - 9.2%
- ---------------------------------------------------------------------------------------------------------------
ALZA Corp., 5% Cv. Sub. Debs., 5/1/06 200,000 193,000
-----------------------------------------------------------------------------------------------------------
Apple Computer, Inc., 6% Cv. Sub. Nts., 6/1/01 (1) 250,000 246,563
-----------------------------------------------------------------------------------------------------------
Apple Computer, Inc., 6% Cv. Sub. Nts., 6/1/01 (2) 100,000 98,625
-----------------------------------------------------------------------------------------------------------
Central Garden & Pet Co., 6% Cv. Sub. Nts., 11/15/03 (1) 300,000 297,750
-----------------------------------------------------------------------------------------------------------
Cirrus Logic, Inc., 6% Cv. Sub. Nts., 12/15/03 (1) 400,000 367,000
-----------------------------------------------------------------------------------------------------------
Continental Airlines, Inc., 6.75% Cv. Sub. Nts., 4/15/06 (1) 500,000 550,000
-----------------------------------------------------------------------------------------------------------
Corporate Express, Inc., 4.50% Cv. Sub. Nts., 7/1/00 (1) 250,000 231,875
-----------------------------------------------------------------------------------------------------------
Home Depot, Inc., 3.25% Cv. Sub. Nts., 10/1/01 230,000 225,112
-----------------------------------------------------------------------------------------------------------
Omnicom Group, Inc., 4.25% Cv. Sub. Debs., 1/3/07 (1)(3) 500,000 510,625
-----------------------------------------------------------------------------------------------------------
Platinum Technology, Inc., 6.75% Cv. Sub. Nts., 11/15/01 500,000 611,875
-----------------------------------------------------------------------------------------------------------
Saks Holdings, Inc., 5.50% Cv. Sub. Nts., 9/15/06 150,000 137,625
-----------------------------------------------------------------------------------------------------------
Softkey International, Inc., 5.50% Cv. Sr. Nts., 11/1/00 300,000 249,375
-----------------------------------------------------------------------------------------------------------
Time Warner, Inc., Zero Coupon Cv. Sr. Sub. Nts., 28.10%, 6/22/13 (4) 500,000 215,000
-----------------------------------------------------------------------------------------------------------
U.S. Office Products Co., 5.50% Cv. Sub. Nts., 5/15/03 (1) 400,000 370,500
-----------
Total Convertible Corporate Bonds and Notes (Cost $4,214,828) 4,304,925
Shares
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 74.6%
- ---------------------------------------------------------------------------------------------------------------
BASIC MATERIALS - 2.8%
- ---------------------------------------------------------------------------------------------------------------
CHEMICALS - 2.8%
-----------------------------------------------------------------------------------------------------------
IMC Global, Inc. 15,000 586,875
-----------------------------------------------------------------------------------------------------------
Olin Corp. 6,500 244,562
-----------------------------------------------------------------------------------------------------------
Potash Corp. of Saskatchewan, Inc. 6,000 510,000
-----------
1,341,437
- ---------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 18.7%
- ---------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING - 0.8%
-----------------------------------------------------------------------------------------------------------
General Motors Corp. 7,000 390,250
- ---------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 8.4%
-----------------------------------------------------------------------------------------------------------
AMR Corp. (5) 4,500 396,562
-----------------------------------------------------------------------------------------------------------
Brinker International, Inc. (5) 16,950 271,200
-----------------------------------------------------------------------------------------------------------
Delta Air Lines, Inc. 8,250 584,719
-----------------------------------------------------------------------------------------------------------
Eastman Kodak Co. 2,500 200,625
-----------------------------------------------------------------------------------------------------------
Gaylord Entertainment Co., Cl. A 7,500 171,562
-----------------------------------------------------------------------------------------------------------
Host Marriott Corp. (5) 10,000 160,000
-----------------------------------------------------------------------------------------------------------
ITT Corp. (New) (5) 12,500 542,187
-----------------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 10,000 714,224
-----------------------------------------------------------------------------------------------------------
Northwest Airlines Corp., Cl. A (5) 5,000 195,625
-----------------------------------------------------------------------------------------------------------
Viacom, Inc., Cl. B (5) 20,000 697,500
-----------
3,934,204
- ---------------------------------------------------------------------------------------------------------------
Media - 5.2%
-----------------------------------------------------------------------------------------------------------
Comcast Corp., Cl. A Special 15,000 267,187
-----------------------------------------------------------------------------------------------------------
Evergreen Media Corp., Cl. A (5) 12,000 300,000
</TABLE>
76
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MEDIA (CONTINUED)
-----------------------------------------------------------------------------------------------------------
Heritage Media Corp., Cl. A (5) 12,500 $ 140,625
-----------------------------------------------------------------------------------------------------------
Metro Networks, Inc. (5) 17,500 441,875
-----------------------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., Cl. A (5) 12,500 371,875
-----------------------------------------------------------------------------------------------------------
Tele-Communications, Inc. (New), TCI Group, Series A (5) 5,000 65,312
-----------------------------------------------------------------------------------------------------------
Time Warner, Inc. 6,000 225,000
-----------------------------------------------------------------------------------------------------------
U S West Media Group (5) 17,500 323,750
-----------------------------------------------------------------------------------------------------------
World Color Press, Inc. (5) 15,000 288,750
-----------
2,424,374
- ---------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL - 1.8%
-----------------------------------------------------------------------------------------------------------
Dillard Department Stores, Inc., Cl. A 10,000 308,750
-----------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc. (5) 16,000 546,000
-----------
854,750
- ---------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 2.5%
-----------------------------------------------------------------------------------------------------------
Alco Standard Corp. 8,000 413,000
-----------------------------------------------------------------------------------------------------------
Gap, Inc. (The) 2,500 75,312
-----------------------------------------------------------------------------------------------------------
Intelligent Electronics, Inc. (5) 45,000 360,000
-----------------------------------------------------------------------------------------------------------
Intimate Brands, Inc., Cl. A 7,500 127,500
-----------------------------------------------------------------------------------------------------------
Limited, Inc. 10,000 183,750
----------
1,159,562
- ---------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS - 12.4%
- ---------------------------------------------------------------------------------------------------------------
BEVERAGES - 0.6%
-----------------------------------------------------------------------------------------------------------
Cott Corp. 40,000 290,000
- ---------------------------------------------------------------------------------------------------------------
FOOD - 1.3%
-----------------------------------------------------------------------------------------------------------
Dominick's Supermarkets, Inc. (5) 15,000 326,250
-----------------------------------------------------------------------------------------------------------
H.J. Heinz Co. 7,500 268,125
-----------
594,375
- ---------------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 1.2%
-----------------------------------------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 10,000 396,250
-----------------------------------------------------------------------------------------------------------
Schering-Plough Corp. 2,500 161,875
-----------
558,125
- ---------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 5.6%
-----------------------------------------------------------------------------------------------------------
American Medical Response, Inc. (5) 31,000 1,007,500
-----------------------------------------------------------------------------------------------------------
Columbia/HCA Healthcare Corp. 5,250 213,937
-----------------------------------------------------------------------------------------------------------
Guidant Corp. 9,500 541,500
-----------------------------------------------------------------------------------------------------------
MedPartners/Mullikin, Inc. (5) 10,000 210,000
-----------------------------------------------------------------------------------------------------------
OrNda Healthcorp (5) 10,000 292,500
-----------------------------------------------------------------------------------------------------------
Ventritex, Inc. (5) 15,000 369,375
-----------
2,634,812
- ---------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS - 1.1%
-----------------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 3,500 333,375
-----------------------------------------------------------------------------------------------------------
Tambrands, Inc. 4,000 163,500
-----------
496,875
- ---------------------------------------------------------------------------------------------------------------
TOBACCO - 2.6%
-----------------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 8,750 985,469
-----------------------------------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 7,500 255,000
-----------
1,240,469
- ---------------------------------------------------------------------------------------------------------------
ENERGY - 1.7%
- ---------------------------------------------------------------------------------------------------------------
Apache Corp. 2,500 88,437
</TABLE>
77
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------
Kerr-McGee Corp. 3,000 $ 216,000
-----------------------------------------------------------------------------------------------------------
Tidewater, Inc. 3,000 135,750
-----------------------------------------------------------------------------------------------------------
Weatherford Enterra, Inc. (5) 7,000 210,000
-----------------------------------------------------------------------------------------------------------
Western Atlas, Inc. (5) 2,000 141,750
------------
791,937
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL - 12.9%
- ---------------------------------------------------------------------------------------------------------------
BANKS - 5.4%
-----------------------------------------------------------------------------------------------------------
Boatmen's Bancshares, Inc. 4,000 258,000
-----------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 8,750 780,937
-----------------------------------------------------------------------------------------------------------
Commonwealth Bancorp, Inc. 10,000 150,000
-----------------------------------------------------------------------------------------------------------
First Commerce Corp. 6,500 252,687
-----------------------------------------------------------------------------------------------------------
First Union Corp. 3,250 240,500
-----------------------------------------------------------------------------------------------------------
Fleet Financial Group, Inc. 9,500 473,813
-----------------------------------------------------------------------------------------------------------
J.P. Morgan & Co., Inc. 2,250 219,656
-----------------------------------------------------------------------------------------------------------
Standard Federal Bancorporation 2,500 142,188
------------
2,517,781
- ---------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 5.0%
-----------------------------------------------------------------------------------------------------------
