OPPENHEIMER VARIABLE ACCOUNT FUNDS
Prospectus dated May 1, 1998
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is a diversified open-end
investment company consisting of ten 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. Secondarily, this Fund seeks capital growth when consistent with its
primary objective. Bond Fund will, under normal market conditions, invest at
least 65% of its total assets in investment grade debt securities.
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) securities of the U.S. Government and its agencies and
instrumentalities ("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. Capital appreciation is not an objective.
OPPENHEIMER AGGRESSIVE GROWTH FUND ("Aggressive Growth Fund") seeks to achieve
capital appreciation by investing in "growth-type" companies. Prior to May 1,
1998, this Fund was named Oppenheimer Capital Appreciation Fund.
OPPENHEIMER GROWTH FUND ("Growth Fund") seeks to achieve capital appreciation by
investing in securities of well-known established companies.
OPPENHEIMER SMALL CAP GROWTH FUND ("Small Cap Growth Fund") seeks capital
appreciation. Current income is not an objective. In seeking its objective, the
Fund emphasizes investments in securities of "growth-type" companies with market
capitalization less than $1 billion, including common stocks, preferred stocks,
convertible securities, rights, warrants and options, in proportions which may
vary from time to time.
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 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.
[OppenheimerFunds Logo]
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, 1998 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
-1-
<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.
o 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. As a secondary investment objective, Bond Fund seeks capital growth when
consistent with its primary objective. 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. Aggressive Growth 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. Small Cap Growth
Fund's investment objective is to seek capital appreciation . 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. 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.
o 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 will,
under normal market conditions, invest at least 65% of its total assets in
investment grade debt securities. 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 ___. Aggressive Growth Fund primarily
invests in "growth-type" companies. Growth Fund primarily invests in securities
of well-known established companies. Small Cap Growth Fund primarily invests in
securities of "growth-type" companies with market capitalization less than $1
billion. Global Securities Fund primarily invests in securities of foreign
issuers, "growth-type" companies, cyclical industries and special situations.
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.
o Who Manages the Funds? The Funds' investment adviser is
OppenheimerFunds, Inc. (the "Manager"), which (including subsidiaries) advises
investment company portfolios having over $85 billion in assets as of March 31,
1998. 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, Thomas P. Reedy; 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);
Growth Fund, Jane Putnam;
Aggressive Growth Fund, Bruce L. Bartlett;
Small Cap Growth Fund, Jay W. Tracey, III and Alan Gilston;
Global Securities Fund, William L. Wilby; and
Growth & Income Fund, 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.
o 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, Aggressive Growth
Fund, Small Cap Growth 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 ten Funds in that Money Fund intends
to maintain a stable net asset value of $1.00 per share, although there is no
assurance that it will be able to do so.
o How Can I Buy, Sell or Exchange 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, sell or exchange shares of the Funds.
o 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.
-2-
<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, 1997, is
included in the Statement of Additional Information. Shares of Small Cap Growth
Fund were not offered prior to May 1, 1998; accordingly no financial information
for that Fund is set forth below.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER MONEY FUND
----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
==================================================================================================================================
<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 .05 .06 .04 .03 .04 .06 .08 .09 .07
Dividends and distributions
to shareholders (.05) (.05) (.06) (.04) (.03) (.04) (.06) (.08) (.09) (.07)
- ----------------------------------------------------------------------------------------------------------------------------------
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) 5.31% 5.13% 5.62% 4.25% 3.09% 3.93% 6.18% 7.84% 9.56% 6.96%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period(in thousands) $126,782 $129,719 $65,386 $89,671 $61,221 $58,266 $58,709 $89,143 $68,440 $69,468
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $133,707 $ 99,263 $75,136 $90,264 $57,654 $61,317 $75,747 $82,966 $67,586 $60,241
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.19% 5.01% 5.52% 4.18% 3.12% 3.76% 5.97% 7.80% 8.82% 7.31%
Expenses 0.48% 0.49% 0.51% 0.43% 0.43% 0.50% 0.49% 0.51% 0.53% 0.55%
</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.
1
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER HIGH INCOME FUND
----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning
of period $11.13 $10.63 $ 9.79 $11.02 $ 9.74 $9.40 $7.90 $8.59 $9.30 $9.14
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .94 .97 .98 .94 .82 1.19 1.28 1.21 1.09 1.12
Net realized and unrealized
gain (loss) .37 .58 .94 (1.27) 1.65 .43 1.30 (.82) (.65) .23
------ ------ ----- ------ ----- ----- ----- ----- ----- -----
Total income (loss) from
investment operations 1.31 1.55 1.92 (.33) 2.47 1.62 2.58 .39 .44 1.35
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment
income (.91) (1.05) (1.08) (.66) (1.19) (1.28) (1.08) (1.08) (1.08) (1.07)
Distributions from net
realized gain (.01) -- -- (.24) -- -- -- -- (.07) (.12)
------ ------ ----- ------ ----- ----- ----- ------ ----- -----
Total dividends and
distributions to
shareholders (.92) (1.05) (1.08) (.90) (1.19) (1.28) (1.08) (1.08) (1.15) (1.19)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $11.52 $11.13 $10.63 $ 9.79 $11.02 $9.74 $9.40 $7.90 $8.59 $9.30
====== ====== ====== ====== ====== ===== ===== ===== ===== =====
=================================================================================================================================
TOTAL RETURN, AT NET
ASSET VALUE(1) 12.21% 15.26% 20.37% (3.18)% 26.34% 17.92% 33.91% 4.65% 4.84% 15.58%
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $291,323 $191,293 $133,451 $ 95,698 $93,011 $40,817 $27,308 $19,172 $23,698 $25,551
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $223,617 $157,203 $115,600 $101,096 $67,000 $36,861 $23,663 $21,493 $26,040 $24,530
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 8.88% 9.18% 9.81% 9.15% 10.50% 12.08% 14.26% 14.32% 11.52% 11.94%
Expenses 0.82% 0.81% 0.81% 0.67% 0.68% 0.73% 0.75% 0.75% 0.75% 0.75%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 167.6% 125.0% 107.1% 110.1% 135.7% 144.2% 108.0% 95.1% 78.7% 57.9%
</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, 1997 were
$378,724,828 and $329,656,036, respectively.
2
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER BOND FUND
-----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning
of period $11.63 $11.84 $10.78 $11.65 $10.99 $11.15 $10.33 $10.49 $10.15 $10.19
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .76 .69 .72 .76 .65 .87 .95 .97 .98 .94
Net realized and unrealized
gain (loss) .28 (.15) 1.07 (.98) .76 (.17) .80 (.18) .32 (.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations 1.04 .54 1.79 (.22) 1.41 .70 1.75 .79 1.30 .89
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment
income (.72) (.74) (.73) (.62) (.75) (.86) (.93) (.95) (.96) (.93)
Distributions from net realized
gain (.04) (.01) -- (.03) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total dividends and
distributions to
shareholders (.76) (.75) (.73) (.65) (.75) (.86) (.93) (.95) (.96) (.93)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $11.91 $11.63 $11.84 $10.78 $11.65 $10.99 $11.15 $10.33 $10.49 $10.15
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
==================================================================================================================================
TOTAL RETURN, AT NET
ASSET VALUE(1) 9.25% 4.80% 17.00% (1.94)% 13.04% 6.50% 17.63% 7.92% 13.32% 8.97%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $520,078 $426,439 $211,232 $135,067 $111,846 $63,354 $32,762 $16,576 $13,422 $ 9,989
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $449,760 $296,253 $170,929 $121,884 $ 87,215 $45,687 $22,169 $15,088 $11,167 $11,028
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.72% 6.72% 6.91% 7.30% 7.20% 7.81% 8.73% 9.30% 9.34% 9.08%
Expenses 0.78% 0.78% 0.80% 0.57% 0.46% 0.56% 0.64% 0.61% 0.64% 0.70%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 116.9% 82.3% 79.4% 35.1% 36.3% 41.3% 7.6% 7.4% 5.4% 36.3%
</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, 1997 were
$497,189,725 and $456,241,630, respectively.
3
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS OPPENHEIMER AGGRESSIVE GROWTH FUND
(FORMERLY OPPENHEIMER CAPITAL APPRECIATION FUND)
----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning
of period $38.71 $34.21 $25.95 $31.64 $26.04 $23.24 $15.24 $20.40 $16.31 $14.39
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .10 .09 .11 .10 .05 .06 .08 .32 .50 .33
Net realized and unrealized
gain (loss) 4.01 6.59 8.29 (2.22) 6.71 3.43 8.18 (3.54) 3.93 1.60
------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Total income (loss) from
investment operations 4.11 6.68 8.40 (2.12) 6.76 3.49 8.26 (3.22) 4.43 1.93
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.09) (.11) (.09) (.04) (.06) (.14) (.26) (.53) (.34) --
Distributions from net
realized gain (1.77) (2.07) (.05) (3.53) (1.10) (.55) -- (1.41) -- (.01)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions to
shareholders (1.86) (2.18) (.14) (3.57) (1.16) (.69) (.26) (1.94) (.34) (.01)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $40.96 $38.71 $34.21 $25.95 $31.64 $26.04 $23.24 $15.24 $20.40 $16.31
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
===================================================================================================================================
TOTAL RETURN, AT NET ASSET
VALUE(1) 11.67% 20.22% 32.52% (7.59)% 27.32% 15.42% 54.72% (16.82)% 27.57% 13.41%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $877,807 $617,392 $325,404 $185,774 $136,885 $83,335 $49,371 $23,295 $27,523 $13,667
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $753,852 $467,080 $240,730 $153,832 $ 98,228 $56,371 $34,887 $24,774 $21,307 $13,239
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.31% 0.32% 0.47% 0.50% 0.23% 0.30% 0.81% 1.93% 3.27% 2.13%
Expenses 0.73% 0.75% 0.78% 0.57% 0.47% 0.54% 0.63% 0.71% 0.68% 0.73%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 87.6% 100.1% 125.5% 96.5% 122.8% 78.9% 122.3% 222.0% 130.5% 128.7%
Average brokerage commission
rate(3) $0.0626 $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, 1997 were
$762,900,287and $551,581,444, 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.
4
<PAGE>
<TABLE>
<CAPTION>
OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS -----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning
of period $27.24 $23.55 $17.68 $17.70 $16.96 $15.17 $12.54 $16.38 $13.64 $11.21
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .25 .15 .25 .22 .46 .16 .30 .56 .66 .29
Net realized and unrealized
gain (loss) 6.62 5.46 6.10 (.05) .74 1.99 2.82 (1.79) 2.50 2.19
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations 6.87 5.61 6.35 .17 1.20 2.15 3.12 (1.23) 3.16 2.48
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment
income (.15) (.25) (.22) (.15) (.14) (.36) (.49) (.62) (.35) --
Distributions from net
realized gain (1.52) (1.67) (.26) (.04) (.32) -- -- (1.99) (.07) (.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total dividends and
distributions to
shareholders (1.67) (1.92) (.48) (.19) (.46) (.36) (.49) (2.61) (.42) (.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $32.44 $27.24 $23.55 $17.68 $17.70 $16.96 $15.17 $12.54 $16.38 $13.64
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
===================================================================================================================================
TOTAL RETURN, AT NET ASSET
VALUE(1) 26.68% 25.20% 36.65% 0.97% 7.25% 14.53% 25.54% (8.21)% 23.59% 22.09%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $493,906 $285,920 $117,710 $63,283 $56,701 $36,494 $22,032 $15,895 $19,301 $17,746
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $390,447 $152,466 $ 88,803 $59,953 $46,389 $25,750 $18,810 $17,235 $18,596 $15,585
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.02% 1.08% 1.46% 1.38% 1.13% 1.36% 2.82% 3.27% 4.09% 2.39%
Expenses, before voluntary
reimbursement by the Manager 0.75% 0.81%(2) 0.79% 0.58% 0.50% 0.61% 0.70% 0.70% 0.71% 0.70%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 66.0% 65.4% 58.2% 53.8% 12.6% 48.7% 133.9% 267.9% 148.0% 132.5%
Average brokerage
commission rate(4) $0.0549 $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 expense ratio was 0.79% net
of the voluntary reimbursement by the Manager. 3. The lesser of purchases or
sales of portfolio securities for a period, divided by the monthly average of
the market value of portfolio securities owned during the period. Securities
with a maturity or expiration date at the time of acquisition of one year or
less are excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the period ended December 31,
1997 were $308,605,124 and $200,244,411, respectively. 4. Total brokerage
commissions paid on applicable purchases and sales of portfolio securities for
the period, divided by the total number of related shares purchased and sold.
<PAGE>
<TABLE>
<CAPTION>
OPPENHEIMER MULTIPLE STRATEGIES FUND
FINANCIAL HIGHLIGHTS ----------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning
of period $15.63 $14.55 $12.91 $13.88 $12.47 $11.96 $10.90 $12.30 $11.58 $10.04
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .62 .72 .66 .63 .55 .55 .69 .73 .73 .66
Net realized and unrealized
gain (loss) 1.95 1.45 2.00 (.90) 1.41 .50 1.15 (.97) 1.04 1.53
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations 2.57 2.17 2.66 (.27) 1.96 1.05 1.84 (.24) 1.77 2.19
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.61) (.74) (.65) (.60) (.55) (.54) (.78) (.70) (.68) (.65)
Distributions from net
realized gain (.58) (.35) (.37) (.10) -- -- -- (.46) (.37) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions to
shareholders (1.19) (1.09) (1.02) (.70) (.55) (.54) (.78) (1.16) (1.05) (.65)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $17.01 $15.63 $14.55 $12.91 $13.88 $12.47 $11.96 $10.90 $12.30 $11.58
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
====================================================================================================================================
TOTAL RETURN, AT NET ASSET
VALUE(1) 17.22% 15.50% 21.36% 1.95)% 15.95% 8.99% 17.48% (1.91)% 15.76% 22.15%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $637,545 $484,285 $381,263 $292,067 $250,290 $159,464 $124,634 $118,888 $121,286 $78,386
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $564,369 $428,277 $344,745 $279,949 $199,954 $139,011 $117,000 $123,231 $101,057 $64,298
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 3.86% 4.89% 4.84% 4.90% 4.44% 4.63% 5.95% 6.36% 6.53% 6.18%
Expenses 0.75% 0.77% 0.77% 0.56% 0.48% 0.55% 0.54% 0.57% 0.55% 0.58%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 41.9% 40.3% 39.0% 31.4% 32.4% 57.8% 80.3% 99.2% 66.9% 110.0%
Average brokerage
commission rate(3) $0.0217 $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, 1997 were
$258,504,039 and $195,905,788, 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. Generally,
non-U.S. commissions are lower than U.S. commissions when expressed as cents per
share but higher when expressed as a percentage of transactions because of the
lower per-share prices of many non-U.S. securities.
6
<PAGE>
<TABLE>
<CAPTION>
OPPENHEIMER GLOBAL SECURITIES FUND
FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990(1)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning
of period $17.67 $15.00 $15.09 $16.30 $ 9.57 $10.38 $10.04 $10.00
- --------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income
(loss) .25 .15 .12 .04 (.02) .07 .04 --
Net realized and unrealized
gain (loss) 3.68 2.52 .19 (.96) 6.75 (.80) .30 .04
------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations 3.93 2.67 .31 (.92) 6.73 (.73) .34 .04
- --------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.23) -- -- (.04) -- (.04) -- --
Distributions from net
realized gain -- -- (.40) (.25) -- (.04) -- --
------ ------ ------ ------ ------ ------- ------ ------
Total dividends and
distributions to
shareholders (.23) -- (.40) (.29) -- (.08) -- --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end
of period $21.37 $17.67 $15.00 $15.09 $16.30 $ 9.57 $10.38 $10.04
====== ====== ====== ====== ====== ====== ====== ======
==============================================================================================================
TOTAL RETURN, AT NET
ASSET VALUE(2) 22.42% 17.80% 2.24% (5.72)% 70.32% (7.11)% 3.39% 0.40%
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $959,110 $582,080 $360,979 $297,842 $96,425 $13,537 $7,339 $432
- --------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $802,389 $466,750 $332,336 $214,545 $31,696 $11,181 $3,990 $263
- --------------------------------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 1.51% 1.09% 0.86% 0.54% 0.72% 1.04% 0.75% 0.08%(3)
Expenses 0.76% 0.81% 0.89% 0.91% 0.92% 1.06% 1.32% 6.84%(3)
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 67.1% 89.9% 131.3% 70.4% 65.1% 34.1% 29.5% 0.0%
Average brokerage
commission rate(5) $0.0041 $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, 1997 were $595,489,366 and
$459,609,905, 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. Generally, non-U.S. commissions are
lower than U.S. commissions when expressed as cents per share but higher when
expressed as a percentage of transactions because of the lower per-share prices
of many non-U.S. securities.
7
<PAGE>
<TABLE>
<CAPTION>
OPPENHEIMER STRATEGIC BOND FUND
FINANCIAL HIGHLIGHTS -------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993(1)
==================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $5.09 $4.91 $4.60 $5.12 $5.00
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .39 .38 .38 .35 .10
Net realized and unrealized gain (loss) .04 .19 .30 (.54) .11
----- ----- ----- ----- -----
Total income (loss) from investment operations .43 .57 .68 (.19) .21
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.39) (.39) (.37) (.32) (.09)
Distributions in excess of net realized gain (.01) -- -- (.01) --
------ ------ ----- ----- ------
Total dividends and distributions to shareholders (.40) (.39) (.37) (.33) (.09)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.12 $5.09 $4.91 $4.60 $5.12
===== ===== ===== ===== =====
==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 8.71% 12.07% 15.33% (3.78)% 4.25%
==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $207,839 $118,716 $60,098 $20,320 $9,887
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $159,934 $ 82,604 $37,698 $15,389 $4,259
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.23% 8.48% 9.32% 8.36% 5.67%(3)
Expenses 0.83% 0.85% 0.85% 0.87% 0.96%(3)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 149.7% 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, 1997 were $280,894,743 and $221,120,528, respectively.
8
<PAGE>
<TABLE>
<CAPTION>
OPPENHEIMER GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS -------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996 1995(1)
=========================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $16.37 $12.51 $10.00
- ---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .19 .14 .01
Net realized and unrealized gain 4.91 3.91 2.52
------ ------ ------
Total income from investment operations 5.10 4.05 2.53
- ---------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.17) (.14) (.02)
Distributions from net realized gain (.72) (.05) --
------ ------ ------
Total dividends and distributions to shareholders (.89) (.19) (.02)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.58 $16.37 $12.51
====== ====== ======
=========================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 32.48% 32.51% 25.25%
=========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $155,368 $47,009 $4,288
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 94,906 $21,562 $1,809
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.15% 1.41% 0.50%(3)
Expenses 0.83% 1.00% 2.07%(3)
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 78.5% 112.6% 23.7%
Average brokerage commission rate(5) $0.0602 $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, 1997 were $155,403,150 and $71,649,903, 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.
9
-3-
<PAGE>
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. Securities
and Exchange Commission Rule 2a-7 ("Rule 2a-7") under the Investment Company Act
generally governs the quality, diversification and maturity of a money market
fund's investments. Under Rule 2a-7, a money market fund may purchase only high
quality securities that present minimal credit risk
(called "eligible securities"). Money Fund must maintain a dollar-weighted
average portfolio maturity of no more than 90 days and the remaining maturity of
any single portfolio investment at the time of purchase may not exceed 397 days.
The securities it purchases must be denominated in U.S. dollars. Money Fund must
diversify its investments so that: (a) no more than 5% of its total assets are
invested in the securities of any one issuer (other than the U.S. Government,
its agencies and instrumentalities); (b) no more than 5% of its total assets are
invested in lower rated eligible securities; and (c) no more than 1% of its
total assets or $1.0 million, whichever is greater, is invested in lower rated
eligible securities of any one issuer. Rule 2a-7 also permits Money Fund to
invest in securities for which payment is guaranteed in accordance with the
Rule. The Trust's Board of Trustees 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. More detailed information about Rule 2a-7 and the Fund's investments
is found in the Statement of Additional Information.
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 will change from time to time and will include direct bank
obligations, foreign government obligations, certificates of deposit, bankers'
acceptances, commercial paper, securities of the U.S. Government and its
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 Money Fund's investments may be
supported by guarantees or may be subject to repurchase transactions (described
below) if the collateral for the agreement complies with Rule 2a-7. 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. 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.
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. It invests in 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 Investors Services, Inc. ("Moody's") or "BBB" or
lower by Standard & Poor's Corporation ("Standard & Poor's")), and unrated
securities. The investments in which High Income Fund will invest principally
will be in the lower rating categories; it may invest in securities rated as low
as "C" by Moody's or "D" by Standard & Poor's. Such ratings indicate that the
obligations are speculative in a high degree and may be in default. Appendix B
of this Prospectus describes these rating categories.
High Income Fund is not obligated to dispose of securities whose issuers
subsequently are in default or if the rating is subsequently downgraded. High
Income Fund may invest, without limit, in unrated securities if such securities
offer, in the opinion of the Manager, yields and risks comparable to rated
securities. Risks of high yield securities are discussed under "Risk Factors"
below. Securities rated by a rating organization represented the following
percentage of High Income Fund's total assets as of December 31, 1997 (the
amounts shown are dollar-weighted average values; securities rated by any rating
organization are included in the equivalent Standard & Poor's rating category):
AAA, 0.85%; AA, 0.01%; A, 4.75%; BBB, 1.43%; BB, 8.16%; B, 43.11%; CCC, 1.39%.
Unrated fixed income securities represented 8.33% of the High Income Fund's
total assets. Additionally, as of that date, U.S. Government securities (which
generally are not rated by any agency), represented 2.93% of High Income. 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 . As a secondary objective, Bond Fund seeks capital growth when
consistent with its primary objective. It seeks its objectives by investing
primarily in debt securities. As a matter of non-fundamental policy, Bond Fund
will, under normal market conditions, invest at least 65% of its total assets in
investment grade debt securities, U.S. Government securities and money market
instruments. Investment grade debt securities are those rated in one of the four
highest categories by Standard & Poor's, Moody's, Fitch's or other Rating
Organizations or if unrated or split-rated (rated as investment grade by one
rating organization but below investment grade by another), determined by the
Manager to be of comparable quality. The Fund is not obligated to dispose of
securities when issuers are in default or if the rating of the security is
reduced. A description of these rating categories is included as Appendix B to
this Prospectus. Since May 1, 1998, the Fund may invest up to 35% of its total
assets in debt securities rated less than investment grade or, if unrated,
judged by the Manager to be of comparable quality to such lower-rated
securities. Lower-grade securities include securities rated BB, B, CCC, CC and D
by Standard & Poor's or Ba, B, Caa, Ca and C by Moody's. Lower-grade securities
(commonly known as "junk bonds") are considered speculative and involve greater
risk which are explained under "Risk Factors" below. Securities rated by a
rating organization represented the following percentage of Bond Fund's total
assets as of December 31, 1997 (the amounts shown are dollar-weighted average
values; securities rated by any rating organization are included in the
equivalent Standard & Poor's rating category): AAA, 2.62%; AA, 2.02%; A, 11.73%;
BBB, 24.14%; BB, 0.10%. Unrated fixed income securities represented 3.47% of the
Fund's total assets. Additionally, as of that date, U.S. Government securities
(which generally are not rated by any agency), represented 53.16% Bond Fund's
total assets. However, these ratings precede the adoption of Bond Fund's present
investment policy with respect to below investment grade debt securities on May
1, 1998, after which date the percentage of securities invested in investment
grade debt securities and U.S. Government securities is expected to decrease.
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.
|X| High Yield Securities. Strategic Bond Fund and High Income Fund may
invest without limitation (and other Funds may invest to a limited extent) in
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, or other rating organizations. These
Funds may invest in securities rated as low as "C" by Moody's or "D" by Standard
& Poor's or other rating organizations. Such ratings indicate that the
obligations are speculative in a high degree and may be in default. Risks of
lower-rated, 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, 1997 (the
amounts shown are dollar-weighted average values; securities rated by any rating
organization are included in the equivalent Standard & Poor's rating category):
AAA, 5.95%; AA, 1.70%; A, 0.06%; BBB, 2.35%; BB, 10.97%; B, 17.98%; CCC, 0.62%.
Unrated fixed income securities represented 8.80% of the Fund's total assets.
Additionally, as of that date, U.S. Government securities (which generally are
not rated by any agency), represented 40.77% of Strategic Bond Fund's total
assets. The Manager will not rely principally on the ratings assigned by rating
services. These Funds are 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. These Funds 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.
|X| 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'."
|X| 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.
|X| Domestic Securities. The Income Funds' investments in domestic
securities may include preferred stocks, participation interests and zero coupon
securities. Domestic investments include fixed- income (debt) 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. Some CMOs in which the Income
Funds may invest are 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 price and yields to maturity of CMOs are, in part, determined by
assumptions about cash- flows from the rate of payments of underlying mortgages.
However, changes in prevailing interest rates may cause the rate of prepayments
of underlying mortgages to change. In general, prepayments on fixed-rate
mortgage loans increase during periods of falling interest rates and decrease
during periods of rising interest rates. Faster than expected prepayments of
underlying mortgages will reduce the market value and yield to maturity of
issued CMOs. If prepayments of mortgages underlying a short-term or
intermediate-term CMO occur more slowly than anticipated because of rising
interest rates, the CMO effectively may become a longer-term security. The
prices of long-term debt securities generally fluctuate more widely than those
of shorter-term securities in response to changes in interest rates which, in
turn, may result in greater fluctuations in the Income Fund's share prices.
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, such as a
Fund, and are typically supported by some form of credit enhancement, such as a
letter of credit, surety bond, limited guarantee by another entity or a
preference right. 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 high yield, lower rated securities in which High Income Fund,
Strategic Bond Fund principally invest and in which Bond Fund may invest up to
35% of its total assets 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 - Aggressive Growth Fund, Growth Fund,
Small Cap Growth Fund, Global Securities Fund, Multiple Strategies Fund and
Growth & Income Fund.
Aggressive Growth Fund. In seeking its objective of capital appreciation,
Aggressive Growth 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. Aggressive Growth 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.
Small Cap Growth Fund. Small Cap Growth Fund seeks capital appreciation as its
investment objective. Current income is not an objective. In seeking its
objective, Small Cap Growth Fund will emphasize investment in securities
considered by the Manager to have appreciation possibilities. Such securities
may either be listed on securities exchanges or traded in the over-the-counter
markets in both the United States and foreign countries. Small Cap Growth Fund
expects a substantial portion of its assets to be invested in over-the-counter
securities.
Small Cap Growth Fund emphasizes investment in securities of growth-type
issuers, including growth companies in emerging markets, described below, with
market capitalization less than $1 billion. Small Cap Growth Fund may continue
to hold investments in issuers whose market capitalization grows in excess of $1
billion, and may from time to time invest in companies with market
capitalization in excess of $1 billion. Small Cap Growth Fund invests primarily
in common stocks or securities having investment characteristics of common
stocks (for example, securities convertible into common stocks).
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 for their
products 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.
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.
o 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.
o Borrowing for Leverage. From time to time, the Funds (other than Money
Fund) may borrow money from banks to buy securities. The 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.