Advanta Corp., Cl. B 20,000 817,500
-----------------------------------------------------------------------------------------------------------
American Express Co. 8,750 494,375
-----------------------------------------------------------------------------------------------------------
Dean Witter, Discover & Co. 8,500 563,125
-----------------------------------------------------------------------------------------------------------
Fannie Mae 3,000 111,750
-----------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 1,000 110,125
-----------------------------------------------------------------------------------------------------------
Travelers Group, Inc. 6,000 272,250
------------
2,369,125
- ---------------------------------------------------------------------------------------------------------------
INSURANCE - 2.5%
-----------------------------------------------------------------------------------------------------------
Allstate Corp. 8,000 463,000
-----------------------------------------------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 14,500 416,875
-----------------------------------------------------------------------------------------------------------
IPC Holdings Ltd. 12,500 279,688
------------
1,159,563
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 4.8%
- ---------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.4%
-----------------------------------------------------------------------------------------------------------
Raychem Corp. 2,500 200,313
- ---------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 2.4%
-----------------------------------------------------------------------------------------------------------
Cognizant Corp. 8,500 280,500
-----------------------------------------------------------------------------------------------------------
DecisionOne Holdings Corp. (5) 15,000 247,500
-----------------------------------------------------------------------------------------------------------
ICTS International NV (5) 32,500 329,063
-----------------------------------------------------------------------------------------------------------
Intelligroup, Inc. (5) 12,500 137,500
-----------------------------------------------------------------------------------------------------------
Viad Corp. 8,000 132,000
------------
1,126,563
- ---------------------------------------------------------------------------------------------------------------
MANUFACTURING - 2.0%
-----------------------------------------------------------------------------------------------------------
AGCO Corp. 5,000 143,125
-----------------------------------------------------------------------------------------------------------
American Standard Cos., Inc. (5) 13,500 516,375
-----------------------------------------------------------------------------------------------------------
Brown & Sharpe Manufacturing Co. (5) 20,000 280,000
------------
939,500
- ---------------------------------------------------------------------------------------------------------------
TECHNOLOGY - 20.7%
- ---------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 3.4%
-----------------------------------------------------------------------------------------------------------
Boeing Co. 3,168 336,996
-----------------------------------------------------------------------------------------------------------
Lockheed Martin Corp. 3,500 320,250
</TABLE>
78
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE (CONTINUED)
-----------------------------------------------------------------------------------------------------------
Raytheon Co. 2,500 $ 120,313
-----------------------------------------------------------------------------------------------------------
Rockwell International Corp. 2,000 121,750
-----------------------------------------------------------------------------------------------------------
Sundstrand Corp. 4,500 191,250
-----------------------------------------------------------------------------------------------------------
TRW, Inc. 10,000 495,000
------------
1,585,559
- ---------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 7.8%
-----------------------------------------------------------------------------------------------------------
Adaptec, Inc. (5) 8,000 320,000
-----------------------------------------------------------------------------------------------------------
Cabletron Systems, Inc. (5) 17,500 581,875
-----------------------------------------------------------------------------------------------------------
Ingram Micro, Inc., Cl. A (5) 5,000 115,000
-----------------------------------------------------------------------------------------------------------
International Business Machines Corp. 5,000 755,000
-----------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A (5) 14,000 386,750
-----------------------------------------------------------------------------------------------------------
Read-Rite Corp. (5) 10,000 252,500
-----------------------------------------------------------------------------------------------------------
Seagate Technology (5) 18,000 711,000
-----------------------------------------------------------------------------------------------------------
Sun Microsystems, Inc. (5) 22,000 565,125
------------
3,687,250
- ---------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 3.9%
-----------------------------------------------------------------------------------------------------------
Electronic Data Systems Corp. 4,500 194,625
-----------------------------------------------------------------------------------------------------------
First Data Corp. 5,000 182,500
-----------------------------------------------------------------------------------------------------------
Informix Corp. (5) 10,000 203,750
-----------------------------------------------------------------------------------------------------------
PLATINUM Technology, Inc. (5) 12,500 170,313
-----------------------------------------------------------------------------------------------------------
Structural Dynamics Research Corp. (5) 37,500 750,000
-----------------------------------------------------------------------------------------------------------
Versant Object Technology Corp. (5) 10,000 186,250
-----------------------------------------------------------------------------------------------------------
Worldtalk Corp. (5) 20,000 150,000
------------
1,837,438
- ---------------------------------------------------------------------------------------------------------------
ELECTRONICS - 3.6%
-----------------------------------------------------------------------------------------------------------
ADT Ltd. (5) 10,000 228,750
-----------------------------------------------------------------------------------------------------------
Applied Materials, Inc. (5) 2,000 71,875
-----------------------------------------------------------------------------------------------------------
Intel Corp. 1,250 163,672
-----------------------------------------------------------------------------------------------------------
LSI Logic Corp. (5) 10,000 267,500
-----------------------------------------------------------------------------------------------------------
Novellus Systems, Inc. (5) 2,250 121,922
-----------------------------------------------------------------------------------------------------------
Waters Corp. (5) 27,500 835,313
------------
1,689,032
- ---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY - 2.0%
-----------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (5) 1,500 95,438
-----------------------------------------------------------------------------------------------------------
LCI International, Inc. (5) 12,500 268,750
-----------------------------------------------------------------------------------------------------------
MCI Communications Corp. 12,500 408,594
-----------------------------------------------------------------------------------------------------------
WorldCom, Inc. (5) 1,500 39,094
-----------------------------------------------------------------------------------------------------------
XLConnect Solutions, Inc. (5) 5,000 143,750
------------
955,626
- ---------------------------------------------------------------------------------------------------------------
UTILITIES - 0.6%
- ---------------------------------------------------------------------------------------------------------------
GTE Corp. 6,250 284,375
------------
Total Common Stocks (Cost $31,800,395) 35,063,295
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 5.3%
- ---------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 8.50% Cum. Cv., Series I 7,500 153,750
-----------------------------------------------------------------------------------------------------------
Host Marriott Financial Trust, 6.75% Cv. Preferred Stock (1)(5) 10,000 535,000
-----------------------------------------------------------------------------------------------------------
K-Mart Financing I, 7.75% Cv. Preferred Stock 7,500 365,625
</TABLE>
79
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
MARKET VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------
Microsoft Corp., $2.196 Cv., Series A 2,500 $ 200,313
-----------------------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., 6.50% Cv. Preferred, Series D (1) 5,000 231,875
-----------------------------------------------------------------------------------------------------------
SunAmerica, Inc., $3.188 Cv. Preferred Equity Redemption Cum. Stock (5) 12,500 528,125
-----------------------------------------------------------------------------------------------------------
Trans World Airlines, Inc., 8% Cum. Cv. Exchangeable Preferred Stock (1) 10,000 242,500
-----------------------------------------------------------------------------------------------------------
Vanstar Financing Trust, 6.75% Cv. Preferred Stock (1) 5,000 260,000
------------
Total Preferred Stocks (Cost $2,706,706) 2,517,188
- ---------------------------------------------------------------------------------------------------------------
Other Securities - 4.8%
- ---------------------------------------------------------------------------------------------------------------
AnnTaylor Finance Trust, 8.50% Cv. Trust Originated
Preferred Securities 7,500 393,750
-----------------------------------------------------------------------------------------------------------
Elsag Bailey Financing Trust, 5.50% Cv. Trust Originated
Preferred Securities (1) 7,500 270,000
-----------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6% Cv. Preferred, Structured
Yield Product Exchangeable for Cox Communications, Inc.
Common Stock 17,500 389,375
-----------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.25% Structured Yield Product
Exchangeable for Stock of IMC Global, Inc. 10,000 401,250
-----------------------------------------------------------------------------------------------------------
Salomon, Inc., 7.625% Cv. Preferred, Debt Exchangeable for
Common Stock of Financial Security Assurance Holdings Ltd. 6,800 209,950
-----------------------------------------------------------------------------------------------------------
Wendy's Financing I/Wendy's International, Inc., 5% Cum.
Cv. Preferred Stock, Series A 5,000 260,000
-----------------------------------------------------------------------------------------------------------
Westinghouse Electric Corp., Participating Equity Preferred
Shares, $1.30 Cv., Series C (1) 20,000 357,500
------------
Total Other Securities (Cost $2,219,700) 2,281,825
PRINCIPAL MARKET VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 6.4%
- ---------------------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co.,
6.52%, dated 12/31/96, to be repurchased at $3,001,087
on 1/2/97, collateralized by U.S. Treasury Nts.,
5.50%-7.50%, 7/15/99-8/15/05, with a value of $3,068,784
(Cost $3,000,000) $ 3,000,000 3,000,000
-----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $44,096,129) 100.6% 47,299,233
-----------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.6) (289,989)
------------ ------------
NET ASSETS 100.0% $ 47,009,244
------------ ------------
------------ ------------
</TABLE>
80
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
1. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These
securities have been determined to be liquid under guidelines
established by the Board of Trustees. These securities amount to
$4,471,188 or 9.51% of the Fund's net assets, at December 31, 1996.
2. Identifies issues considered to be illiquid - See applicable note of
Notes to Financial Statements.
3. When-issued security to be delivered and settled after December 31,
1996.
4. For zero coupon bonds, the interest rate shown is the effective yield
on the date of purchase.
5. Non-income producing security.
See accompanying Notes to Financial Statements.