Borrowing for leverage is subject to regulatory limits described in more detail
in "Borrowing" in the Statement of Additional Information. The Funds may also
borrow in order to facilitate redemptions. As a matter of fundamental policy,
the 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.
o Investments In Small, Unseasoned Companies. each Each Fund may 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. Small Cap Growth Fund
intends to invest no more than 20% of its total assets in securities of small,
unseasoned issuers. Money Fund, Aggressive Growth Fund, Growth & Income Fund,
Global Securities Fund and Strategic Bond Fund are not subject to any such
intended limitation.
o 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.
o 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 intend 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.
o 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.
o Year 2000 Risks. Because many computer software systems in use today
cannot distinguish the year 2000 from the year 1900, the markets for securities
in which the Funds invest could be detrimentally affected by computer failures
beginning January 1, 2000. Failures of computer systems used for securities
trading could result in settlement and liquidity problems for the Funds, and
other investments. Data processing errors by corporate and government issuers of
securities could result in production problems and economic uncertainties, and
those issuers may incur substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Funds' investments and
returns.
o 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. For further details about these investments, see "Warrants and
Rights" in the Statement of Additional Information.
o 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.
o 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 (other than those with puts exercisable within seven
days), 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. The Manager monitors holdings of illiquid and
restricted securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity.
o 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 a Fund's net assets and are subject to other conditions
described in the Statement of Additional Information. The value of securities
loaned, if any, is not expected to exceed 5% of the value of a Fund's total
assets.
o "When-Issued" or Delayed Delivery Transactions. Each Fund (except Small
Cap Growth 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.
o 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, Small Cap Growth 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.
o Futures. Global Securities Fund, Small Cap Growth Fund, Aggressive
Growth Fund, Growth Fund, Multiple Strategies Fund, Growth & Income Fund,
Strategic Bond Fund, Bond Fund and High
Income Fund may buy and sell futures contracts that relate to (i) broadly-based
securities indices (these are referred to as Stock Index Futures and Bond Index
Futures) , (ii) interest rates (these are referred to as Interest Rate Futures)
or (iii) foreign currencies. In addition, the Income Funds may buy and sell
futures contracts that relate to commodities (these are referred to as Commodity
Futures).
o Put and Call Options. The Funds may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by a Fund
will not exceed 5% of the Fund's total assets.
If a Fund sells (that is, writes) a call option, it must be "covered."
That means that the Fund must own the security subject to the call while the
call is outstanding, or, for other types of written calls, the Funds must
segregate liquid assets to enable it to satisfy its obligations if the call is
exercised. Up to 100% of a Fund's total assets may be subject to calls.
The Funds may buy puts whether or not it holds the underlying investment
in the portfolio. If the Fund writes a put, the put must be covered by
segregated liquid assets. The Funds will not write puts if more than 50% of the
Fund's net assets would have to be segregated to cover put options.
o 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.
o 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.
|X| Derivative Investments. Each Fund (other than Money Fund) can invest in
a number of different kinds of "derivative investments." The Funds (other than
Money Fund) 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).
o 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 Aggressive
Growth 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 other than Small Cap Growth Fund, which is not expected to have
portfolio turnover in excess of 100% each year.
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:
o 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);
o 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");
o concentrate investments in any particular industry, other than
securities of the U.S. Government or its agencies or instrumentalities ;
therefore the 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 (i) Money Fund in obligations issued by domestic
banks, foreign branches of domestic banks (if guaranteed by the domestic
parent), or savings and loan associations or (ii) Money Fund, Bond Fund and High
Income Fund in securities of the U.S. Government or its agencies or
instrumentalities.
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 ten separate Funds - Money Fund, Bond Fund and Growth Fund, all
organized in 1984, High Income Fund, Aggressive Growth Fund and Multiple
Strategies Fund, all organized in 1986, Global Securities Fund, organized in
1990, Strategic Bond Fund, organized in 1993, Growth & Income Fund, organized in
1995, and Small Cap Growth Fund, organized in 1998.
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 Board of Trustees has the power, without shareholder approval, to
divide unissued shares of any or all of the Funds into two or more classes.
The Board has done so, and each Fund currently has two classes of shares, one
without a numerical designation and another class of shares, designated as Class
2. Each class of a Fund invests in the same investment portfolio.
Each class of a Fund has its own dividends and distributions and pays certain
expenses which may be different for each class. Each class of a Fund may have a
different net asset value. Each share has one vote at shareholder meetings, with
fractional shares voting proportionally. Only shares of a particular class of a
Fund vote as a class on matters that affect that class alone. Shares are freely
transferrable. Further information on how shares are voted is set forth in the
Statement of Additional Information under "How the Funds are Managed."
The Manager and Its Affiliates. All Funds are managed by the Manager,
OppenheimerFunds, Inc., which is responsible for selecting the Funds'
investments and handles their 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 responsibilities of
the Manager. The Investment Advisory 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. As of March
31, 1998, the Manager, including subsidiaries, manages assets in excess of $85
billion, including more than 65 funds with more than 4 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.
The management services provided to the Funds by the Manager , and the
services provided by the Transfer Agent to shareholders, depend on the smooth
functioning of their computer systems. Many computer software systems in use
today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. That failure could have a negative impact on
handling securities trades, pricing and account services. The Manager and
Transfer Agent have been actively working on necessary changes to their computer
systems to deal with the year 2000 and expect that their systems will be adapted
in time for that event, although there cannot be assurance of success.
Additionally, because the services they provide depend on the interaction of
their computer systems with the computer systems of brokers, information
services and other parties, any failure on the part of the computer systems of
those third parties to deal with the year 2000 may also have a negative effect
on the services provided to the Funds.
o Portfolio Managers
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 High Income Fund is Thomas P. Reedy. He is the person
principally responsible for the day-to-day management of the High Income Fund
since January 1, 1998. During the past five years Mr. Reedy has served as a
portfolio manager and officer of other Oppenheimer funds and formerly served as
a Securities Analyst for the Manager.
The Portfolio Manager of 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
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 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 Managers of Small Cap Growth Fund are Jay W. Tracey, III and Alan
Gilston. They are the persons principally responsible for the day-to-day
management of the Fund since May 1998, and have served as portfolio managers and
officers of other Oppenheimer funds. During the past five years Mr. Tracey
formerly served as a Managing Director of Buckingham Capital Management, prior
to which he was a portfolio manager and Vice President of other Oppenheimer
funds and a Vice President of the Manager. During the past five years Mr.
Gilston has served as a Vice President and portfolio manager for Schroeder
Capital Management International, Inc.
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 Aggressive Growth Fund is Bruce L. Bartlett. He has
been the person principally responsible for the day-to-day management of that
Fund's portfolio since April, 1998. During the past five years, Mr. Bartlett has
served as portfolio manager and Vice President of other Oppenheimer funds and
formerly served as a Vice President and Senior Portfolio Manager at First of
America Investment Corp.
The Portfolio Manager of Growth & Income Fund is Michael S. Levine. He has been
the person principally responsible for the day-to-day management of that Fund
since April, 1998, and shared that responsibility with another portfolio manager
from July, 1995 to April, 1998.
During the past five years, 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. Bartlett, Negri, Reedy, Tracey Gilston and Ms. Putnam and Ms. Warmack
are Vice Presidents of the Manager, Messrs. Rubinstein, Steinmetz and Wilby are
Senior Vice Presidents of the Manager and Mr. Levine is Assistant Vice President
of the Manager. Each of the Portfolio Managers named above is also a Vice
President of the Trust.
o 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 Aggressive Growth Fund, Growth Fund, Small
Cap 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, 1997, the management fee
(computed on an annualized basis as a percentage of the net assets of each of
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 then in existence were as
follows:
Total
Management Operating
Fees Expenses(1)
- -------------------------------------------------------------------------------
Money Fund 0.45% 0.48%
- --------------------------------------------------------------------------------
High Income Fund 0.75% 0.82%
- --------------------------------------------------------------------------------
Bond Fund 0.73% 0.78%
- -------------------------------------------------------------------------------
Strategic Bond Fund 0.75% 0.83%
- -------------------------------------------------------------------------------
Aggressive Growth Fund 0.71% 0.73%
- -------------------------------------------------------------------------------
Growth Fund 0.73% 0.75%
- -------------------------------------------------------------------------------
Global Securities Fund 0.70% 0.76%
- -------------------------------------------------------------------------------
Multiple Strategies Fund 0.72% 0.75%
- --------------------------------------------------------------------------------
Growth & Income Fund 0.75% 0.83%
- --------------------
(1) This table does not reflect expenses that apply at the separate account
level or to related insurance products, or the fees or expenses of Small Cap
Growth Fund, which had not yet commenced operations.
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 Agreements 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.
o The Distributor. Each Fund's Class 2 shares are sold to insurance company
separate account sponsors and their affiliates that have a participation
agreement with OppenheimerFunds Distributor, Inc. (the "Distributor"), a
subsidiary of the Manager that acts as the Distributor of the Funds' Class 2
shares. The Distributor also distributes shares of the other Oppenheimer funds
and is sub-distributor for funds managed by a subsidiary of the Manager.
o 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.
o 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.
o 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 a 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, 1997 followed by a graphical comparison of each Fund's
performance, except Money Fund, to an appropriate broad-based market index. No
performance information or index comparisons are shown for Small Cap Growth
Fund, which did not commence operations until 1998.
Management's Discussion of Performance. During the Funds' fiscal year ended
December 31, 1997, 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
and overall portfolio allocations of each of the Funds. Investments in foreign
securities contributed far less to Fund performance, due to substantial
volatility, especially in several Southeast Asian markets, largely in reaction
to currency devaluations. During the fiscal year ended December 31, 1997, the
Manager emphasized the following investment strategies and overall portfolio
allocations 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 lower rated corporate bonds in
telecommunications companies, cable operators and financial services industries,
which were expected to benefit from deregulation. Foreign bond positions were
primarily in emerging markets, particularly in Latin America. The Fund invested
to a lesser degree in domestic preferred stocks.
Bond Fund emphasized investments in cable operators, media and commercial
banking industries, due to the same expectation concerning deregulation. The
Fund also took a substantial position in commercial private mortgage securities,
representing pools of mortgages on hotels, shopping malls, apartment buildings
and other enterprises.
Aggressive Growth Fund emphasized investments in small and medium-sized
companies with new products and services. Its largest sector allocation was in
the technology sector, followed by consumer noncyclical companies, industrial
companies and financial services.
Growth Fund emphasized large cap stocks believed to be selling at
below-average valuations with above-average earnings growth. It emphasized
investments in high-growth sectors such as financial services and technology
companies, followed by consumer products.
Multiple Strategies Fund's equity and fixed-income investments were broadly
diversified among sectors. The Fund's largest sectors were technology and
finance. In addition to domestic banks, the Fund's large equity holdings
included banks in Switzerland, Italy, France and Germany, expected to benefit
from improved efficiency. Its fixed-income investments included U.S. Treasury
securities and high-yield corporate bonds issued in the U.S. and foreign bonds
issued in developed and emerging countries.
Growth & Income Fund's portfolio included substantial positions in
financial stocks expected to benefit from consolidation and strong fundamentals,
and technology companies with promising products.
Global Securities Fund sought to avoid the volatility mentioned above in
certain foreign markets, by seeking capital appreciation from U.S. companies,
and to a lesser extent from companies in developed European countries. Its
largest sector allocations were to financial services, technology companies and
consumer products companies.
Strategic Bond Fund's allocation to high-yield corporate bonds performed
particularly well, due to strong performance by telecommunications companies,
cable operators and financial services companies. The Fund also maintained a
substantial allocation to U.S. Government securities and to foreign fixed-income
securities from developed and emerging markets.
o 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 and Small Cap Growth Fund) held until December 31, 1997. 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.
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 Aggressive Growth 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. The average annual total returns shown
below each graph show the average rate of return of a hypothetical investment in
a Fund over a stated period, assuming that all dividends and capital gains
distributions are invested in additional shares.
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 12/31/97
1 year 5 year 10 year
12.21% 13.75% 14.32%
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.
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 12/31/97
1 year 5 year 10 year
9.25% 8.23% 9.50%
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.
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
Aggressive Growth Fund
Versus S&P 500 Index
[Graph comparing total return of Aggressive Growth Fund shares to performance
of S&P 500 Index]
Average Annual Total Returns at 12/31/97
1 year 5 year 10 year
11.67% 15.92% 16.23%
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.
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 12/31/97
1 year 5 years 10 Years
26.68% 18.61% 16.67%
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.
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 12/31/97
1 year 5 years 10 years
17.22% 13.31% 12.74%
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.
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 12/31/97
1 year 5 years Life of Fund (1)
22.42% 18.81% 12.26%
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 12/31/97
1 year Life of Fund (1)
8.71% 7.64%
- --------------
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 12/31/97
1 year Life of Fund (1)
32.48% 37.24%
- -------------------------
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.
The Trust has authorized the Distributor, certain insurance companies,
broker-dealers and agents or intermediaries designated by the Trust or the
Distributor to accept orders for purchase and redemption of shares. In most
cases, to enable you to receive that day's offering or redemption price, the
Distributor or its designated agent must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days.
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 SEC. 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 (or its authorized 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.
Classes of Shares. The Funds offer investors two different classes of shares,
one without numerical designation and the other numerically designated as Class
2 shares. The different classes of shares represent investments in the same
portfolio of securities of a Fund but may be subject to different expenses and
except for Money Fund, will likely have different share prices.
|X| Service Plan for Class 2 Shares. The Trust has adopted Service Plans
for Class 2 shares of each Fund to compensate the Distributor in connection with
the personal services and maintenance of accounts that hold Class 2 shares.
Reimbursement is made quarterly at an annual rate that may not exceed 0.25% of
the average annual net assets (currently set at 0.10% of the average annual net
assets) of Class 2 shares of each Fund. The Trust's Board of Trustees may raise
the payment level up to 0.25% of average net assets of Class 2 shares without
advance notice or shareholder approval. The Distributor uses all of those fees
to reimburse insurance company separate account sponsors quarterly for providing
personal services to Account owners and maintenance of Account owners' accounts
that hold Class 2 shares and to reimburse itself (if the Trust's Board of
Trustees authorizes such reimbursements, which it has not yet done) for its
other expenditures under the Plan.
Services to be provided include, among other things, answering Account
owner inquiries about the Funds, assisting in establishing and maintaining
accounts holding Class 2 shares and providing other services at the request of
the Trust or the Distributor. Payments are made by the Distributor quarterly at
an annual rate not to exceed 0.25% of the average annual net assets of Class 2
shares held in accounts of the insurance company separate account sponsors. The
payments under the Plan increase the annual expenses of Class 2 shares. For more
details, please refer to "Service Plans" in the Statement of Additional
Information.
This prospectus may not be used to offer or sell Class 2 shares.
Accordingly, it does not include a description of the Service Plans that only
affect Class 2 shares of each Fund and the holders of such shares. An
alternative version of the Trust's prospectus that includes such disclosure may
be obtained without charge whenever Class 2 shares are offered, by contacting
any insurance sponsor offering Class 2 shares of the Funds, or by contacting the
Distributor, which may be reached at 1-800- 525-7048.
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 , Multiple Strategies Fund,
Aggressive Growth Fund, Growth Fund, Small Cap Growth Fund and Global Securities
Fund. The Trust intends to declare dividends on an annual basis for all Funds
other than Money Fund.
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. 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.
-4-
<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.
Guarantee means an unconditional obligation of a person other than the issuer of
the security to undertake to pay, upon presentment by the holder of the
guarantee (if required), the principal amount of the underlying security plus
accrued interest when due or upon default, or, in the case of an Unconditional
Demand Feature (as defined in Rule 2a-7), an obligation that entitles the holder
to receive upon exercise the approximate amortized cost of the underlying
security or securities, plus accrued interest, if any. A guarantee includes a
letter of credit, financial guaranty (bond) insurance, and an Unconditional
Demand Feature (other than an Unconditional Demand Feature provided by the
issuer of the security).
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.
A-1
<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 Standard & Poor's. 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.
B-1
<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
- ---------- ---------------- ------------
12/31/87 10,000 10,000
12/31/88 11,558 11,347
12/31/89 12,118 11,818
12/31/90 12,681 11,313
12/31/91 16,981 15,225
12/31/92 20,025 17,989
12/31/93 25,298 21,081
12/31/94 24,495 20,829
12/31/95 29,483 24,984
12/31/96 33,981 27,748
12/31/97 38,132 31,307
Lehman
Brothers
Fiscal Corporate
Year Ended Bond Fund Bond Index
- ---------- --------- ----------
12/31/87 10,000 10,000
12/31/88 10,897 10,922
12/31/89 12,348 12,461
12/31/90 13,326 13,340
12/31/91 15,675 15,809
12/31/92 16,694 17,183
12/31/93 18,872 19,272
12/31/94 18,506 18,514
12/31/95 21,651 22,632
12/31/96 22,689 23,376
12/31/97 24,789 25,768
Fiscal Aggressive
Year Ended Growth Fund S&P 500 Index
- ---------- -------------------------------------
12/31/87 10,000 10,000
12/31/88 11,341 11,656
12/31/89 14,469 15,343
12/31/90 12,035 14,866
12/31/91 18,619 19,386
12/31/92 21,491 20,861
12/31/93 27,362 22,958
12/31/94 25,285 23,261
12/31/95 33,507 31,991
12/31/96 40,286 39,331
12/31/97 44,987 52,449
Fiscal
Year Ended Growth Fund S&P 500 Index
- ---------- ----------- -------------
12/31/87 10,000 10,000
12/31/88 12,210 11,656
12/31/89 15,089 15,343
12/31/90 13,849 14,866
12/31/91 17,387 19,386
12/31/92 19,913 20,861
12/31/93 21,357 22,958
12/31/94 21,564 23,261
12/31/95 29,468 31,991
12/31/96 36,895 39,331
12/31/97 46,739 52,449
Lehman
Brothers
Fiscal Multiple Aggregate
Year Ended Strategies Fund S&P 500 Index Bond Index
- ---------- --------------- ------------- ----------
12/31/87 10,000 10,000 10,000
12/31/88 12,215 11,656 10,789
12/31/89 14,139 15,343 12,356
12/31/90 13,870 14,866 13,463
12/31/91 16,294 19,386 15,618
12/31/92 17,758 20,.861 16,774
12/31/93 20,591 22,958 18,409
12/31/94 20,190 23,261 17,872
12/31/95 24,502 31,991 21,174
12/31/96 28,300 39,331 21,943
12/31/97 33,172 52,449 24,061
Fiscal Global Morgan 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
12/31/97 22,829 23,809
Lehman Solomon
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
12/31/97 14,094 13,680 13,326
- -----------------------
(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
12/31/97 21,989 18,761
- -----------------------
(1) Commencement of operations.
B-2
<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.
PR0600.001.0498
prosp4\ pspb.98
B-3
<PAGE>
Oppenheimer Variable Account Funds
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated May 1, 1998.
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is an investment company
consisting
of ten separate Funds (the "Funds"):
Oppenheimer Money Fund ("Money Fund")
Oppenheimer High Income Fund ("High Income Fund")
Oppenheimer Bond Fund ("Bond Fund")
Oppenheimer Strategic Bond Fund ("Strategic Bond Fund")
Oppenheimer Aggressive Growth Fund ("Aggressive Growth Fund"). Prior to May
1, 1998, this
Fund was named "Oppenheimer Capital Appreciation Fund." Oppenheimer Growth
Fund ("Growth Fund") Oppenheimer Small Cap Growth Fund ("Small Cap Growth
Fund"). Oppenheimer Global Securities Fund ("Global Securities Fund")
Oppenheimer Multiple Strategies Fund ("Multiple Strategies Fund") Oppenheimer
Growth & Income Fund ("Growth & Income 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, 1998. 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............................................
Investment Policies and Strategies.......................................
Other Investment Techniques and Strategies...............................
Other Investment Restrictions............................................
How the Funds are Managed.....................................................
Organization and History.................................................
Trustees and Officers of the Trust.......................................
The Manager and Its Affiliates...........................................
Brokerage Policies of the Funds...............................................
Performance of the Funds......................................................
Class 2 Service Plans.........................................................
About Your Account
How to Buy Shares.............................................................
Dividends, Capital Gains and Taxes............................................
Additional Information About the Funds........................................
Page
Financial Information About the Funds
Independent Auditors' Report..................................................
Financial Statements..........................................................
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.
o Money Fund. Under Rule 2a-7, Money Fund may purchase only "Eligible
Securities," as defined below, that the Manger, 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 (the "Rating Requirements"), (b) a security that is guaranteed, and
either that guarantee or the party providing that guarantee meets the Rating
Requirements, or (c) an unrated security that is either issued by an issuer
having another similar security that meets the Rating Requirements, or is judged
by the Manager to be of comparable quality to investments that meet the Rating
Requirements. 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. 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.
o Certificates of Deposit and Commercial Paper. 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 in the prospectus), if the collateral for the
agreement complies with Rule 2a-7.
o 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.
o 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.
o 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.
o Commodity Futures Contracts. High Income Fund, Strategic Bond and Bond
Fund (collectively, the "Income Funds") may invest a portion of their assets in
commodity futures contracts (referred to as commodity futures). Commodity
futures may be based upon commodities within the energy groups, which includes
minerals, natural gas, gasoline and heating oil . The Income Funds may purchase
and sell commodity futures contracts, options on futures contracts and options
and futures on commodity indices with respect to this commodity group and the
individual commodities within this group, as well as other related types of
commodities.
o Characteristics of the commodity futures markets. A commodity futures
contract is an agreement between two parties in which one party agrees to buy an
asset from the other party at a later date at a price and quantity agreed upon
when the contract is made. In the United States, commodity futures contracts are
traded on futures exchanges. These futures exchanges offer a central marketplace
for transactions in futures contracts, a clearing corporation to process trades,
a standardization of expiration dates and contract sizes, and the availability
of a secondary market. Futures markets also regulate the terms and conditions of
delivery as well as the maximum permissible price movement during a trading
session. Additionally, the commodity futures exchanges have position limit rules
which limit the amount of futures contracts that any one party may hold in a
particular commodity at any point in time. These position limit rules are
designed to prevent any one participant from controlling a significant portion
of the market.
o Comparison to forward contracts. Futures contracts and forward contracts
have the same economic effect: both are an agreement to purchase a specified
amount of a specified commodity at a specified future date for a price agreed
upon at the time the contract is entered into. However, there are significant
differences in the two types of contracts. Forward contracts are individually
negotiated transactions and are not exchange traded. Therefore, under a forward
contract, the Income Funds would make a commitment to carry out the purchase or
sale of the underlying commodity at expiration.
o Storage Costs. As in the financial futures markets, there are hedgers
and speculators in the commodity futures markets. However, unlike financial
instruments, commodities entail costs of physical storage when purchased. For
instance, a large manufacturer of baked goods that wishes to hedge against a
rise in the price of wheat has two basic choices: (i) it can purchase the wheat
today in the cash market and store the wheat at its cost until it needs the
wheat to produce baked goods, or (ii) it can buy commodity futures related to
wheat. The price of the commodity futures will reflect the storage costs
associated with purchasing the physical commodity. To the extent that these
storage costs change for an underlying commodity while the Income Funds are
"long" (that is, owns) futures contracts on that commodity, the value of the
futures contract may change commensurately.
o Reinvestment Risk. In the commodity futures markets, if producers of
the underlying commodity wish to hedge the price risk of selling the
commodity, they will sell futures contracts to lock
in the price of the commodity at delivery in the future. In order to induce
speculators to take the corresponding purchase side of the same futures
contract, the commodity producer must be willing to sell the futures contract at
a price which is below the expected future spot price. Conversely, if the
predominant group of hedgers in the futures market are the purchasers of the
underlying commodity who purchase futures contracts to hedge against a rise in
prices, then speculators will take the short side of the futures contract only
if the futures price is greater than the expected future spot price of the
commodity.
o Strategies. The changing strategies of the hedgers and speculators in
the commodity markets can determine whether futures prices are above or below
the expected future spot price. This can have significant implications for the
Income Funds when it is time to reinvest the proceeds from a maturing futures
contract into a new futures contract. If the strategy of hedgers and speculators
in futures markets has shifted such that commodity purchasers are the
predominant group of hedgers in the market, the Income Funds might have to
reinvest at higher futures prices or choose other related commodity investments.
o Additional Economic Factors. The values of commodities which underlie
commodity futures contracts are subject to additional variables which may be
less significant in the case of traditional securities such as stocks and bonds.
Variables such as drought, floods, weather, livestock disease, embargoes and
tariffs may have a greater impact on commodity prices and commodity-linked
instruments, including futures contracts, commodity options and commodity swaps,
than on traditional securities. These additional variables may create additional
investment risks which subject the Income Funds' commodity-related investments
to greater volatility than investments in traditional securities.
o Leverage. There is much greater leverage in futures trading than in
trading stocks and bonds. As a registered investment company, the Income Funds
must pay in full for all securities it purchases. In other words, the Income
Funds are not allowed to purchase securities on margin. However, the Income
Funds are allowed to purchase futures contracts on margin where the initial
margin requirements are typically between 3 and 6 percent of the face value of
the contract. That means the Income Funds are required to pay up front only
between 3 to 6 percent of the face value of the futures contract. Therefore, the
Income Funds have a higher degree of leverage in its futures contract purchases
than in its stock purchases. As a result there may be greater volatility in the
rates of return on futures contract purchases than on stock purchases.
o Price volatility. Despite the daily price limits on the futures
exchanges, the short-term price volatility of commodity futures contracts has
been historically greater than that for traditional securities such as stocks
and bonds. To the extent that the Income Funds invest in commodity futures
contracts, the assets of the Income Funds, and hence the net asset value of a
Fund's shares, may be subject to greater volatility.
o Marking-to-market futures positions. The futures clearinghouse marks
every futures contract to market at the end of each trading day, to ensure that
the outstanding futures obligations are limited by the maximum daily permissible
price movement. This process of marking-to-market is designed to prevent losses
from accumulating in any futures account. Therefore, if the Income Funds'
futures positions have declined in value, the Income Funds may be required to
post additional margin to cover that decline. Alternatively, if the Income
Funds' futures positions have increased in value, that increase will be credited
to the Income Funds' accounts.
o 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.
o High Yield Securities. As stated in the Prospectus, the corporate debt
in which High Income Fund and Strategic Bond Fund will principally invest, and
in which Bond Fund may invest up to 35% of its net assets, 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 Funds. For example,
federally-insured savings and loan associations have been required to divest
their investments in high yield bonds.
o Aggressive Growth Fund, Growth Fund, Multiple Strategies Fund, Growth &
Income Fund, Strategic Bond Fund, Global Securities Fund and Small Cap Growth
Fund. The investment risks and rewards of certain of the investment policies of
these Funds are discussed below.
o Securities of Growth-Type Companies. Aggressive Growth Fund, Growth
Fund, Small Cap 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.
o Small, Unseasoned Companies. Each of these 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.
o 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.
o Over-the-counter options. These Funds may trade over the counter
options, as permitted by and consistent with their investment objectives and
policies. Over-the-counter options are not traded on an exchange and are traded
directly with dealers. To the extent an over-the-counter option is a tailored
investment for a Fund, it may be less liquid than an exchange traded option.
Further, similar to hybrid instruments, over the counter options contain
counterparty risk.