81
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
OPPENHEIMER
OPPENHEIMER OPPENHEIMER OPPENHEIMER CAPITAL
OPPENHEIMER
MONEY HIGH INCOME BOND APPRECIATION
GROWTH
FUND FUND FUND FUND
FUND
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<C>
ASSETS:
Investments, at value (cost * ) (including repurchase
agreements **) - see accompanying statements $126,653,598 $188,944,878 $454,375,154 $624,437,033
$282,517,247
Unrealized appreciation on forward foreign currency
exchange contracts - See applicable note -- 214,142 493,660 --
--
Cash 46,464 1,661,545 283,522 1,370,404
402,646
Receivables:
Closed forward foreign currency exchange contracts -- 39,075 160,642 --
--
Daily variation on futures contracts -
See applicable note -- -- -- --
--
Dividends, interest and principal paydowns 279,382 2,648,895 5,918,417 87,611
209,594
Shares of beneficial interest sold 3,274,696 48,723 257,841 743,805
265,873
Investments sold -- 2,034,126 105,013 3,398,148
6,576,480
Other 5,797 5,662 22,853 7,041
5,364
- ------------------------------------------------------------------------
Total assets 130,259,937 195,597,046 461,617,102 630,044,042
289,977,204
- ------------------------------------------------------------------------
LIABILITIES:
Options written, at value (premiums received ***)
- see accompanying statements and notes -- 85,670 135,465 --
--
Unrealized depreciation on forward foreign currency
exchange contracts - See applicable note -- 817 840 --
--
Payables and other liabilities:
Closed forward foreign currency exchange contracts -- 73,512 194,781 --
--
Daily variation on futures contracts - See
applicable note -- 16,431 51,600 627,000
--
Dividends 207,568 -- -- --
--
Custodian fees 9,988 21,606 18,186 12,417
28,869
Investments purchased (including those purchased
on a when-issued basis ****) - See applicable note -- 3,985,947 34,639,233 9,598,112
3,846,972
Shares of beneficial interest redeemed 298,879 87,930 47,480 2,324,434
145,589
Other 24,982 31,760 90,572 89,807
35,624
- ------------------------------------------------------------------------
Total liabilities 541,417 4,303,673 35,178,157 12,651,770
4,057,054
- ------------------------------------------------------------------------
NET ASSETS $129,718,520 $191,293,373 $426,438,945 $617,392,272
$285,920,150
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Paid-in capital $129,733,901 $180,181,078 $418,133,217 $481,442,351
$210,289,842
Undistributed net investment income -- 913,946 1,873,402 1,479,312
1,631,413
Accumulated net realized gain (loss) from investments
and foreign currency transactions (15,381) (367,314) 1,330,823 29,248,149
16,943,396
Net unrealized appreciation on investments and
translation of assets and liabilities denominated
in foreign currencies -- 10,565,663 5,101,503 105,222,460
57,055,499
- ------------------------------------------------------------------------
NET ASSETS $129,718,520 $191,293,373 $426,438,945 $617,392,272
$285,920,150
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST OUTSTANDING 129,733,922 17,186,015 36,675,439 15,949,976
10,495,044
NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $1.00 $11.13 $11.63 $38.71
$ 27.24
Cost $126,653,598 $178,526,490 $449,692,946 $519,731,267
$225,461,748
**Repurchase agreements -- $ 12,900,000 $ 14,000,000 $138,000,000
$ 73,000,000
***Premiums received -- $ 42,285 $ 80,184 --
--
****When-issued basis -- $ 1,137,309 $ 23,817,266 --
--
</TABLE>
See accompanying Notes to Financial Statements.
82
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
OPPENHEIMER OPPENHEIMER OPPENHEIMER OPPENHEIMER
MULTIPLE GLOBAL STRATEGIC GROWTH
STRATEGIES SECURITIES BOND BOND
FUND FUND FUND FUND
------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (cost * ) (including repurchase
agreements **) - see accompanying statements $490,493,991 $588,435,102 $126,561,270 $47,299,233
Unrealized appreciation on forward foreign currency
exchange contracts - See applicable note -- 2,384,877 177,714 --
Cash 382,731 249,257 1,078,050 347,450
Receivables:
Closed forward foreign currency exchange contracts -- 141,470 31,726 --
Daily variation on futures contracts -
See applicable note -- -- 112,480 --
Dividends, interest and principal paydowns 3,758,618 729,667 2,037,566 84,424
Shares of beneficial interest sold 250,065 325,558 70,406 102,680
Investments sold 382,810 965,585 447,735 --
Other 8,366 7,129 3,551 3,067
------------------------------------------------------
Total assets 495,276,581 593,238,645 130,520,498 47,836,854
------------------------------------------------------
LIABILITIES:
Options written, at value (premiums received ***)
- see accompanying statements and notes 2,402,150 -- 183,464 --
Unrealized depreciation on forward foreign currency
exchange contracts - See applicable note -- 259,966 -- --
Payables and other liabilities:
Closed forward foreign currency exchange contracts -- -- 8,704 --
Daily variation on futures contracts - See
applicable note -- -- 1,000 --
Dividends -- -- -- --
Custodian fees 34,558 144,157 15,974 12,963
Investments purchased (including those purchased
on a when-issued basis ****) - See applicable note 8,378,745 10,463,998 10,988,361 755,000
Shares of beneficial interest redeemed 133,561 229,118 581,333 39,701
Other 42,087 61,217 25,252 19,946
------------------------------------------------------
Total liabilities 10,991,101 11,158,456 11,804,088 827,610
------------------------------------------------------
NET ASSETS $484,285,480 $582,080,189 $118,716,410 $47,009,244
------------------------------------------------------
------------------------------------------------------
COMPOSITION OF NET ASSETS:
Paid-in capital $400,616,188 $508,449,760 $114,926,697 $41,140,854
Undistributed net investment income 961,193 7,724,243 751,089 12,643
Accumulated net realized gain (loss) from investments
and foreign currency transactions 17,756,534 (17,047,799) 33,221 2,652,643
Net unrealized appreciation on investments and
translation of assets and liabilities denominated
in foreign currencies 64,951,565 82,953,985 3,005,403 3,203,104
------------------------------------------------------
NET ASSETS $484,285,480 $582,080,189 $118,716,410 $47,009,244
------------------------------------------------------
------------------------------------------------------
SHARES OF BENEFICIAL INTEREST OUTSTANDING 30,992,794 32,946,137 23,316,322 2,870,820
NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $ 15.63 $ 17.67 $5.09 $ 16.37
*Cost $424,386,458 $507,602,388 $123,793,236 $44,096,129
**Repurchase agreements $ 73,600,000 $ 60,500,000 -- $ 3,000,000
***Premiums received $ 1,235,136 -- $ 120,238 --
****When-issued basis $ 6,145,771 -- $ 10,061,458 $ 500,000
</TABLE>
See accompanying Notes to Financial Statements.
83
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
OPPENHEIMER
OPPENHEIMER OPPENHEIMER OPPENHEIMER CAPITAL
OPPENHEIMER
MONEY HIGH INCOME BOND APPRECIATION
GROWTH
FUND FUND FUND FUND
FUND
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<C>
INVESTMENT INCOME:
Interest (net of withholding taxes of *) $5,465,680 $14,989,197 $22,103,878 $ 4,761,662
$ 1,546,005
Dividends (net of withholding taxes of **) -- 722,664 118,899 255,664
1,313,796
- ------------------------------------------------------------------------
Total income 5,465,680 15,711,861 22,222,777 5,017,326
2,859,801
- ------------------------------------------------------------------------
EXPENSES:
Management fees - See applicable note 445,899 1,177,754 2,188,350 3,382,840
1,139,255
Custodian fees and expenses 18,295 59,180 39,017 38,039
30,306
Legal and auditing fees 13,168 16,801 13,317 14,799
13,953
Insurance expenses 3,668 5,140 6,266 8,469
4,605
Trustees' fees and expenses 2,377 3,406 4,796 4,586
2,165
Registration and filing fees 3,693 18,035 68,766 71,749
45,206
Other 2,326 602 1,179 507
618
- ------------------------------------------------------------------------
Total expenses 489,426 1,280,918 2,321,691 3,520,989
1,236,108
- ------------------------------------------------------------------------
Less reimbursement of expenses by
OppenheimerFunds, Inc. - See applicable note -- -- -- --
(27,276)
- ------------------------------------------------------------------------
Net expenses 489,426 1,280,918 2,321,691 3,520,989
1,208,832
- ------------------------------------------------------------------------
NET INVESTMENT INCOME 4,976,254 14,430,943 19,901,086 1,496,337
1,650,969
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) from:
Investments:
Unaffiliated companies 2,966 2,988,616 1,627,695 29,669,378
17,101,200
Affiliated companies -- -- -- --
--
Closing of futures contracts -- (110,588) (317,839) (99,708)
--
Closing and expiration of options written -- 256,826 111,765 --
--
Foreign currency transactions -- 198,737 848,023 --
--
Net change in unrealized appreciation or
depreciation on:
Investments -- 4,835,153 (5,057,017) 42,247,113
52,525,464
Translation of assets and liabilities denominated
in foreign currencies -- 5,267 314,977 --
--
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2,966 8,174,011 (2,472,396) 71,816,783
69,626,664
- ------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,979,220 $22,604,954 $17,428,690 $73,313,120
$71,277,633
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
*Interest -- $ 10,053 $ 27,906 --
--
**Dividends -- -- -- --
--
</TABLE>
See accompanying Notes to Financial Statements.
84
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
OPPENHEIMER OPPENHEIMER OPPENHEIMER OPPENHEIMER
MULTIPLE GLOBAL STRATEGIC GROWTH &
STRATEGIES SECURITIES BOND INCOME
FUND FUND FUND FUND
------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of withholding taxes of *) $20,239,476 $ 2,558,378 $ 7,601,520 $ 279,949
Dividends (net of withholding taxes of **) 3,975,470 6,284,482 102,704 239,716
------------------------------------------------------
Total income 24,214,946 8,842,860 7,704,224 519,665
------------------------------------------------------
EXPENSES:
Management fees - See applicable note 3,132,569 3,395,740 618,338 160,819
Custodian fees and expenses 80,873 292,641 47,774 28,358
Legal and auditing fees 22,096 20,195 11,149 8,682
Insurance expenses 8,720 8,139 3,117 1,853
Trustees' fees and expenses 9,483 4,647 937 2,157
Registration and filing fees 28,677 44,572 17,357 11,310
Other 5,519 1,196 776 2,930
------------------------------------------------------
Total expenses 3,287,937 3,767,130 699,448 216,109
------------------------------------------------------
Less reimbursement of expenses by
OppenheimerFunds, Inc. - See applicable note -- -- -- --
------------------------------------------------------
Net expenses 3,287,937 3,767,130 699,448 216,109
------------------------------------------------------
NET INVESTMENT INCOME 20,927,009 5,075,730 7,004,776 303,556
------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) from:
Investments:
Unaffiliated companies 17,262,810 13,879,186 1,992,319 2,651,709
Affiliated companies -- 20,580 -- --
Closing of futures contracts -- -- (200,568) --
Closing and expiration of options written 1,047,239 -- 6,447 4,530
Foreign currency transactions 284,643 (2,124,032) 37,472 1,517
Net change in unrealized appreciation or
depreciation on:
Investments 23,243,765 61,185,137 938,418 2,697,929
Translation of assets and liabilities denominated
in foreign currencies (451,671) (2,041,403) 225,934 --
------------------------------------------------------
Net realized and unrealized gain (loss) 41,386,786 70,919,468 3,000,022 5,355,685
------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $62,313,795 $75,995,198 $10,004,798 $5,659,241
------------------------------------------------------
------------------------------------------------------
*Interest $ 18,557 -- $ 20,561 --
**Dividends $ 86,118 $ 397,043 -- $ 1,148
</TABLE>
See accompanying Notes to Financial Statements.