The Fund will take on the credit risk that the seller of an over the counter
option will perform its obligations under the option agreement if that Fund
exercises the option. To minimize this risk, the Funds intend to transact, to
the extent practicable, with issuers that have an investment grade credit
rating.
o 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.
o 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. Money Fund may invest in asset-backed securities
that meet the requirements of Rule 2a-7.
o 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.
These Funds 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.
o 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.
o 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.
o Foreign Securities. As noted in the Prospectus, each 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.
Under normal market conditions, Global Securities 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 Global Securities 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 Securities 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.
o 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.
o Repurchase Agreements. Each Fund 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.
o 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.
o Borrowing. From time to time, the Funds (other than Money 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 and the Fund's fundamental investment policies require 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. 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 the 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. The Funds (including Money Fund) may also borrow as a
temporary measure for extraordinary or emergency purposes.
o 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 liquid assets on its records as
segregated, 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
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 identified on the Fund's
records as segregated) 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 identifies liquid assets on its records as segregated 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 may 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").
Each Fund will identify liquid assets on its records as segregated, having
a value equal to the aggregate amount of that Fund's commitments under forward
contracts entered into with respect to position hedges and cross hedges. If the
value of the assets placed in the separate account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's obligations with respect to such
contracts. As an alternative to maintaining all or part of the separate account,
the Funds may purchase a call option permitting that 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 Funds may purchase a put option
permitting that 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 that 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 when 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 may 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, that Fund will identify liquid assets on its
records, 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.
Certain foreign currency exchange contracts ("Forward Contracts") in which
the Fund may invest are treated as "section 1256 contracts." Gains or losses
relating to section 1256 contracts generally are characterized under the
Internal Revenue Code as 60% long-term and 40% short-term capital gains or
losses. However, foreign currency gains or losses arising from certain section
1256 contracts (including Forward Contracts) generally are treated as ordinary
income or loss. In addition, section 1256 contracts held by the Fund at the end
of each taxable year are "marked-to-market" with the result that unrealized
gains or losses are treated as though they were realized. These contracts also
must be marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character and timing of gains (or losses) recognized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent such loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses attributable to fluctuations in the value of a foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. Currency gains and losses
are offset against market gains and losses on each trade before determining a
net "Section 988" gain or loss under the Internal Revenue Code for that trade,
which may increase or decrease the amount of the Fund's investment company
income available for distribution to its shareholders.
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.
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:
o invest in real estate or in interests in real estate, but may purchase
securities of issuers holding real estate or interests therein;
o invest in companies for the purpose of acquiring control of
management thereof;
o 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;
o 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.
o invest in oil or gas exploration or development programs, but may
purchase options, futures contracts, swaps and other investments, which are
backed by, or the investment return from which are linked to oil, gas and
mineral values; or
o pledge, mortgage , hypothecate or otherwise encumber its assets to
secure a debt or a loan; the escrow, collateral and margin arrangements involved
with any of the Funds' investments are not considered to involve such a pledge,
mortgage or hypothecation.
For purposes of the Funds' policy not to concentrate described in the
investment restrictions listed in the Prospectus, the Funds have adopted the
corporate industry classifications set forth in Appendix A to the Statement of
Additional Information. In addition, the Funds are restricted by the Investment
Company Act from issuing senior securities (as defined in that Act). These are
not fundamental policies.
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 will 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 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 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") except for Mr. Fossel, who
is not a Trustee of Centennial New York Tax-Exempt Trust or Managing General
Partner of Centennial America Fund, L.P. 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, 1998, none of the Trustees or officers were
Account owners and thus none owned any Fund shares.
Robert G. Avis, Trustee*; Age: 66
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: 83
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 67
1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services management
company); formerly
Vice President of McDonnell Douglas Space Systems Co. and associated with the
National Aeronautics
and Space Administration.
Jon S. Fossel, Trustee; Age: 56
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company Institute (a national
trade association of investment companies), Chairman of the Investment Company
Institute Education Foundation; formerly Chairman and a director of the Manager,
President and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company, and Shareholder Services, Inc. ("SSI") and Shareholder
Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager.
- --------------
*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act.
Sam Freedman, Trustee; Age: 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief
Executive Officer and a director of SSI, Chairman, Chief Executive and
Officer and director of SFSI,
Vice President and director of OAC and a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Trustee; Age: 68
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products
training company).
C. Howard Kast, Trustee; Age: 76
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee; Age: 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age: 82
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
James C. Swain, Chairman, Chief Executive Officer and Trustee*; Age: 64 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager (since
September 1988); formerly President and a director of Centennial Asset
Management Corporation, an investment adviser subsidiary of the Manager
("Centennial"), and Chairman of the Board of SSI.
Bridget A. Macaskill, President; Age: 49
Two World Trade Center, New York, New York 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996) ; President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund manager
subsidiary of the Manager ("OFIL") and Oppenheimer Millennium Funds plc (since
October 1997); President and a director of other Oppenheimer funds; a director
of the NASDAQ Stock Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); a Trustee and Director of other Oppenheimer funds; formerly an
Executive Vice President of the Manager.
- --------------
*A Trustee who is an "interested person" of the Trust as defined in the
Investment Company Act.
Bruce L. Bartlett, Vice President; Aggressive Growth
Fund Portfolio Manager; Age 48
Two World Trade Center, New York, New York 10048-0203 Vice President of the
Manager (since April 1995); Vice President and portfolio manager of other
Oppenheimer funds; formerly a Vice President and Senior Portfolio Manager at
First of America Investment Corp.
Alan Gilston, Vice President; Small Cap Growth Fund Portfolio Manager; Age:
39
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since September 1997); formerly a Vice President
and portfolio manager at Schroder Capital Management International, Inc.
Michael S. Levine, Vice President; Growth & Income
Fund Portfolio Manager; Age: 32
Two World Trade Center, New York, New York 10048-0203
Assistant Vice President of the Manager (since April 1996); prior to which he
was portfolio manager and research associate for Amas Securities, Inc., prior to
which he was an analyst for Shearson Lehman Hutton Inc.
David P. Negri, Vice President; Bond Fund, Strategic Bond Fund and Multiple
Strategies Fund Portfolio Manager; Age: 44 Two World Trade Center, New York, New
York 10048-0203 Vice President of the Manager (since June 1989); an officer of
other Oppenheimer funds.
Jane Putnam, Vice President; Growth Fund Portfolio Manager; Age: 37 Two World
Trade Center, New York, New York 10048-0203 Vice President of the Manager (since
October 1995); previously a portfolio manager and equity research analyst for
Chemical Bank.
Thomas P. Reedy, Vice President; High Income Fund Portfolio Manager; Age: 36 Two
World Trade Center, New York, New York 10048-0203 Vice President of the Manager
(since June 1993); an officer of other Oppenheimer funds; formerly a Securities
Analyst for the Manager.
Richard H. Rubinstein, Vice President; Multiple Strategies Fund Portfolio
Manager; Age: 49
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since October 1995); an officer of other
Oppenheimer funds (since June 1990).
Arthur P. Steinmetz, Vice President; Strategic Bond Fund Portfolio Manager;
Age: 39
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since March 1993); an officer of other
Oppenheimer funds.
Jay W. Tracey III, Vice President; Small Cap Growth Fund Portfolio Manager; Age:
44 Two World Trade Center, New York, New York 10048-0203 Vice President of the
Manager (since September 1994); Vice President and portfolio manager of other
OppenheimerFunds; formerly a Managing Director of Buckingham Capital Management
(February 1994-September 1994), prior to which he was Vice President and
portfolio manager of other Oppenheimer funds and a Vice President of the Manager
(July 1991-February 1994).
Dorothy G. Warmack, Vice President; Money Fund Portfolio Manager; Age: 61
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager and Centennial (since January 1992); an officer
of other Oppenheimer
funds.
William L. Wilby, Vice President; Global Securities Fund Portfolio Manager;
Age: 53
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since July 1994) and Vice President of
HarbourView (since October 1993); an officer of other Oppenheimer funds;
formerly international investment strategist at Brown Brothers Harriman & Co.,
prior to which he was a Managing Director and Portfolio Manager at AIG Global
Investors.
Andrew J. Donohue, Vice President and Secretary; Age: 47
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
Vice President of OFIL and Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds.
George C. Bowen, Vice President, Treasurer, and Assistant Secretary; Age: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); a Trustee, Director and officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 39
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Robert G. Zack, Assistant Secretary; Age: 49
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
o 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
compensation shown below. The compensation from the Trust was paid during its
fiscal year ended December 31, 1997. 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 1997.
Total
Compensation
Aggregate From All
Compensation Denver-based
Name Position From Trust Oppenheimer
Funds1
Robert G. Avis Trustee $3,391.05 $63,501
William A. Baker Audit and Review $3,410.51 $77,502
Committee Ex-Officio
Member2 and Trustee
Charles Conrad, Jr. Trustee(3) $3,649.51 $72,000
Total
Compensation
Aggregate From All
Compensation Denver-based
Name Position From Trust Oppenheimer
Funds1
Jon S. Fossel Trustee $3,391.05 $63,277
Sam Freedman Audit and Review $2,579.56
Committee Member2 $66,501
and Trustee
Raymond J. Kalinowski Audit and Review $3,822.45 $ 71,561
Committee Member2
and Trustee
C. Howard Kast Audit and Review $4,088.19 $76,503
Committee Chairman2
and Trustee
Robert M. Kirchner Trustee3 $3,649.51 $ 72,000
Ned M. Steel Trustee $3,391.05 $ 63,501
1 For the 1997 calendar year.
2Commitee positions effective July 1, 1997.
3Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation plan for disinterested Trustees that enables Trustees to elect to
defer receipt of all or a portion of the annual fees they are entitled to
receive from the Trust. As of December 31, 1997, none have elected to do so.
Under the plan, the compensation deferred by a Trustee is periodically adjusted
as though an equivalent amount had been invested in shares of one or more
Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under
the plan will be determined based upon the performance of the selected funds.
Deferral of Trustees' fees under the plan will not materially affect the assets,
liabilities or net income per share of any Fund. The plan will not obligate the
Trust to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the SEC, the Trust
may invest in the funds selected by the Trustee under the plan without
shareholder approval for the limited purpose of determining the value of the
Trustee's deferred fee account.
o Major Shareholders. As of April 9, 1998 the holders of 5% or more of the
outstanding shares of any Fund were separate accounts of the following insurance
companies and their respective affiliates: (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, Greensboro, NC, Chubb Life Insurance Company of America, and Alexander
Hamilton Life Insurance Company of America, Concord, NH (collectively,
"Jefferson Pilot"); and (viii) CUNA Mutual Group ("CUNA"), Madison, WI . Such
shares were held as shown in Appendix B. No shares of Small Cap Growth Fund and
no Class 2 shares of any Fund were outstanding as of that date.
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.
o Portfolio Management. The Portfolio Managers of the Funds are as
follows; Money Fund, Dorothy Warmack; High Income, Thomas P. Reedy; 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); Small Cap Growth Fund, Jay W. Tracey III and Alan Gilston;
Aggressive Growth Fund, Bruce L. Bartlett; Growth Fund, Jane Putnam; Global
Securities Fund, William Wilby; and Growth & Income Fund, Michael S. Levine.
They are the persons principally responsible for the day-to-day management of
each of the Fund's respective portfolios. Their backgrounds are described in the
Prospectus under "Portfolio Managers." Other members of the Manager's Equity
Portfolio Department, particularly, George Evans and Frank Jennings for Global
Securities Fund, Robert Doll for Growth Fund and Michael S. Levine for Multiple
Strategies Fund, provide the portfolio managers of those Funds with counsel and
support in managing those Funds' portfolios. Similarly, other members of the
Manager's Fixed Income Portfolio Department, particularly portfolio analysts,
traders and other portfolio managers having broad experience with domestic and
international government and corporate fixed-income securities, provide the
portfolio managers of Money Fund, High Income Fund, Bond Fund and Strategic Bond
Fund with support in managing the portfolios of those Funds.
o The Investment Advisory Agreements. The Investment Advisory
Agreements between the Manager and the Trust for each of the ten 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 Investment
Advisory Agreements are paid by the Trust. The Investment 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. Each Fund (and whenever
shares of more than one class are outstanding, each class) bears its
respective expenses. The management fees paid by the Funds to the Manager
for the Funds' most recent three fiscal years (except for Small Cap Growth
Fund, which commenced operations in 1998) were as follows:
Fiscal year ended December 31,
1995 1996 1997
Money Fund $ 338,483 $ 445,89 $ 601,698
High Income Fund $ 866,154 $1,177,754 $1,667,490
Bond Fund $1,280,422 $2,188,350 $3,281,556
Aggressive Growth Fund $1,790,785 $3,382,840 $5,324,309
Growth Fund $ 644,977 $1,139,255(2) $2,859,202
Multiple Strategies Fund $2,540,311 $3,132,569 $4,068,887
Global Securities Fund $2,451,556 $3,395,740 $5,615,606
Strategic Bond Fund $ 281,335 $ 618,33 $1,197,613
Growth & Income Fund(1) $ 6,710(1$ 160,81 $ 709,577
- --------------------
(1)From July 5, 1995 (commencement of operations) to December 31, 1995.
(2) 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.
Aggressive Growth Fund, Inc.
The Investment 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 Investment Advisory 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 Investment Advisory 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.