85
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
OPPENHEIMER OPPENHEIMER
MONEY HIGH INCOME
FUND FUND
- -----------------------------------------------------------
1996 1995 1996 1995
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 4,976,254 $ 4,149,627 $ 14,430,943 $
11,343,977
Net realized gain (loss) 2,966 5,356 3,333,591
622,733
Net change in unrealized appreciation or depreciation -- -- 4,840,420
9,413,001
- -----------------------------------------------------------
Net increase in net assets resulting from operations 4,979,220 4,154,983 22,604,954
21,379,711
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (4,976,254) (4,149,626) (15,283,448)
(12,039,383)
Distributions from net realized gain -- -- --
--
Distributions in excess of net realized gain -- -- --
--
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net assets resulting from
beneficial interest transactions - See applicable note 64,329,094 (24,289,814) 50,521,087
28,412,143
- -----------------------------------------------------------
NET ASSETS:
Total increase (decrease) 64,332,060 (24,284,457) 57,842,593
37,752,471
Beginning of period 65,386,460 89,670,917 133,450,780
95,698,309
- -----------------------------------------------------------
End of period $129,718,520 $ 65,386,460 $191,293,373
$133,450,780
- -----------------------------------------------------------
- -----------------------------------------------------------
Undistributed (overdistributed) net investment income $ 0 $ 0 $ 913,946 $
1,473,129
<CAPTION>
OPPENHEIMER
BOND
FUND
----------------------------
1996 1995
----------------------------
OPERATIONS:
Net investment income $ 19,901,086 $ 11,813,502
Net realized gain (loss) 2,269,644 1,310,131
Net change in unrealized appreciation or depreciation (4,742,040) 13,318,419
----------------------------
Net increase in net assets resulting from operations 17,428,690 26,442,052
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (20,181,337) (11,209,883)
Distributions from net realized gain (133,010) --
Distributions in excess of net realized gain -- --
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net assets resulting from
beneficial interest transactions - See applicable note 218,092,832 60,932,217
----------------------------
NET ASSETS:
Total increase (decrease) 215,207,175 76,164,386
Beginning of period 211,231,770 135,067,384
----------------------------
End of period $426,438,945 $211,231,770
----------------------------
----------------------------
Undistributed (overdistributed) net investment income $ 1,873,402 $ 1,342,481
</TABLE>
See accompanying Notes to Financial Statements.
86
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
OPPENHEIMER
CAPITAL OPPENHEIMER
APPRECIATION GROWTH
FUND FUND
- -----------------------------------------------------------
1996 1995 1996 1995
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,496,337 $ 1,123,451 $ 1,650,969 $
1,297,719
Net realized gain (loss) 29,569,670 22,379,477 17,101,200
8,674,291
Net change in unrealized appreciation or depreciation 42,247,113 47,042,428 14,349,688
16,396,856
- -----------------------------------------------------------
Net increase in net assets resulting from operations 73,313,120 70,545,356 33,101,857
26,368,866
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (1,132,964) (719,183) (1,310,185)
(821,641)
Distributions from net realized gain (21,289,429) (363,458) (8,706,724)
(973,385)
Distributions in excess of net realized gain -- -- --
--
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net assets resulting from
beneficial interest transactions - See applicable note 241,097,454 70,167,835 145,125,312
29,852,876
- -----------------------------------------------------------
NET ASSETS:
Total increase (decrease) 291,988,181 139,630,550 168,210,260
54,426,716
Beginning of period 325,404,091 185,773,541 117,709,890
63,283,174
- -----------------------------------------------------------
End of period $617,392,272 $325,404,091 $285,920,150
$117,709,890
- -----------------------------------------------------------
- -----------------------------------------------------------
Undistributed (overdistributed) net investment income $ 1,479,312 $ 1,115,939 $ 1,631,413 $
1,290,629
<CAPTION>
OPPENHEIMER
MULTIPLE
STRATEGIES
FUND
---------------------------
1996 1995
---------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 20,927,009 $ 16,593,514
Net realized gain (loss) 18,594,692 8,275,324
Net change in unrealized appreciation or depreciation 22,792,094 39,976,755
---------------------------
Net increase in net assets resulting from operations 62,313,795 64,845,593
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (21,290,805) (16,066,432)
Distributions from net realized gain (9,273,309) (8,717,288)
Distributions in excess of net realized gain -- --
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net assets resulting from
beneficial interest transactions - See applicable note 71,272,635 49,134,087
---------------------------
NET ASSETS:
Total increase (decrease) 103,022,316 89,195,960
Beginning of period 381,263,164 292,067,204
---------------------------
End of period $484,285,480 $381,263,164
---------------------------
---------------------------
Undistributed (overdistributed) net investment income $ 961,193 $ 1,361,279
</TABLE>
See accompanying Notes to Financial Statements.
87
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
OPPENHEIMER OPPENHEIMER
GLOBAL STRATEGIC
SECURITIES BOND
FUND FUND
- -----------------------------------------------------------
1996 1995 1996 1995
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 5,075,730 $ 2,845,513 $ 7,004,776 $
3,514,505
Net realized gain (loss) 11,775,734 (25,767,883) 1,835,670
(869,176)
Net change in unrealized appreciation or depreciation 59,143,734 31,653,008 1,164,352
2,877,343
- -----------------------------------------------------------
Net increase in net assets resulting from operations 75,995,198 8,730,638 10,004,798
5,522,672
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income -- -- (6,891,899)
(3,151,540)
Distributions from net realized gain -- (8,174,158) --
--
Distributions in excess of net realized gain -- -- --
--
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net assets resulting from
beneficial interest transactions - See applicable note 145,106,158 62,580,432 55,505,898
37,406,166
- -----------------------------------------------------------
NET ASSETS:
Total increase (decrease) 221,101,356 63,136,912 58,618,797
39,777,298
Beginning of period 360,978,833 297,841,921 60,097,613
20,320,315
- -----------------------------------------------------------
End of period $582,080,189 $360,978,833 $118,716,410
$60,097,613
- -----------------------------------------------------------
- -----------------------------------------------------------
Undistributed (overdistributed) net investment income $ 7,724,243 $ (1,068) $ 751,089 $
483,938
<CAPTION>
OPPENHEIMER
GROWTH &
INCOME
FUND
---------------------------
1996 1995(1)
---------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 303,556 $ 4,573
Net realized gain (loss) 2,657,756 27,238
Net change in unrealized appreciation or depreciation 2,697,929 505,175
--------------------------
Net increase in net assets resulting from operations 5,659,241 536,986
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (291,690) (4,891)
Distributions from net realized gain (31,219) --
Distributions in excess of net realized gain -- 37
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net assets resulting from
beneficial interest transactions - See applicable note 37,384,461 3,756,393
--------------------------
NET ASSETS:
Total increase (decrease) 42,720,793 4,288,451
Beginning of period 4,288,451 --
--------------------------
End of period $47,009,244 $4,288,451
--------------------------
--------------------------
Undistributed (overdistributed) net investment income $ 12,643 $ (318)
</TABLE>
1. For the period from July 5, 1995 (commencement of operations) to
December 31, 1995.
See accompanying Notes to Financial Statements.
88
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
FINANCIAL HIGHLIGHTS
DECEMBER 31, 1996
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------
Income from investment operations - net
investment income and net realized gain .05 .06 .04 .03 .04
Dividends and distributions to shareholders (.05) (.06) (.04) (.03) (.04)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 5.13% 5.62% 4.25% 3.09% 3.93%
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $129,719 $65,386 $89,671 $61,221 $58,266
- ------------------------------------------------------------------------------------------------
Average net assets (in thousands) $99,263 $75,136 $90,264 $57,654 $61,317
- ------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.01% 5.52% 4.18% 3.12% 3.76%
Expenses 0.49% 0.51% 0.43% 0.43% 0.50%
</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.
See accompanying Notes to Financial Statements.
89
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 10.63 $ 9.79 $ 11.02 $ 9.74 $ 9.40
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .97 .98 .94 .82 1.19
Net realized and unrealized gain (loss) .58 .94 (1.27) 1.65 .43
- ----------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.55 1.92 (.33) 2.47 1.62
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (1.05) (1.08) (.66) (1.19) (1.28)
Distributions from net realized gain -- -- (.24) -- --
- ----------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.05) (1.08) (.90) (1.19) (1.28)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.13 $ 10.63 $ 9.79 $ 11.02 $ 9.74
----------------------------------------------------------
----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 15.26% 20.37% (3.18)% 26.34% 17.92%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $191,293 $133,451 $ 95,698 $93,011 $40,817
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $157,203 $115,600 $101,096 $67,000 $36,861
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 9.18% 9.81% 9.15% 10.50% 12.08%
Expenses 0.81% 0.81% 0.67% 0.68% 0.73%
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 125.0% 107.1% 110.1% 135.7% 144.2%
</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. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1996 were
$216,284,607 and $177,884,266, respectively.
See accompanying Notes to Financial Statements.
90
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 11.84 $ 10.78 $ 11.65 $ 10.99 $ 11.15
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .69 .72 .76 .65 .87
Net realized and unrealized gain (loss) (.15) 1.07 (.98) .76 (.17)
- ----------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .54 1.79 (.22) 1.41 .70
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.74) (.73) (.62) (.75) (.86)
Distributions from net realized gain (.01) -- (.03) -- --
- ----------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.75) (.73) (.65) (.75) (.86)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.63 $ 11.84 $ 10.78 $ 11.65 $ 10.99
----------------------------------------------------------
----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 4.80% 17.00% (1.94)% 13.04% 6.50%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $426,439 $211,232 $135,067 $111,846 $63,354
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $296,253 $170,929 $121,884 $ 87,215 $45,687
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.72% 6.91% 7.30% 7.20% 7.81%
Expenses 0.78% 0.80% 0.57% 0.46% 0.56%
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 82.3% 79.4% 35.1% 36.3% 41.3%
</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. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1996 were
$449,994,454 and $218,747,414, respectively.
See accompanying Notes to Financial Statements.
91
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993
1992
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
<S> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $34.21 $25.95 $31.64 $26.04
$23.24
- ----------------------------------------------------------------------------------------------------------------
- ---------
Income (loss) from investment operations:
Net investment income .09 .11 .10 .05
.06
Net realized and unrealized gain (loss) 6.59 8.29 (2.22) 6.71
3.43
- ----------------------------------------------------------------------------------------------------------------
- ---------
Total income (loss) from investment operations: 6.68 8.40 (2.12) 6.76
3.49
- ----------------------------------------------------------------------------------------------------------------
- ---------
Dividends and distributions to shareholders:
Dividends from net investment income (.11) (.09) (.04) (.06)
(.14)
Distributions from net realized gain (2.07) (.05) (3.53) (1.10)
(.55)
- ----------------------------------------------------------------------------------------------------------------
- ---------
Total dividends and distributions
to shareholders (2.18) (.14) (3.57) (1.16)
(.69)
- ----------------------------------------------------------------------------------------------------------------
- ---------
Net asset value, end of period $38.71 $34.21 $25.95 $31.64
$26.04
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
TOTAL RETURN, AT NET ASSET VALUE(1) 20.22% 32.52% (7.59)% 27.32%
15.42%
- ----------------------------------------------------------------------------------------------------------------
- ---------
- ----------------------------------------------------------------------------------------------------------------
- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $617,392 $325,404 $185,774 $136,885
$83,335
- ----------------------------------------------------------------------------------------------------------------
- ---------
Average net assets (in thousands) $467,080 $240,730 $153,832 $98,228
$56,371
- ----------------------------------------------------------------------------------------------------------------
- ---------
Ratios to average net assets:
Net investment income 0.32% 0.47% 0.50% 0.23%
0.30%
Expenses 0.75% 0.78% 0.57% 0.47%
0.54%
- ----------------------------------------------------------------------------------------------------------------
- ---------
Portfolio turnover rate(2) 100.1% 125.5% 96.5% 122.8%
78.9%
Average brokerage commission rate(3) $0.0583 $0.0577 -- --
--
</TABLE>
1. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Total returns are not annualized for periods of less than one full year.
Total return information does not reflect expenses that apply at the separate
account level or to related insurance products. Inclusion of these charges
would reduce the total return figures for all periods shown.
2. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1996 were
$507,743,146 and $384,247,154, respectively.
3. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total of related shares
purchased and sold.
See accompanying Notes to Financial Statements.
92
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $23.55 $17.68 $17.70 $16.96 $15.17
- ------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .15 .25 .22 .46 .16
Net realized and unrealized gain (loss) 5.46 6.10 (.05) .74 1.99
- ------------------------------------------------------------------------------------------------
Total income from investment operations 5.61 6.35 .17 1.20 2.15
- ------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.25) (.22) (.15) (.14) (.36)
Distributions from net realized gain (1.67) (.26) (.04) (.32) --
- ------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.92) (.48) (.19) (.46) (.36)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $27.24 $23.55 $17.68 $17.70 $16.96
-----------------------------------------------------
-----------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 25.20% 36.65% 0.97% 7.25% 14.53%
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $285,920 $117,710 $63,283 $56,701 $36,494
- ------------------------------------------------------------------------------------------------
Average net assets (in thousands) $152,466 $88,803 $59,953 $46,389 $25,750
- ------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.08% 1.46% 1.38% 1.13% 1.36%
Expenses, before voluntary reimbursement
by the Manager 0.81% 0.79% 0.58% 0.50% 0.61%
Expenses, net of voluntary reimbursement
by the Manager 0.79% N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 65.4% 58.2% 53.8% 12.6% 48.7%
Average brokerage commission rate(3) $0.0589 $0.0590 -- -- --
</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. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1996 were
$117,544,250 and $78,446,013, respectively.
3. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
93
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 14.55 $ 12.91 $ 13.88 $ 12.47 $ 11.96
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .72 .66 .63 .55 .55
Net realized and unrealized gain (loss) 1.45 2.00 (.90) 1.41 .50
- ----------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 2.17 2.66 (.27) 1.96 1.05
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.74) (.65) (.60) (.55) (.54)
Distributions from net realized gain (.35) (.37) (.10) -- --
- ----------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.09) (1.02) (.70) (.55) (.54)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.63 $ 14.55 $ 12.91 $ 13.88 $ 12.47
----------------------------------------------------------
----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 15.50% 21.36% (1.95)% 15.95% 8.99%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $484,285 $381,263 $292,067 $250,290 $159,464
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $428,277 $344,745 $279,949 $199,954 $139,011
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.89% 4.81% 4.90% 4.44% 4.63%
Expenses 0.77% 0.77% 0.56% 0.48% 0.55%
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 40.3% 39.0% 31.4% 32.4% 57.8%
Average brokerage commission rate(3) $ 0.0361 $ 0.0329 -- -- --
</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. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1996 were
$211,489,140 and $146,222,245 respectively.
3. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
94
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 15.00 $ 15.09 $ 16.30 $ 9.57 $ 10.38
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .15 .12 .04 (.02) .07
Net realized and unrealized gain (loss) 2.52 .19 (.96) 6.75 (.80)
- ----------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 2.67 .31 (.92) 6.73 (.73)
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- -- (.04) -- (.04)
Distributions from net realized gain -- (.40) (.25) -- (.04)
- ----------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders -- (.40) (.29) -- (.08)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.67 $ 15.00 $ 15.09 $ 16.30 $ 9.57
----------------------------------------------------------
----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 17.80% 2.24% (5.72)% 70.32% (7.11)%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $580,998 $360,979 $297,842 $96,425 $13,537
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $466,750 $332,336 $214,545 $31,696 $11,181
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.09% 0.86% 0.54% 0.72% 1.04%
Expenses 0.81% 0.89% 0.91% 0.92% 1.06%
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 89.9% 131.3% 70.4% 65.1% 34.1%
Average brokerage commission rate(3) $ 0.0045 $ 0.0092 -- -- --
</TABLE>
1. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Total returns are not annualized for periods of less than one full year.
Total return information does not reflect expenses that apply at the separate
account level or to related insurance products. Inclusion of these charges
would reduce the total return figures for all periods shown.
2. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1996 were
$508,437,343 and $396,821,829, respectively.
3. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
95
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993(1)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 4.91 $ 4.60 $ 5.12 $ 5.00
- ---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .38 .38 .35 .10
Net realized and unrealized gain (loss) .19 .30 (.54) .11
- ---------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .57 .68 (.19) .21
- ---------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.39) (.37) (.32) (.09)
Distributions in excess of net realized gain -- -- (.01) --
- ---------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.39) (.37) (.33) (.09)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.09 $ 4.91 $ 4.60 $ 5.12
---------------------------------------------
---------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 12.07% 15.33% (3.78)% 4.25%
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $118,716 $60,098 $20,320 $9,887
- ---------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 82,604 $37,698 $15,389 $4,259
- ---------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.48% 9.32% 8.36% 5.67%(3)
Expenses 0.85% 0.85% 0.87% 0.96%(3)
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 144.3% 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. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1996 were
$173,855,919 and $107,646,460, respectively.
See accompanying Notes to Financial Statements.
96
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED DECEMBER 31,
1996 1995(1)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 12.51 $ 10.00
- -----------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .01
Net realized and unrealized gain 3.91 2.52
- -----------------------------------------------------------------------
Total income from investment operations 4.05 2.53
- -----------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.14) (.02)
Distributions from net realized gain (.05) --
- -----------------------------------------------------------------------
Total dividends and distributions
to shareholders (.19) (.02)
- -----------------------------------------------------------------------
Net asset value, end of period $ 16.37 $ 12.51
---------------------
---------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 32.51% 25.25%
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $47,009 $ 4,288
- -----------------------------------------------------------------------
Average net assets (in thousands) $21,562 $ 1,809
- -----------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.41% 0.50%(3)
Expenses 1.00% 2.07%(3)
- -----------------------------------------------------------------------
Portfolio turnover rate(4) 112.6% 23.7%
Average brokerage commission rate(5) $0.0618 $0.0598
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. Purchases and sales of investment securities (excluding
short-term securities) for the period ended December 31, 1996 were
$58,041,356 and $22,631,948, respectively.
5. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
97
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Money Fund (OMF), Oppenheimer High Income Fund (OHIF),
Oppenheimer Bond Fund (OBF), Oppenheimer Capital Appreciation Fund (OCAP),
Oppenheimer Growth Fund (OGF), Oppenheimer Multiple Strategies Fund (OMSF),
Oppenheimer Global Securities Fund (OGSF), Oppenheimer Strategic Bond Fund
(OSBF) and Oppenheimer Growth & Income Fund (OGIF) (collectively, the
Funds) are separate series of Oppenheimer Variable Account Funds (the
Trust), a diversified, open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Trust's
investment adviser is OppenheimerFunds, Inc. (the Manager). Shares of the
Oppenheimer Variable Account Funds are sold only to separate accounts of
insurance companies, principally MassMutual Life Insurance Company, an
affiliate of the Manager, Aetna Life Insurance & Annuity Company, Merrill
Lynch Insurance Group, Bankers Security Life Insurance Society, Life
Insurance Company of Virginia, Nationwide Life Insurance Company, and
Jefferson Pilot. The following is a summary of significant accounting
policies consistently followed by the Funds. The Funds' objectives are as
follows:
OPPENHEIMER MONEY FUND seeks the maximum current income from investments in
"money market" securities consistent with low capital risk and the
maintenance of liquidity.
OPPENHEIMER HIGH INCOME FUND seeks a high level of current income from
investments in high yield fixed income securities.
OPPENHEIMER BOND FUND primarily seeks a high level of current income from
investments in high yield fixed income securities.
OPPENHEIMER CAPITAL APPRECIATION FUND seeks to achieve capital appreciation
by investing in "growth-type" companies.
OPPENHEIMER GROWTH FUND seeks to achieve capital appreciation by investing
in securities of well-known established companies.
OPPENHEIMER 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 GLOBAL SECURITIES FUND seeks long-term capital appreciation by
investing a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special institutions which
are considered to have appreciation possibilities.
OPPENHEIMER STRATEGIC BOND FUND seeks a high level of current income
principally derived from interest on debt securities.
OPPENHEIMER 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.
INVESTMENT VALUATION.