The Investment Advisory Agreements contain no expense limitation.
o The Distributor. Under its General Distributor's Agreement with the
Trust dated May 1, 1998, the Distributor acts as the principal underwriter in
the continuous public offering of the Fund's Class 2 shares only, but is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales (other than those paid under the Class 2 Service Plans of each Fund),
including advertising and the cost of printing and mailing prospectuses (other
than those furnished to existing shareholders), may be borne by the Distributor
or by the insurance company separate account sponsors and their affiliates that
offer Class 2 shares to their contract owners. For additional information about
distribution of the each Fund's shares and the expenses connected with such
activities, please refer to "Class 2 Service Plans," below.
o 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 . One of the duties
of the Manager under the Investment Advisory Agreements is to arrange the
portfolio transactions for the Funds. The Investment 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
Investment 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 Investment 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 Investment 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, 1995, 1996 and 1997 total
brokerage commissions paid by the Funds (not including spreads or concessions on
principal transactions on a net trade basis) were $4,083,132, $507,501 and
$810,749, respectively, for Aggressive Growth Fund; $104,203 $24,248 and
$20,256, respectively, for High Income Fund; $152,870, $215,286 and $506,443,
respectively, for Growth Fund; $400,275, $351,373 and $500,783, respectively,
for Multiple Strategies Fund; $2,826,016, $2,101,076 and $2,114,523,
respectively for Global Securities Fund; $13,074, $11,995 and $17,121,
respectively, for Strategic Bond Fund; $2,100, $13,852 and $21,630,
respectively, for Bond Fund; and $42,952, $71,023 and $209,630, respectively for
Growth & Income Fund. During the fiscal year ended December 31, 1997, $
$268,676, $392,618, $324,805, $1,954,773, $1,925, $568, $348 and $172,825 was
paid by Aggressive Growth Fund, Growth Fund, Multiple Strategies Fund, Global
Securities Fund, Strategic 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 $_______$150,491,397,
$274,315,170, $158,798,990, $745,018,249, $3,544,062, $1,764,195, $2,853,710 and
$106,164,211 for these respective Funds.
Performance of the Funds
o 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, 1997, Money Fund's "current yield" was 5.03% and its
compounded "effective yield" for that period was 5.38%.
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.
o 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 stated period is calculated using the following formula set
forth in the SEC rules: Standardized ~ Yield ~ = ~ 2~ [~ (~ {a-b} over cd ~ +~
1~ )
SUP 6~ -~ 1~ ]
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period. b = expenses
accrued for the period (net of any expense 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 stated period may differ from the yield for any
other periods. 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, 1997, the yield of High
Income Fund, Bond Fund and Strategic Bond Fund, calculated as described above,
was 7.38%, 5.92% and 8.44%, 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.
o 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, 1997, was 6.96%, 6.04% and 7.83%,
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: LEFT (
{~ERV~} OVER P~ right) SUP {1/n}~-1~=~Average~Annual~Total~ Return
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: ALIGNC {ERV~-~ P~} over P~ =~Total~ Return
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 (which preceded the inception of Small Cap
Growth Fund):
Average Annual Total Return for:
Cumulative
Total
Fiscal Year Five Year Ten Year Return From
Ended Period Period Inception(1)Inception(1)
Fund 12/31/97 Ended 12/31/97 Ended 1to 12/31/97 to 12/31/97
- ---- -------- -------------- ------------------ -----------
High Income Fund 12.21% 13.75% 14.32% 13.35% 331.57%
Bond Fund 9.25% 8.23% 9.50% 9.89% 232.54%
Aggressive Growth Fund 11.67% 15.92% 16.23% 15.31% 405.90%
Growth Fund 26.68% 18.61% 16.67% 15.43% 522.65%
Multiple Strategies 17.22% 13.31% 12.74% 12.04% 244.89%
Fund
Global Securities Fund 22.42% 18.81% n/a 12.26% 128.29%
Strategic Bond Fund 8.71% n/a n/a 7.64% 40.95%
Growth & Income Fund 32.48% n/a n/a 37.24% 119.88%
- --------------
(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 Aggressive Growth 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 the Funds
(except Money Fund) may be compared with performance for the same period of the
index shown in that Fund's performance graph in the Prospectus. The performance
of Small Cap Growth Fund can be compared to the performance during the same
period of the Russell 2000, a widely recognized index of small capitalization
U.S. issuers.
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. In addition, the Policies may have inception dates different
than those of the Funds shown 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 sub-account
charges or taxes into consideration.
From time to time, the Trust may include in its advertisements and sales
literature performance information about the Funds (and the insurance company
separate accounts that hold their shares) cited in other newspapers and
periodicals, such as The New York Times, which may include performance
quotations from other sources, including Lipper and Morningstar.
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 variable annuity
sub-accounts that offer 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, but does not take sub-account charges
into consideration. 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.
Class 2 Service Plans
The Trust has adopted a Service Plan for Class 2 shares of each Fund under
Rule 12b-1 of the Investment Company Act, pursuant to which the each Fund makes
payments to the Distributor in connection with the distribution and/or servicing
of the shares of Class 2. Each Class 2 Plan has been approved by a vote of (i)
the Board of Trustees of the Trust, including a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on that
Plan, and (ii) the Manager as the then-sole initial holder of such shares. As of
the date of this Statement of Additional Information, no Class 2 shares have
been issued and therefore no payments have been made under the Plans.
Under the Class 2 Plans, no payment will be made to any insurance company
separate account sponsor or affiliate thereof under a Fund's Class 2 Plan (each
is referred to as a "Recipient") in any quarter if the aggregate net assets of
all Fund shares held by the Recipient for itself and its customers did not
exceed a minimum amount, if any, that may be determined from time to time by a
majority of the Trust's Independent Trustees. Initially, the Board of Trustees
has set the fee at 0.10% of average annual net assets and set no minimum amount.
In addition, the Manager and the Distributor may, under the Plans, from
time to time from their own resources (which, as to the Manager, may include
profits derived from the advisory fee it receives from each respective Fund)
make payments to Recipients for distribution and administrative services they
perform. The Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of distribution assistance payments they make to
Recipients from their own assets.
Unless terminated as described below, each Class 2 Plan continues in
effect from year to year but only as long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees and its Independent
Trustees by a vote cast in person at a meeting called for the purpose of voting
on such continuance. Any Class 2 Plan may be terminated at any time by the vote
of a majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of that class. For purposes of voting with respect to the Class 2 Plans, Account
owners are considered to be shareholders of a Fund's shares. No Class 2 Plan may
be amended to increase materially the amount of payments to be made unless such
amendment is approved by Account owners of the class affected by the amendment.
All material amendments must be approved by the Board the Independent Trustees.
While the plans are in effect, the Treasurer of the Trust must provide
separate written reports to the Trust's Board of Trustees at least quarterly
describing the amount of payments made pursuant to each Plan and the purposes
for which the payments were made. The Class 2 reports also must include the
identity of each Recipient that received any payment. These reports are subject
to the review and approval of the Independent Trustees.
The Class 2 Plans provide for the Distributor to be compensated at a flat
rate, whether the Distributor's distribution expenses are more or less than the
amounts paid by the Funds. Such payments are made in recognition that the
Distributor will pay insurance company separate account sponsors for certain
activities, as described in the Prospectus.
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 or after a holiday). The NYSE's most
recent annual announcement (which is subject to change) states that it will
close on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may 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
the principal exchange for such security or NASDAQ that day (the "Valuation
Date") or, in the absence of sales that day, at the last reported sale price of
the preceding trading day, or closing bid prices that day; (ii) securities
traded on a foreign securities exchange are valued generally at the last sales
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 at its last trading session on or immediately preceding the Valuation
Date, or, at the mean between "bid" and "asked" prices obtained from the
principal exchange or two active market makers in the security on the basis of
reasonable inquiry; (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 Fund'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 "bid" and
"asked" prices determined by a 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; (v) money market-type debt
securities held by a non- money market fund that had a maturity of less than 397
days when issued that have a remaining maturity of 60 days or less, and debt
instruments held by a money market fund that have a remaining maturity of 397
days or less, shall be valued at cost, adjusted for amortization of premiums and
accretion of discount; and (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 at the mean between the "bid" and "asked" prices provided by a
single active market maker (which in certain cases may be the "bid" price if no
"asked" price is available).
Trading in securities on European and Asian exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange.
Events affecting the values of foreign securities traded in securities markets
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the 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 is likely to
effect a material change in the value of such security
. 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.
The Manager may use pricing services approved by the Board of Trustees to
price U.S. Government securities, corporate debt securities or mortgage-backed
securities for which last sale information is not generally available. The
pricing service, when valuing such securities, may use "matrix" comparisons to
the prices for comparable instruments on the basis of quality, yield, maturity
and other special factors involved. The Manager will monitor the accuracy of the
pricing services, which may include comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls and futures are valued at the last sales price on the
principal exchange on which they are traded or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of 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; Financial Statements. 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.
The Trust's financial
statements included in this Statement of Additional Information cover the period
ended December 31, 1997, and therefore (i) refer to Oppenheimer Aggressive
Growth Fund by its prior name, "Oppenheimer Capital Appreciation Fund", and (ii)
do not include any information on Small Cap Growth Fund, which had not yet
commenced operations as of that date.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
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, 1997, the related statements of operations for the year then
ended, the statements of changes in net assets for the years ended December 31,
1997 and 1996, and the financial highlights for the applicable periods ended
December 31, 1997, 1996, 1995, 1994 and 1993. 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, 1997 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, 1997, 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 23, 1998
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT NOTE 1
<S> <C> <C>
- -------------------------------------------------------------
DIRECT BANK OBLIGATIONS - 9.4%
- -------------------------------------------------------------
Abbey National North America Corp.,
5.54%, 1/23/98 $6,000,000 $ 5,979,687
- -------------------------------------------------------------
Bankers Trust Co., New York, 5.71%,
4/15/98(1) 3,000,000 3,000,000
- -------------------------------------------------------------
National Westminster Bank of
Canada, 5.59%, 4/30/98 3,000,000 2,944,585
------------
Total Direct Bank Obligations 11,924,272
- -------------------------------------------------------------
LETTERS OF CREDIT - 8.6%
- -------------------------------------------------------------
ABN Amro Bank NV, guaranteeing
commercial paper of Formosa
Plastics Corp., USA-Series A,
5.55%, 2/27/98 2,000,000 1,982,425
- -------------------------------------------------------------
Bank of America, guaranteeing
commercial paper of Formosa
Plastics Corp., USA-Series B,
5.55%, 3/19/98 2,000,000 1,976,258
- -------------------------------------------------------------
Credit Suisse, guaranteeing
commercial paper of Daewoo
International Corp., 5.63%, 4/22/98 5,000,000 4,913,204
- -------------------------------------------------------------
Societe Generale, guaranteeing
commercial paper of Nacional
Financiera SNC-Series B, 5.535%,
2/17/98 2,000,000 1,985,548
------------
Total Letters of Credit 10,857,435
- -------------------------------------------------------------
SHORT-TERM NOTES - 75.7%
- -------------------------------------------------------------
AUTOMOTIVE - 0.8%
BMW US Capital Corp., 5.65%,
1/14/98 1,000,000 997,960
- -------------------------------------------------------------
BANKS - 4.9%
Bankers Trust New York Corp.,
5.54%, 2/17/98 3,280,000 3,256,276
- -------------------------------------------------------------
Barnett Banks, Inc., 5.92%, 1/16/98 3,000,000 2,992,500
------------
6,248,776
- -------------------------------------------------------------
BROKER/DEALERS - 24.5%
Bear Stearns Cos., Inc., 6.169%,
3/23/98(1) 5,000,000 5,002,296
- -------------------------------------------------------------
Lehman Brothers Holdings, Inc.:
4.975%, 8/14/98(1) 2,000,000 2,000,000
5.70%, 4/10/98 3,000,000 2,952,975
- -------------------------------------------------------------
Merrill Lynch & Co., Inc., 5.67%,
5/22/98 6,250,000 6,111,203
- -------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co., 6.75%, 3/24/98 5,000,000 5,000,000
- -------------------------------------------------------------
Republic New York Securities Corp.,
7%, 4/24/98 5,000,000 5,000,000
- -------------------------------------------------------------
Salomon Smith Barney, Inc.:
5.77%, 3/30/98 2,000,000 1,971,791
5.884%, 10/20/98(1) 3,000,000 3,000,000
------------
31,038,265
- -------------------------------------------------------------
COMMERCIAL FINANCE - 6.5%
CIT Group Holdings, Inc., 5.902%,
3/11/98(1) 1,000,000 1,000,000
- -------------------------------------------------------------
FINOVA Capital Corp.:
5.60%, 1/5/98 2,000,000 1,998,756
5.61%, 4/29/98 2,000,000 1,963,223
- -------------------------------------------------------------
Heller Financial, Inc.:
6%, 1/9/98 334,000 333,555
6%, 4/2/98 3,000,000 2,954,500
------------
8,250,034
- -------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 1.5%
First Data Corp., 5.67%, 5/19/98 2,000,000 1,956,530
- -------------------------------------------------------------
DIVERSIFIED FINANCIAL - 3.2%
General Electric Capital Corp.,
5.55%, 2/23/98 2,510,000 2,489,491
- -------------------------------------------------------------
General Motors Acceptance Corp.,
5.56%, 1/26/98 1,500,000 1,494,208
------------
3,983,699
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT NOTE 1
- -------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL SERVICES - 4.7%
PHH Corp.:
5.939%, 1/27/98(1) $1,000,000 $ 999,986
5.96%, 1/15/98(1) 5,000,000 4,999,981
------------
5,999,967
- -------------------------------------------------------------
INSURANCE - 5.5%
Pacific Mutual Life Insurance Co.,
5.647%, 1/2/98(1)(2) 5,000,000 5,000,000
- -------------------------------------------------------------
Travelers Insurance Co., 5.708%,
9/16/98(1)(2) 2,000,000 2,000,000
------------
7,000,000
- -------------------------------------------------------------
LEASING & FACTORING - 3.9%
American Honda Finance Corp.,
5.58%, 1/22/98 5,000,000 4,983,725
- -------------------------------------------------------------
MANUFACTURING - 1.4%
Rexam PLC, 6%, 1/12/98(3) 1,750,000 1,746,792
- -------------------------------------------------------------
METALS/MINING - 3.3%
Rio Tinto America, Inc., 5.55%,
2/27/98(3) 4,200,000 4,163,093
- -------------------------------------------------------------
NONDURABLE HOUSEHOLD GOODS - 2.6%
Newell Co., 6.80%, 1/2/98(3) 3,345,000 3,344,368
- -------------------------------------------------------------
SPECIAL PURPOSE FINANCIAL - 12.9%
Asset Backed Capital Finance, Inc.:
5.60%, 2/9/98(3) 1,500,000 1,490,900
5.68%, 1/8/98(3) 2,000,000 1,997,791
- -------------------------------------------------------------
Beta Finance, Inc.:
5.54%, 2/25/98(3) 2,000,000 1,983,072
5.56%, 3/12/98(3) 2,000,000 1,978,300
5.57%, 4/29/98(3) 2,000,000 1,963,486
- -------------------------------------------------------------
Cooperative Assn. of Tractor
Dealers-Series A, 5.95%, 2/10/98 1,000,000 993,389
- -------------------------------------------------------------
CXC, Inc.:
5.59%, 2/17/98(3) 3,000,000 2,978,106
5.68%, 3/26/98(3) 3,000,000 2,960,240
------------
16,345,284
------------
Total Short-Term Notes 96,058,493
- -------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS -
5.5%
- -------------------------------------------------------------
Finnish Export Credit Ltd., 5.55%,
7/15/98 2,000,000 1,939,875
- -------------------------------------------------------------
Westseutsche Landsbank
Girozentrale, 8%, 1/2/98 5,000,000 4,998,889
------------
Total Foreign Government
Obligations 6,938,764
- -------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE 99.2% 125,778,964
- -------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.8 1,003,418
---------- ------------
NET ASSETS 100.0% $126,782,382
---------- ------------
---------- ------------
</TABLE>
Short-term notes, 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, 1997. 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 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 $7,000,000, or 5.52% 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.
3. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $24,606,148, or 19.41% of the
Fund's net assets and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 4.6%
- ----------------------------------------------------------------------
Amresco Commercial Mortgage Funding
I Corp., Multiclass Mtg. Pass-
Through Certificates, Series
1997-C1, Cl. H, 7%, 6/17/29(2) $ 200,000 $ 178,813
- ----------------------------------------------------------------------
Asset Securitization Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1997-D4:
Cl. B1, 7.525%, 4/14/29(3) 167,000 165,435
Cl. B2, 7.525%, 4/14/29(3) 167,000 161,338
Cl. B3, 7.525%, 4/14/29(3) 166,000 153,835
- ----------------------------------------------------------------------
CBA Mortgage Corp., Mtg.
Pass-Through Certificates, Series
1993-C1:
Cl. E, 7.76%, 12/25/03(3) 250,000 252,675
Cl. F, 7.76%, 12/25/03(3)(4) 700,000 562,590
- ----------------------------------------------------------------------
CS First Boston Mortgage Securities
Corp., Mtg. Pass-Through
Certificates, Series 1997-C1:
Cl. E, 7.50%, 3/1/11(2) 506,000 523,862
Cl. F, 7.50%, 6/20/13(2) 300,000 291,000
Cl. G, 7.50%, 6/20/14(2) 500,000 462,350
Cl. H, 7.50%, 8/20/14(2) 225,000 177,660
- ----------------------------------------------------------------------
Commercial Mortgage Acceptance
Corp., Collateralized Mtg.
Obligation, Series 1996-C1, Cl. E,
8.129%, 12/25/20(3)(4) 250,000 261,250
- ----------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1:
8.116%, 2/25/11(2)(3) 1,500,000 1,276,950
8.116%, 5/25/08(2)(3) 300,000 304,290
- ----------------------------------------------------------------------
First Union-Lehman Brothers
Commercial Mortgage Trust,
Interest-Only Stripped Mtg.-Backed
Security, Series 1997-C1, 7.086%,
4/18/27(5) 8,207,763 640,109
- ----------------------------------------------------------------------
General Motors Acceptance Corp.,
Interest-Only Stripped Mtg.-Backed
Security, Series 1997-C1, Cl. X,
8.905%, 7/15/27(5) 9,689,791 975,035
- ----------------------------------------------------------------------
Merrill Lynch Mortgage Investors,
Inc., Mtg. Pass-Through
Certificates, Series 1995-C2, Cl.
D, 8.189%, 6/15/21(3) 367,685 375,958
- ----------------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. E, 7.51%,
2/15/28(2)(3) 835,342 798,404
Series 1997-HF1, Cl. F, 6.86%,
2/15/10(2) 300,000 273,375
- ----------------------------------------------------------------------
Mortgage Capital Funding, Inc.:
Commercial Mtg. Pass-Through
Certificates, Series 1997-MC1, Cl.
F, 7.452%, 5/20/07(2) 254,890 242,783
Multifamily Mtg. Pass-Through
Certificates, Series 1996-MC1, Cl.
G, 7.15%, 6/15/06(4) 750,000 712,734
- ----------------------------------------------------------------------
NationsCommercial Corp., NB
Commercial Mtg. Pass-Through
Certificates, Series-DMC, Cl. C,
8.921%, 8/12/11(4) 900,000 961,031
- ----------------------------------------------------------------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates:
Series 1994-C1, Cl. E, 8%, 6/25/26 664,744 656,286
Series 1994-C2, Cl. G, 8%, 4/25/25 745,616 744,456
Series 1995-C1, Cl. F, 6.90%,
2/25/27 724,039 682,516
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED OBLIGATIONS
(CONTINUED)
- ----------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Series 1996-B, Cl.
1, 7.136%, 4/25/26 $ 1,473,761 $ 1,040,844
- ----------------------------------------------------------------------
Structured Asset Securities Corp.,
Multiclass Pass-Through
Certificates, Series 1996-C3, Cl.
E, 8.458%, 6/25/30(4) 650,000 651,625
------------
Total Mortgage-Backed Obligations
(Cost $12,447,815) 13,527,204
- ----------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 3.2%
- ----------------------------------------------------------------------
U.S. Treasury Bonds, 6.125%,
11/15/27 (Cost $9,255,469) 9,000,000 9,250,317
- ----------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS -
2.1%
- ----------------------------------------------------------------------
Argentina (Republic of) Unsec.
Unsub. Medium-Term Nts., 5.50%,
3/27/01 JPY 110,000,000 835,103
- ----------------------------------------------------------------------
Argentina (Republic of) Unsec.
Unsub. Medium-Term Nts., 8.75%,
7/10/02 ARP 420,000 364,417
- ----------------------------------------------------------------------
Bulgaria (Republic of) Interest
Arrears Bonds, 6.69%, 7/28/11(3) 50,000 36,625
- ----------------------------------------------------------------------
Ecuador (Republic of) Disc. Bonds,
6.688%, 2/28/25(3) 335,000 252,925
- ----------------------------------------------------------------------
Ecuador (Republic of) Past Due
Interest Bonds, 6.688%, 2/27/15(3) 699,878 458,420
- ----------------------------------------------------------------------
Financiera Energetica Nacional SA
Nts., 9.375%, 6/15/06 500,000 504,688
- ----------------------------------------------------------------------
Halkbank Turkiye Halk Bonds, 8%,
2/26/02 DEM 170,000 89,820
- ----------------------------------------------------------------------
Hashemite (Kingdom of Jordan)
Collateralized Par Bonds, Series
DEF, 4%, 12/23/23(3) 580,000 400,200
- ----------------------------------------------------------------------
Hashemite (Kingdom of Jordan) Disc.
Bonds, 6.875%, 12/23/23(3) 500,000 417,031
- ----------------------------------------------------------------------
Ivory Coast (Government of) Past
Due Interest Bonds, 12/29/49(7) 1,375,000 543,125
- ----------------------------------------------------------------------
Nigeria (Federal Republic of)
Promissory Nts., Series RC, 5.092%,
1/5/10 319,347 225,695
- ----------------------------------------------------------------------
Pakistan (Republic of) Bonds,
9.856%, 5/30/00(3) 130,000 125,125
- ----------------------------------------------------------------------
Pakistan (Republic of) Debs.,
11.50%, 12/22/99 54,000 54,135
- ----------------------------------------------------------------------
Pera Financial Services Sec. Nts.,
9.375%, 10/15/02(4) 110,000 101,337
- ----------------------------------------------------------------------
Peru (Republic of) Front-Loaded
Interest Reduction Bonds, 3.25%,
3/7/17(3) 300,000 177,750
- ----------------------------------------------------------------------
Peru (Republic of) Past Due
Interest Bonds, 4%, 3/7/17(3) 260,000 168,675
- ----------------------------------------------------------------------
Petroleos Mexicanos Debs., 14.50%,
3/31/06 GBP 180,000 376,139
- ----------------------------------------------------------------------
PT Hutama Karya Promissory Nts.,
Zero Coupon, 28.69%, 2/10/98(8) IDR 1,000,000,000 174,620
- ----------------------------------------------------------------------
Romania (Government of) Bonds,
7.75%, 6/17/02 DEM 98,000 52,732
- ----------------------------------------------------------------------
Turkey (Republic of) Treasury
Bills, Zero Coupon, 101.517%,
3/18/98(8) TRL 20,000,000,000 79,557
- ----------------------------------------------------------------------
Venezuela (Republic of) Bonds,
9.25%, 9/15/27 65,000 58,403
- ----------------------------------------------------------------------
Venezuela (Republic of) Disc.
Bonds, Series W-B, 6.75%,
3/31/20(3) 3,570 3,209
- ----------------------------------------------------------------------
Venezuela (Republic of) Disc.
Bonds, Series DL, 6.75%,
12/18/07(3) 238,095 214,137
- ----------------------------------------------------------------------
Venezuela (Republic of) Sr. Unsec.
Unsub. Nts., Series REGS, 9.125%,
6/18/07 300,000 294,000
------------
Total Foreign Government
Obligations (Cost $6,283,361) 6,007,868
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
LOAN PARTICIPATIONS - 0.7%
- ----------------------------------------------------------------------
Algeria (Republic of) Reprofiled
Debt Loan Participation, Tranche A,
6.625%, 9/4/06(3) $ 1,010,000 $ 828,200
- ----------------------------------------------------------------------
Morocco (Kingdom of) Loan
Participation Agreement, Tranche A,
6.66%, 1/1/09(3) 100,000 86,391
- ----------------------------------------------------------------------
Russian (Government of) Principal
Loans Debs., 6.719%,
6/2/98(2)(3)(7) 1,115,000 689,906
- ----------------------------------------------------------------------
Trinidad & Tobago Loan
Participation Agreement, Tranche B,
1.575%, 9/30/00(2)(3) JPY 59,260,366 423,871
------------
Total Loan Participations (Cost
$2,073,605) 2,028,368
- ----------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 57.5%
- ----------------------------------------------------------------------
BASIC INDUSTRY - 3.5%
- ----------------------------------------------------------------------
CHEMICALS - 1.8%
ClimaChem, Inc., 10.75% Gtd. Sr.
Unsec. Nts., 12/1/07(4) 300,000 310,500
- ----------------------------------------------------------------------
ICO, Inc., 10.375% Sr. Nts., 6/1/07 250,000 269,375
- ----------------------------------------------------------------------
Laroche Industries, Inc., 9.50% Sr.
Sub. Nts., 9/15/07(4) 475,000 470,250
- ----------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr.
Sec. Nts., 10/15/03 1,045,000 1,162,562
- ----------------------------------------------------------------------
PCI Chemicals Canada, Inc., 9.25%
Sr. Nts., 10/15/07(4) 400,000 396,000
- ----------------------------------------------------------------------
Pioneer Americas Acquisition Corp.,
9.25% Sr. Nts., 6/15/07 575,000 582,187
- ----------------------------------------------------------------------
Sovereign Specialty Chemicals,
Inc., 9.50% Sr. Sub. Nts.,
8/1/07(4) 750,000 772,500
- ----------------------------------------------------------------------
Sterling Chemicals Holdings, Inc.,
0%/13.50% Sr. Disc. Nts.,
8/15/08(9) 650,000 399,750
- ----------------------------------------------------------------------
Sterling Chemicals, Inc.:
11.25% Sr. Sub. Nts., 4/1/07 300,000 301,500
11.75% Sr. Unsec. Sub. Nts.,
8/15/06 635,000 650,875
------------
5,315,499
- ----------------------------------------------------------------------
CONTAINERS - 0.1%
Consumers International, Inc.,
10.25% Sr. Sec. Nts., 4/1/05(2) 375,000 412,500
- ----------------------------------------------------------------------
METALS/MINING - 0.2%
Metallurg, Inc., 11% Sr. Nts.,
12/1/07(4) 535,000 551,050
- ----------------------------------------------------------------------
PAPER - 0.4%
Four M Corp., 12% Sr. Nts., Series
B, 6/1/06(2) 150,000 159,750
- ----------------------------------------------------------------------
Riverwood International Corp.,
10.625% Sr. Unsec. Nts., 8/1/07 750,000 765,000
- ----------------------------------------------------------------------
U.S. Timberlands Co. LP, 9.625% Sr.
Nts., 11/15/07 300,000 312,000
------------
1,236,750
- ----------------------------------------------------------------------
STEEL - 1.0%
AK Steel Corp., 9.125% Sr. Nts.,
12/15/06 540,000 556,200
- ----------------------------------------------------------------------
Algoma Steel, Inc., 12.375% First
Mtg. Nts., 7/15/05 675,000 783,000
- ----------------------------------------------------------------------
Bar Technologies, Inc., 13.50% Sr.