Portfolio securities of OMF are valued on the basis of amortized cost,
which approximates market value. Portfolio securities of OHIF, OBF, OCAP,
OGF, OMSF, OGSF, OSBF and OGIF are valued at the close of the New York
Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale
price of the day or, in the absence of sales, at values based on the
closing bid or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio
pricing service approved by the Board of Trustees. Such securities which
cannot be valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by
the Board of Trustees to determine fair value in good faith. Short-term
"money market type" debt securities having a remaining maturity of 60 days
or less are valued at cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount. Forward foreign
currency exchange contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange markets on a
daily basis as provided by a reliable bank or dealer. Options are valued
based upon the last sale price on the principal exchange on which the
option is traded or, in the absence of any transactions that day, the value
is based upon the last sale on the prior trading date if it is within the
spread between the closing bid and asked prices. If the last sale price is
outside the spread, the closing bid is used.
98
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS.
Delivery and payment for securities that have been purchased by OHIF, OBF,
OMSF, OSBF and OGIF on a forward commitment or when-issued basis can take
place a month or more after the transaction date. During the period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Funds maintain,
in segregated accounts with the custodian, assets with a market value equal
to the amount of their purchase commitments. The purchase of securities on
a when-issued or forward commitment basis may increase the volatility of
the Funds' net asset values to the extent the Funds make such purchases
while remaining substantially fully invested.
In connection with their ability to purchase securities on a when-issued or
forward commitment basis, OHIF, OBF and OSBF may enter into mortgage
"dollar-rolls" in which the Funds sell securities for delivery in the
current month and simultaneously contract with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical
securities on a specified future date. The Funds record each dollar-roll
as a sale and a new purchase transaction. As of December 31, 1996, OBF had
entered into outstanding when-issued or forward commitments for mortgage
"dollar-rolls" of $23,817,266.
SECURITY CREDIT RISK.
OHIF, OMSF and OSBF invest in high yield securities, which may be subject
to a greater degree of credit risk, greater market fluctuations and risk of
loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The
Funds may acquire securities in default, and are not obligated to dispose
of securities whose issuers subsequently default.
FOREIGN CURRENCY TRANSLATION.
The accounting records of the Funds are maintained in U.S. dollars. Prices
of securities purchased by OHIF, OBF, OMSF, OGSF, OSBF and OGIF that are
denominated in foreign currencies are translated into U.S. dollars at the
closing rates of exchange. Amounts related to the purchase and sale of
securities and investment income are translated at the rates of exchange
prevailing on the respective dates of such transactions.
For OHIF, OBF, OMSF, OGSF, OSBF and OGIF, the effect of changes in foreign
currency exchange rates on investments is separately identified from the
fluctuations arising from changes in market values of securities held and
reported with all other foreign currency gains and losses in the Funds'
Statements of Operations.
REPURCHASE AGREEMENTS.
The Funds require the custodian to take possession, to have legally
segregated in the Federal Reserve Book Entry System or to have segregated
within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of purchase.
If the seller of the agreement defaults and the value of the collateral
declines, or if the seller enters an insolvency proceeding, realization of
the value of the collateral by the Funds may be delayed or limited.
FEDERAL TAXES.
The Trust intends for each Fund to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At December 31, 1996,
OBF and OGSF had available for federal income tax purposes an unused
capital loss carryover of approximately $727,000 and $16,867,000, which
expires in 2003.
DISTRIBUTIONS TO SHAREHOLDERS.
Dividends and distributions to shareholders of OHIF, OBF, OCAP, OGF, OMSF,
OGSF, OSBF and OGIF are recorded on the ex-dividend date. OMF intends to
declare dividends from net investment income each day the New York Stock
Exchange is open for business and pay such dividends monthly. To effect
its policy of maintaining a net asset value of $1.00 per share, OMF may
withhold dividends or make distributions of net realized gains.
99
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes primarily because of premium
amortization, paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes.
The character of the distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gain (loss) was
recorded by the Funds.
During the year ended December 31, 1996, the Funds adjusted the
classification of distributions to shareholders to reflect the differences
between financial statement amounts and distributions determined in
accordance with income tax regulations. Changes in classification made
during the fiscal year ended December 31, 1996 are shown below:
<TABLE>
<CAPTION>
Adjustments for the Fiscal Year Ended December 31, 1996
-----------------------------------------------------------------------
Undistributed Net
Investment Income Undistributed Net Realized Paid-in
(Loss) Gain (Loss) on Investments Capital
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer High Income Fund $ 293,322 $ (293,322)
- --
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Bond Fund 811,172 (811,172)
- --
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Fund (36,290) 36,290
- --
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 2,649,581 (2,649,581)
- --
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 154,274 (154,274)
- --
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund 1,095 (1,095)
- --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER.
Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased by OHIF, OBF, OMSF,
OGSF, OSBF and OGIF is amortized over the life of the respective
securities, in accordance with federal income tax requirements. Realized
gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same
basis used for federal income tax purposes. Dividends-in-kind are
recognized as income on the ex-dividend date, at the current market value
of the underlying security. Interest on payment-in-kind debt instruments
is accrued as income at the coupon rate, and a market adjustment is made on
the ex-date.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
100
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF BENEFICIAL INTEREST
The Funds have authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
OPPENHEIMER MONEY FUND
<TABLE>
<CAPTION>
Year Ended December 31, 1996 Year Ended December 31, 1995
----------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold 304,073,729 $ 304,073,729 202,748,102 $ 202,748,102
Dividends and
distributions reinvested 4,923,661 4,923,661 4,222,747 4,222,747
Issued in connection with the
acquisition of:
Panorama Series Fund, Inc.,
Money Market
Portfolio - Note 9 63,968,818 63,968,791 -- --
Redeemed (308,637,087) (308,637,087) (231,260,663) (231,260,663)
------------ ------------ ------------ -------------
Net increase (decrease) 64,329,121 $ 64,329,094 (24,289,814) $ (24,289,814)
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
OPPENHEIMER HIGH INCOME FUND
Year Ended December 31, 1996 Year Ended December 31, 1995
----------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold 9,857,582 $107,788,590 5,873,231 $ 60,932,670
Dividends and
distributions reinvested 1,412,713 15,283,448 1,162,957 12,040,152
Redeemed (6,635,862) (72,550,951) (4,263,757) (44,560,679)
------------ ------------ ------------ -------------
Net increase 4,634,433 $ 50,521,087 2,772,431 $ 28,412,143
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
OPPENHEIMER BOND FUND
Year Ended December 31, 1996 Year Ended December 31, 1995
----------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold 10,037,878 $116,328,846 7,311,733 $ 83,544,442
Dividends and
distributions reinvested 1,774,316 20,314,347 976,291 11,209,883
Issued in connection with the
acquisition of:
Panorama Series Fund, Inc.,
Income Portfolio - Note 9 9,249,653 107,187,159 -- --
Panorama Series Fund, Inc.,
Government Securities
Portfolio - Note 9 4,237 48,557 -- --
JP Investment Grade Bond
Fund, Inc. - Note 9 2,594,896 30,151,368 -- --
Redeemed (4,827,959) (55,937,445) (2,972,687) (33,822,108)
------------ ------------ ------------ -------------
Net increase 18,833,021 $218,092,832 5,315,337 $ 60,932,217
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
101
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF BENEFICIAL INTEREST (continued)
OPPENHEIMER CAPITAL APPRECIATION FUND
Year Ended December 31, 1996 Year Ended December 31, 1995
----------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold 12,247,492 $455,862,164 8,882,212 $ 260,650,476
Dividends and
distributions reinvested 643,582 22,422,394 40,594 1,082,642
Redeemed (6,453,749) (237,187,104) (6,567,729) (191,565,283)
------------ ------------ ------------ -------------
Net increase 6,437,325 $ 241,097,454 2,355,077 $ 70,167,835
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
OPPENHEIMER GROWTH FUND
Year Ended December 31, 1996 Year Ended December 31, 1995
----------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold 5,738,355 $144,756,556 4,302,304 $ 89,007,340
Dividends and
distributions reinvested 430,280 10,016,909 95,991 1,795,026
Issued in connection with the
acquisition of JP Capital
Appreciation Fund,
Inc. - Note 5 3,293,050 90,009,399 -- --
Redeemed (3,964,366) (99,657,552) (2,980,080) (60,949,490)
------------ ------------ ------------ -------------
Net increase 5,497,319 $145,125,312 1,418,215 $ 29,852,876
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
OPPENHEIMER MULTIPLE STRATEGIES FUND
Year Ended December 31, 1996 Year Ended December 31, 1995
----------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold 5,556,735 $ 83,206,142 6,445,242 $ 88,771,497
------------ ------------ ------------ -------------
Dividends and
distributions reinvested 2,062,453 30,564,114 1,818,313 24,783,721
Redeemed (2,838,629) (42,497,621) (4,671,097) (64,421,131)
------------ ------------ ------------ -------------
Net increase 4,780,559 $ 71,272,635 3,592,458 $ 49,134,087
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
102
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF BENEFICIAL INTEREST (continued)
OPPENHEIMER GLOBAL SECURITIES FUND
Year Ended December 31, 1996 Year Ended December 31, 1995
----------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold 14,595,634 $237,535,239 11,235,722 $ 166,766,446
Dividends and
distributions reinvested -- -- 585,961 8,174,158
Redeemed (5,717,318) (92,429,081) (7,497,205) (112,360,172)
------------ ------------ ------------ -------------
Net increase 8,878,316 $145,106,158 4,324,478 $ 62,580,432
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
OPPENHEIMER STRATEGIC BOND FUND
Year Ended December 31, 1996 Year Ended December 31, 1995
----------------------------- -----------------------------
Shares Amount Shares Amount
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold 12,624,581 $ 63,274,177 9,417,090 $ 44,897,472
Dividends and
distributions reinvested 1,387,256 6,891,899 661,301 3,151,540
Redeemed (2,946,444) (14,660,178) (2,245,623) (10,642,846)
------------ ------------ ------------ -------------
Net increase 11,065,393 $ 55,505,898 7,832,768 $ 37,406,166
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
OPPENHEIMER GROWTH & INCOME FUND
Year Ended December 31, 1996 Year Ended December 31, 1995(1)
----------------------------- -------------------------------
Shares Amount Shares Amount
---------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sold 2,942,183 $43,552,642 358,253 $3,933,459
Dividends and
distributions reinvested 21,023 322,909 404 4,928
Redeemed (435,180) (6,491,090) (15,863) (181,994)
------------ ------------ ------------ -------------
Net increase 2,528,026 $37,384,461 342,794 $3,756,393
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
</TABLE>
1. For the period from July 5, 1995 (commencement of operations) to December 31,
1995.
103
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At December 31, 1996, net unrealized appreciation or depreciation on investments
and options written consisted of the following:
OPPENHEIMER
OPPENHEIMER OPPENHEIMER CAPITAL OPPENHEIMER
HIGH INCOME BOND APPRECIATION GROWTH
FUND FUND FUND FUND
-------------------------------------------------------
Gross appreciation $11,696,415 $ 7,567,187 $116,514,163 $60,419,855
Gross depreciation (1,321,412) (2,940,260) (11,808,397) (3,364,356)
-------------------------------------------------------
Net unrealized
appreciation $10,375,003 $ 4,626,927 $104,705,766 $57,055,499
-------------------------------------------------------
-------------------------------------------------------
OPPENHEIMER OPPENHEIMER OPPENHEIMER OPPENHEIMER
MULTIPLE GLOBAL STRATEGIC GROWTH &
STATEGIES SECURITIES BOND INCOME
FUND FUND FUND FUND
-------------------------------------------------------
Gross appreciation $74,183,201 $89,877,396 $3,681,908 $ 4,492,146
Gross depreciation (9,242,682) (9,044,682) (977,100) (1,289,042)
-------------------------------------------------------
Net unrealized
appreciation $64,940,519 $80,832,714 $2,704,808 $ 3,203,104
-------------------------------------------------------
-------------------------------------------------------
4. OPTION ACTIVITY
The Funds (except OMF) may buy and sell put and call options, or write put and
covered call options on portfolio securities in order to produce incremental
earnings or protect against changes in the value of portfolio securities.
The Funds generally purchase put options or write covered call options to hedge
against adverse movements in the value of portfolio holdings. When an option is
written, the Funds receive a premium and become obligated to sell or purchase
the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Funds will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statements of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a
footnote to the Statements of Investments. Options written are reported as a
liability in the Statements of Assets and Liabilities. Gains and losses are
reported in the Statements of Operations.
The risk in writing a call option is that the Funds give up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Funds may incur a loss
if the market price of the security decreases and the option is exercised. The
risk in buying an option is that the Funds pay a premium whether or not the
option is exercised. The Funds also have the additional risk of not being able
to enter into a closing transaction if a liquid secondary market does not exist.
The Funds may also write over-the-counter options where the completion of the
obligation is dependent upon the credit standing of the counterparty.
104
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
4. OPTION ACTIVITY (continued)
OHIF option activity for the year ended December 31, 1996 was as follows:
CALL OPTIONS PUT OPTIONS
--------------------- -------------------
Number of Amount of Number of Amount of
Options Premiums Options Premiums
---------- -------- -------- ---------
Options outstanding at
December 31, 1995 100 $ 1,430 -- $ --
Options written 13,189,736 158,172 229,892 288,149
Options closed or expired (8,691,827) (94,602) (229,892) (288,149)
Options exercised (2,037,479) (22,715) -- --
---------- -------- -------- ---------
Options outstanding at
December 31, 1996 2,460,530 $ 42,285 -- $ --
---------- -------- -------- ---------
---------- -------- -------- ---------
OBF option activity for the year ended December 31, 1996 was as follows:
CALL OPTIONS
-------------------------
Number of Amount of
Options Premiums
----------- ---------
Options outstanding at December 31, 1995 -- $ --
Options written 31,041,247 255,822
Options closed or expired (20,301,055) (150,082)
Options exercised (4,540,442) (25,556)
----------- ---------
Options outstanding at December 31, 1996 6,199,750 $ 80,184
----------- ---------
----------- ---------
OMSF option activity for the year ended December 31, 1996 was as follows:
CALL OPTIONS
-------------------------
Number of Amount of
Options Premiums
----------- ---------
Options outstanding at December 31, 1995 3,603 $ 1,100,095
Options written 8,420 2,216,105
Options closed or expired (5,866) (1,583,301)
Options exercised (1,588) (497,763)
----------- -----------
Options outstanding at December 31, 1996 4,569 $ 1,235,136
----------- -----------
----------- -----------
OSBF option activity for the year ended December 31, 1996 was as follows:
CALL OPTIONS PUT OPTIONS
--------------------- --------------------
Number of Amount of Number of Amount of
Options Premiums Options Premiums
---------- -------- -------- ---------
Options outstanding at
December 31, 1995 1,000 $ 14,300 -- $ --
---------- -------- -------- ---------
Options written 21,470,679 231,513 158,210 100,144
---------- -------- -------- ---------
Options closed or expired (8,767,062) (112,587) -- --
Options exercised (3,329,326) (21,980) (157,835) (91,152)
---------- -------- -------- ---------
Options outstanding at
December 31, 1996 9,375,291 $ 111,246 375 $ 8,992
---------- -------- -------- ---------
---------- -------- -------- ---------
105
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
4. OPTION ACTIVITY (continued)
OGIF option activity for the year ended December 31, 1996 was as follows:
CALL OPTIONS
-------------------------
Number of Amount of
Options Premiums
----------- ---------
Options outstanding at December 31, 1995 -- $ --
Options written 19 6,301
Options closed or expired (19) (6,301)
--- -------
Options outstanding at December 31, 1996 -- $ --
--- -------
--- -------
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Funds (except OMF) use forward contracts to seek to manage foreign currency
risks. They may also be used to tactically shift portfolio currency risk. The
Funds generally enter into forward contracts as a hedge upon the purchase or
sale of a security denominated in a foreign currency. In addition, the Funds
may enter into such contracts as a hedge against changes in foreign currency
exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of the forward currency
contract rates in the London foreign exchange markets on a daily basis as
provided by a reliable bank or dealer. The Funds will realize a gain or loss
upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on outstanding
forward contracts are noted in the Statements of Investments where applicable.
Unrealized appreciation or depreciation on forward contracts is reported in the
Statements of Assets and Liabilities. Realized gains and losses are reported
with all other foreign currency gains and losses in the Funds' Statements of
Operations.
Risks include the potential inability of the counterparty to meet the terms of
the contract and unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At December 31, 1996, outstanding forward contracts to purchase and sell foreign
currencies were as follows:
OPPENHEIMER HIGH INCOME FUND
<TABLE>
<CAPTION>
CONTRACT AMOUNT VALUATION AS OF UNREALIZED
UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE (000'S) DECEMBER 31, 1996 APPRECIATION
DEPECIATION
- ----------------------------------------------------------------------------------------------------------------
- -----------------
<S> <C> <C> <C> <C>
<C>
South African Rand (ZAR) 1/3/97 940 ZAR $ 200,737 $ 547
$ --
Spanish Peseta (ESP) 10/20/97 135,015 ESP 1,038,134 9,835
--
---------- --------
----
$1,238,871 10,382
--
---------- --------
----
----------
CONTRACTS TO SELL
- -----------------
Swiss Franc (CHF) 1/21/97-10/20/97 4,920 CHF $3,708,898 $203,760
817
---------- --------
----
----------
Total Unrealized Appreciation and Depreciation $214,142
$817
--------
----
--------
----
106
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (continued)
OPPENHEIMER BOND FUND
CONTRACT AMOUNT VALUATION AS OF UNREALIZED
UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE (000'S) DECEMBER 31, 1996 APPRECIATION
DEPECIATION
- ----------------------------------------------------------------------------------------------------------------
- -----------------
South African Rand (ZAR) 1/3/97 2,352 ZAR $ 502,368 $ 1,369
$
Spanish Peseta (ESP) 10/20/97 387,303 ESP 2,977,974 21,075
--
---------- ------------
------
$3,480,342 22,444
--
---------- ------------
------
----------
CONTRACTS TO SELL
- -----------------
Canadian Dollar (CAD) 3/3/97 1,700 CAD 1,245,403 23,727
--
Swiss Franc (CHF) 1/21/97-10/20/97 10,860 CHF 8,205,646 447,489
840
---------- ------------
------
$9,451,049 471,216
840
---------- ------------
------
----------
Total Unrealized Appreciation and Depreciation $ 493,660
$840
------------
------
------------
------
OPPENHEIMER GLOBAL SECURITIES FUND
CONTRACT AMOUNT VALUATION AS OF UNREALIZED
UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE (000'S) DECEMBER 31, 1996 APPRECIATION
DEPECIATION
- ----------------------------------------------------------------------------------------------------------------
- -----------------
British Pound Sterling (GBP) 1/7/97 126 GBP $ 216,416 $ 2,493
$ --
Deutsche Mark (DEM) 1/2/97-1/3/97 3,477 DEM 2,256,966 19,488
--
------------ ----------
--------
$ 2,473,382 21,981
--
------------ ----------
--------
------------
CONTRACTS TO SELL
- -----------------
Brazilian Real (BRR) 1/2/97 303 BRR $ 292,022 --
339
French Franc (FRF) 3/11/97 130,595 FRF 25,256,084 --
256,084
Swiss Franc (CHF) 1/8/97 17,203 CHF 12,832,949 990,675
--
Deutsche Mark (DEM) 1/6/97-1/8/97 29,194 DEM 19,081,287 1,372,221
3,543
------------ ----------
---------
$ 57,462,342 2,362,896
259,966
------------ ----------
---------
------------
Total Unrealized Appreciation and Depreciation $2,384,877
$ 259,966
----------
---------
----------
---------
OPPENHEIMER STRATEGIC BOND FUND
CONTRACT AMOUNT VALUATION AS OF UNREALIZED
CONTRACTS TO SELL EXPIRATION DATE (000'S) DECEMBER 31, 1996 APPRECIATION
- --------------------------------------------------------------------------------------------------------------
Canadian Dollar (CAD) 2/12/97-3/5/97 4,680 CAD $3,427,518 $ 44,790
Swedish Krona (SEK) 2/3/97 2,500 SEK 368,393 14,045
Swiss Franc (CHF) 1/21/97-3/17/97 3,395 CHF 2,540,623 118,879
---------- ---------
$6,336,534 $177,714
---------- ---------
---------- ---------
</TABLE>
6. FUTURES CONTRACTS
The Funds (except OMF) may buy and sell interest rate futures contracts in order
to gain exposure to or protect against changes in interest rates. The Funds may
also buy or write put or call options on these futures contracts.
The Funds generally sell futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Funds may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Funds are required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Funds each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Funds recognize a realized gain or loss when the contract is closed
or expires.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statements of Investments. The
Statements of Assets and Liabilities reflect a receivable or payable for the
daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
107
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
6. FUTURES CONTRACTS (continued)
At December 31, 1996, outstanding futures contracts were as follows:
OPPENHEIMER HIGH INCOME FUND
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Date Futures Contracts December 31, 1996 Depreciation
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Russell 2000 Index 3/97 35 $ 3,730,781 $17,500
----------- -------
----------- -------
OPPENHEIMER BOND FUND
Expiration Number of Valuation as of Unrealized
Date Futures Contracts December 31, 1996 Depreciation
- ------------------------------------------------------------------------------------------------
U.S. Treasury Nts. 3/97 30 $ 3,197,813 $15,000
U.S. Treasury Bonds 3/97 30 3,378,750 250
----------- -------
$ 6,576,563 $15,250
----------- -------
----------- -------
OPPENHEIMER CAPITAL APPRECIATION FUND
Expiration Number of Valuation as of Unrealized
Date Futures Contracts December 31, 1996 Depreciation
- ------------------------------------------------------------------------------------------------
Russell 2000 Index 3/97 440 $79,805,000 $516,694
----------- -------
----------- -------
OPPENHEIMER STRATEGIC BOND FUND
Unrealized
Expiration Number of Valuation as of Appreciation
Date Futures Contracts December 31, 1996 (Depreciation)
- ------------------------------------------------------------------------------------------------
French Nts. 3/97 20 $ 2,468,292 $ 15,485
German Nts. 3/97 3 490,507 (3,196)
U.S. Treasury Nts. 3/97 89 9,724,938 121,406
----------- --------
$12,683,737 $133,695
----------- ---------
----------- ---------
</TABLE>
7. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreements with the Trust. For OHIF, OBF, OCAP, OGF, OMSF, OGSF, OSBF
and OGIF, the annual fees are 0.75% of the first $200 million of net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million and 0.60% of net assets in excess of $800 million. In
addition, management fees for OHIF, OBF and OSBF are 0.50% of net assets in
excess of $1 billion. Management fees for OMF are 0.45% of the first $500
million, 0.425% of the next $500 million, 0.40% of the next $500 million and
0.375% of net assets in excess of $1.5 billion. For OSBF, the Manager has
agreed to limit the management fee charged so that the ordinary operating
expenses of the Fund will not exceed 1.0% of its average net assets in any
fiscal year. The Manager has agreed to reimburse OGF for SEC fees incurred in
connection with the acquisition of JP Capital Appreciation Fund, Inc.
8. ILLIQUID AND RESTRICTED SECURITIES
At December 31, 1996, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily-available market or if its valuation has not
changed for a certain period of time. The Funds intend to invest no more than
10% of its net assets (determined at the time of purchase and reviewed from time
to time) in illiquid and restricted securities. Certain restricted securities,
eligible for resale to qualified institutional investors, are not subject to
that limit. The aggregate value of illiquid and restricted securities subject
to this 10% limitation at December 31, 1996 are shown on the following page:
108
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
8. ILLIQUID AND RESTRICTED SECURITIES (continued)
PERCENTAGE TO
AMOUNT NET ASSETS
- ------------------------------------------------------------------------------
Oppenheimer High Income Fund $18,868,579 9.86%
- ------------------------------------------------------------------------------
Oppenheimer Bond Fund $21,365,291 5.01%
- ------------------------------------------------------------------------------
Oppenheimer Capital Appreciation Fund $ 1,083,000 0.18%
- ------------------------------------------------------------------------------
Oppenheimer Growth Fund -- --
- ------------------------------------------------------------------------------
Oppenheimer Multiple Strategies Fund $ 1,156,500 0.24%
- ------------------------------------------------------------------------------
Oppenheimer Global Securities Fund $ 3,166,926 0.55%
- ------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund $ 4,733,489 3.99%
- ------------------------------------------------------------------------------
Oppenheimer Growth & Income Fund $ 98,625 0.21%
- ------------------------------------------------------------------------------
Information concerning restricted securities is as follows:
OPPENHEIMER HIGH INCOME FUND
Valuation Per
Unit as of
Acquisition Cost December 31,
Security Date Per Unit 1996
- ------------------------------------------------------------------------------
BONDS
ECM Fund L.P.I., 14% Sub. Nts., 6/10/02 4/14/92 100.00% 110.50%
STOCKS AND WARRANTS
ECM Fund L.P.I. 4/14/92 $1,000.00 $1,005.00
Gillett Holdings, Inc. 12/1/92-1/18/96 $ 16.27 $ 36.00
Omnipoint Corp. 1/26/96 $ 16.00 $ 18.29
Omnipoint Corp. Wts., Exp. 11/00 11/29/95 $ 0.00 $ 18.29
OPPENHEIMER BOND FUND
Valuation Per
Unit as of
Acquisition Cost December 31,
Security Date Per Unit 1996
- ------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.
Units, 9.75%, 6/15/99 5/15/95 110.05% 118.80%
OPPENHEIMER STRATEGIC BOND FUND
Valuation Per
Unit as of
Acquisition Cost December 31,
Security Date Per Unit 1996
- ------------------------------------------------------------------------------
BONDS
Trasnpower Finance Ltd., 8% Gtd.
Unsec. Unsub. Bonds, 2/15/01 5/17/96 6.49% 72.19%
STOCKS
Gillett Holdings, Inc. 1/18/96 $21.25 $36.00
109
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
9. ACQUISITIONS
On June 3, 1996, OMF acquired a portion of the net assets of Panorama
Series Fund, Inc. - Money Market Portfolio. The Fund issued 49,302,270 shares
of beneficial interest, valued at $49,302,270, in exchange for the net assets,
resulting in combined net assets of $113,051,628 on June 3, 1996.
On December 2, 1996, OMF acquired the remaining net assets of Panorama
Series Fund, Inc. - Money Market Portfolio. The Fund issued 14,666,548 shares
of beneficial interest, valued at $14,666,521, in exchange for the net assets,
resulting in combined net assets of $124,845,270 on December 2, 1996.
On May 1, June 3 and December 2, 1996, OBF acquired all the net assets of
Panorama Series Fund, Inc., Income Portfolio. The Fund issued 12,999,
6,743,062 and 2,493,592 shares of beneficial interest, respectively, valued
at $148,965, $77,208,064 and $29,830,130, respectively, in exchange for
the net assets, resulting in combined net assets of $227,552,225,
$308,666,225 and $396,656,585.
On May 1, 1996, OBF acquired a portion of the net assets of Panorama Series
Fund, Inc., Government Securities Portfolio. The Fund issued 4,237 shares of
beneficial interest valued at $48,557, in exchange for the net assets, resulting
in combined net assets of $227,552,225 on May 1, 1996.
On December 20, 1996, OBF acquired all the net assets of JP Investment
Grade Bond Fund, Inc., pursuant to an agreement and plan of reorganization
approved by the JP Investment Grade Bond Fund, Inc. shareholders on
December 3, 1996. The Fund issued 2,594,896 shares of beneficial
interest valued at $30,151,368, in exchange for the net assets, resulting
in combined net assets of $426,447,902 on December 20, 1996. The net
assets acquired included net unrealized appreciation of $1,017,069. The
exchange qualifies as a tax-free reorganization for federal income tax
purposes.
On December 20, 1996, OGF acquired all the net assets of JP Capital
Appreciation Fund, Inc., pursuant to an agreement and plan of
reorganization approved by the JP Capital Appreciation Fund, Inc.
shareholders on December 3, 1996. The Fund issued 3,293,050 shares of
beneficial interest, valued at $90,009,399, in exchange for the net assets,
resulting in combined net assets of $289,484,969 on December 20, 1996. The
net assets acquired included net unrealized appreciation of $19,087,888.
The exchange qualifies as a tax-free reorganization for federal income tax
purposes.
<PAGE>
<PAGE>
Appendix A
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking<PAGE>
<PAGE>
APPENDIX B
MAJOR SHAREHOLDERS
As of March 31, 1997, the number of shares and approximate
percentage of Fund shares held of record by separate accounts of
the following insurance companies (and their respective
subsidiaries) that held 5% or more of the outstanding shares of one
of the Funds were as follows:
<TABLE>
<CAPTION>
Life of
Monarch ReliaStar Virginia Nationwide Aetna
<S> <C> <C> <C> <C> <C>
Money Fund 29,898,726 14,681,996 * * 14,810,409
21.066% 10.345% 10.435%
High Income Fund 1,097,016 1,945,740 8,957,544 * 3,164,101
6.340% 11.245% 51.769% 18.286%
Bond Fund * * 2,963,905 19,861,395 *
8.038% 53.866%
Capital
Appreciation * 1,444,422 4,888,030 * 1,628,130
Fund 8.007% 27.095% 9.025%
Growth Fund 1,006,969 * 3,318,018 * 1,983,722
8.321% 27.417% 16.392%
Multiple
Strategies 3,320,492 3,419,982 4,018,475 17,399,593 3,662,968
Fund 9.920% 10.218% 12.006% 51.983% 10.944%
Global
Securities * * * 20,180,921 2,704,317
Fund 55.631% 7.455%
Strategic
Bond Fund * * * * 3,342,326
12.654%
Growth & Income * * * * *
Fund
_______________
</TABLE>
*Less than 5% of the outstanding shares of that Fund.
(continued)<PAGE>
MassMutual Jefferson-Pilot
Money Fund 79,836,295 *
56.251%
High Income Fund 2,138,566 *
12.360%
Bond Fund 9,567,872 2,511,101
25.949% 6.810%
Capital
Appreciation 9,534,658 *
Fund 52.852%
Growth Fund 2,193,113 3,437,640
18.122% 28.405%
Multiple Strategies * *
Fund
Global Securities 11,877,059 *
Fund 32.741%
Strategic Bond
Fund 22,859,812 *
86.545%
Growth & Income 4,057,116 *
Fund 100.000%
_______________
*Less than 5% of the outstanding shares of that Fund.
<PAGE>
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
1-800-525-7048
Custodian
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