Sec. Nts., 4/1/01 700,000 764,750
- ----------------------------------------------------------------------
Keystone Consolidated Industries,
Inc., 9.625% Sr. Nts., 8/1/07(4) 825,000 832,219
------------
2,936,169
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
CONSUMER RELATED - 7.6%
- ----------------------------------------------------------------------
CONSUMER PRODUCTS - 1.9%
Coleman Escrow Corp., Zero Coupon
Sr. First Priority Disc. Nts.,
10.71%, 5/15/01(8) $ 530,000 $ 353,775
- ----------------------------------------------------------------------
Dyersburg Corp., 9.75% Sr. Unsec.
Sub. Nts., 9/1/07 250,000 262,500
- ----------------------------------------------------------------------
Holmes Products Corp., 9.875% Gtd.
Nts., 11/15/07(4) 400,000 409,000
- ----------------------------------------------------------------------
Icon Fitness Corp., 0%/14% Sr.
Disc. Nts., 11/15/06(2)(9) 900,000 513,000
- ----------------------------------------------------------------------
Icon Health & Fitness, Inc., 13%
Sr. Sub. Nts., Series B, 7/15/02 800,000 898,000
- ----------------------------------------------------------------------
IHF Holdings, Inc., 0%/15% Sr. Sub.
Disc. Nts., Series B, 11/15/04(9) 1,450,000 1,268,750
- ----------------------------------------------------------------------
Revlon Worldwide Corp., Zero Coupon
Sr. Sec. Disc. Nts.:
10.56%, 3/15/01(8) 1,515,000 1,052,925
12.33%, 3/15/98(8) 350,000 346,421
- ----------------------------------------------------------------------
TAG Heuer International SA, 12% Sr.
Sub. Nts., 12/15/05(2) 350,000 421,750
------------
5,526,121
- ----------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO - 0.6%
CFP Holdings, Inc., 11.625% Gtd.
Sr. Nts., Series B, 1/15/04 75,000 75,375
- ----------------------------------------------------------------------
Del Monte Foods Co., 0%/12.50% Sr.
Disc. Nts., 12/15/07(4)(9) 500,000 288,750
- ----------------------------------------------------------------------
Sparkling Spring Water Group Ltd.,
11.50% Sr. Sub. Nts., 11/15/07(4) 1,000,000 1,035,000
- ----------------------------------------------------------------------
Windy Hill Pet Food, Inc., 9.75%
Sr. Sub. Nts., 5/15/07 350,000 358,750
------------
1,757,875
- ----------------------------------------------------------------------
HEALTHCARE - 0.6%
Genesis Health Ventures, Inc.,
9.25% Sr. Sub. Nts., 10/1/06 115,000 117,731
- ----------------------------------------------------------------------
Integrated Health Services, Inc.:
10.25% Sr. Sub. Nts., 4/30/06 35,000 37,275
9.50% Sr. Sub. Nts., 9/15/07(4) 765,000 787,950
- ----------------------------------------------------------------------
Sun Healthcare Group, Inc., 9.50%
Sr. Sub. Nts., 7/1/07(4) 655,000 674,650
------------
1,617,606
- ----------------------------------------------------------------------
HOTEL/GAMING - 3.5%
Boyd Gaming Corp.:
9.25% Sr. Unsec. Gtd. Nts., 10/1/03 575,000 605,187
9.50% Sr. Unsec. Sub. Nts., 7/15/07 125,000 131,562
- ----------------------------------------------------------------------
Capital Gaming International, Inc.,
Promissory Nts., 8/1/95(10) 9,500 0
- ----------------------------------------------------------------------
Capstar Hotel Co., 8.75% Sr. Sub.
Nts., 8/15/07 825,000 853,875
- ----------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd.
First Mtg. Nts., 12/1/03 1,550,000 1,674,000
- ----------------------------------------------------------------------
HMH Properties, Inc., 8.875% Sr.
Nts., 7/15/07 400,000 423,000
- ----------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr.
Sub. Nts., 6/15/07 1,275,000 1,341,937
- ----------------------------------------------------------------------
Mohegan Tribal Gaming Authority
(Connecticut), 13.50% Sr. Sec.
Nts., Series B, 11/15/02 700,000 899,500
- ----------------------------------------------------------------------
Rio Hotel & Casino, Inc.:
10.625% Sr. Sub. Nts., 7/15/05 125,000 135,625
9.50% Gtd. Sr. Sub. Nts., 4/15/07 550,000 584,375
- ----------------------------------------------------------------------
Showboat Marina Casino
Partnership/Showboat Marina Finance
Corp., 13.50% First Mtg. Nts.,
Series B, 3/15/03 1,100,000 1,325,500
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
HOTEL/GAMING (CONTINUED)
Signature Resorts, Inc., 9.75% Sr.
Sub. Nts., 10/1/07(4) $ 900,000 $ 904,500
- ----------------------------------------------------------------------
Station Casinos, Inc.:
10.125% Sr. Sub. Nts., 3/15/06 735,000 779,100
9.625% Sr. Sub. Nts., 6/1/03 200,000 207,000
- ----------------------------------------------------------------------
Venetian Casino Resort LLC/Las
Vegas Sands, Inc., 12.25% Mtg.
Nts., 11/15/04(4) 375,000 377,344
------------
10,242,505
- ----------------------------------------------------------------------
RESTAURANTS - 0.7%
Ameriking, Inc., 10.75% Sr. Nts.,
12/1/06 755,000 796,525
- ----------------------------------------------------------------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 139,000 142,127
9.75% Sr. Sub. Nts., 6/1/02(11) 950,000 980,875
------------
1,919,527
- ----------------------------------------------------------------------
TEXTILE/APPAREL - 0.3%
CMI Industries, Inc., 9.50% Sr.
Sub. Nts., 10/1/03(2) 95,000 93,812
- ----------------------------------------------------------------------
Dan River, Inc., 10.125% Sr. Sub.
Nts., 12/15/03 250,000 268,437
- ----------------------------------------------------------------------
Tultex Corp., 9.625% Sr. Unsec.
Nts., 4/15/07 150,000 150,000
- ----------------------------------------------------------------------
William Carter Co., 10.375% Sr.
Sub. Nts., Series A, 12/1/06 350,000 369,250
------------
881,499
- ----------------------------------------------------------------------
ENERGY - 4.3%
- ----------------------------------------------------------------------
Belden & Blake Corp., 9.875% Sr.
Sub. Nts., 6/15/07 1,385,000 1,405,775
- ----------------------------------------------------------------------
Clark R&M, Inc., 8.875% Sr. Sub.
Nts., 11/15/07(4) 1,200,000 1,218,000
- ----------------------------------------------------------------------
Clark USA, Inc., 10.875% Sr. Nts.,
Series B, 12/1/05 275,000 301,125
- ----------------------------------------------------------------------
Cliffs Drilling Co., 10.25% Sr.
Nts., 5/15/03 200,000 218,750
- ----------------------------------------------------------------------
Dailey International, Inc., 9.75%
Gtd. Sr. Unsec. Nts., 8/15/07(4) 425,000 448,375
- ----------------------------------------------------------------------
Energy Corp. of America, 9.50% Sr.
Sub. Nts., Series A, 5/15/07 665,000 666,662
- ----------------------------------------------------------------------
Forcenergy, Inc.:
8.50% Sr. Sub. Nts., Series B,
2/15/07 400,000 407,000
9.50% Sr. Sub. Nts., 11/1/06 280,000 298,200
- ----------------------------------------------------------------------
Gothic Energy Corp., 12.25% Sr.
Nts., 9/1/04(2) 1,000,000 1,050,000
- ----------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr.
Sub. Bonds, 7/15/06 1,500,000 1,614,375
- ----------------------------------------------------------------------
Parker Drilling Corp., 9.75% Gtd.
Sr. Nts., 11/15/06 600,000 649,500
- ----------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.,
9.375% Sub. Debs., 2/1/06 1,150,000 1,040,750
- ----------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub.
Nts., 5/15/07 910,000 928,200
- ----------------------------------------------------------------------
Statia Terminals
International/Statia Terminals
(Canada), Inc., 11.75% First Mtg.
Nts., Series B, 11/15/03 225,000 238,500
- ----------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub.
Nts., 9/15/07 1,675,000 1,712,687
- ----------------------------------------------------------------------
Wiser Oil Co., 9.50% Sr. Sub. Nts.,
5/15/07 265,000 261,025
------------
12,458,924
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES - 3.0%
- ----------------------------------------------------------------------
BANKS & THRIFTS - 0.5%
Bank Plus Corp., 12% Sr. Nts.,
7/18/07 $ 517,000 $ 581,625
- ----------------------------------------------------------------------
Local Financial Corp., 11% Sr.
Nts., 9/8/04(2) 800,000 848,000
------------
1,429,625
- ----------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 1.8%
Amresco, Inc., 10% Sr. Sub. Nts.,
Series 97-A, 3/15/04 600,000 625,500
- ----------------------------------------------------------------------
Bakrie Investindo, Zero Coupon
Promissory Nts., 19.09%, 3/26/98(8) IDR 1,000,000,000 166,261
- ----------------------------------------------------------------------
ECM Fund, L.P.I., 14% Sub. Nts.,
6/10/02(2) 91,619 91,849
- ----------------------------------------------------------------------
Emergent Group, Inc., 10.75% Sr.
Nts., 9/15/04 425,000 423,406
- ----------------------------------------------------------------------
Ocwen Capital Trust I, 10.875% Gtd.
Bonds, 8/1/27 450,000 490,500
- ----------------------------------------------------------------------
Ocwen Financial Corp., 11.875%
Nts., 10/1/03 850,000 962,625
- ----------------------------------------------------------------------
Saul (B.F.) Real Estate Investment
Trust, 11.625% Sr. Sec. Nts.,
Series B, 4/1/02 1,200,000 1,290,000
- ----------------------------------------------------------------------
Southern Pacific Funding Corp.,
11.50% Sr. Nts., 11/1/04 600,000 603,000
- ----------------------------------------------------------------------
Veritas Capital Trust, 10% Gtd.
Debs., 1/1/28(4) 525,000 536,812
------------
5,189,953
- ----------------------------------------------------------------------
INSURANCE - 0.7%
Residential Reinsurance, 11.447%
Nts., 12/15/98(3) 1,000,000 1,032,175
- ----------------------------------------------------------------------
Veritas Holdings, Inc., 9.625% Sr.
Nts., 12/15/03 1,000,000 1,070,000
------------
2,102,175
- ----------------------------------------------------------------------
HOUSING RELATED - 0.9%
- ----------------------------------------------------------------------
BUILDING MATERIALS - 0.2%
Nortek, Inc., 9.25% Sr. Nts.,
Series B, 3/15/07 600,000 615,000
- ----------------------------------------------------------------------
HOMEBUILDERS/REAL ESTATE - 0.7%
Continental Homes Holding Corp.,
10% Gtd. Unsec. Bonds, 4/15/06 80,000 87,600
- ----------------------------------------------------------------------
First Place Tower, Inc., Units
(each unit consists of one $10
principal amount of 8.50% cv. sub.
debs., 12/15/15 and 40 common
shares)(12) CAD 180,660 473,421
- ----------------------------------------------------------------------
Greystone Homes, Inc., 10.75% Sr.
Gtd. Nts., 3/1/04(2) 280,000 306,600
- ----------------------------------------------------------------------
Hovnanian K. Enterprises, Inc.,
11.25% Gtd. Sub. Nts., 4/15/02 200,000 210,500
- ----------------------------------------------------------------------
Nortek, Inc., 9.125% Sr. Nts.,
Series B, 9/1/07 1,000,000 1,020,000
------------
2,098,121
- ----------------------------------------------------------------------
MANUFACTURING - 5.3%
- ----------------------------------------------------------------------
AEROSPACE - 2.4%
America West Airlines, Inc., 10.75%
Sr. Nts., 9/1/05(11) 1,700,000 1,827,500
- ----------------------------------------------------------------------
Amtran, Inc., 10.50% Sr. Nts.,
8/1/04(4) 700,000 731,500
- ----------------------------------------------------------------------
Atlas Air, Inc.:
10.75% Sr. Nts., 8/1/05 700,000 742,000
12.25% Pass-Through Certificates,
12/1/02 950,000 1,059,250
- ----------------------------------------------------------------------
Constellation Finance LLC, 9.80%
Airline Receivable Asset-Backed
Nts., Series 1997-1, 1/1/01(2) 500,000 505,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
AEROSPACE (CONTINUED)
Kitty Hawk, Inc., 9.95% Sr. Nts.,
11/15/04(4) $ 525,000 $ 530,250
- ----------------------------------------------------------------------
Pegasus Aircraft Lease
Securitization Trust, 11.76% Sr.
Nts., Cl. B, 6/15/04(2) 340,067 350,847
- ----------------------------------------------------------------------
Trans World Airlines, Inc., 11.50%
Sr. Sec. Nts., 12/15/04(4) 1,200,000 1,212,000
------------
6,958,347
- ----------------------------------------------------------------------
AUTOMOTIVE - 0.9%
Aftermarket Technology Corp., 12%
Sr. Sub. Nts., Series B, 8/1/04 300,000 334,500
- ----------------------------------------------------------------------
Cambridge Industries, Inc., 10.25%
Sr. Sub. Nts., 7/15/07(4) 450,000 472,500
- ----------------------------------------------------------------------
Collins & Aikman Products Co.,
11.50% Gtd. Sr. Sub. Nts., 4/15/06 100,000 113,000
- ----------------------------------------------------------------------
Delco Remy International, Inc.,
8.625% Sr. Nts., 12/15/07 225,000 229,219
- ----------------------------------------------------------------------
Hayes Wheels International, Inc.:
11% Sr. Sub. Nts., 7/15/06 600,000 672,000
9.125% Sr. Sub. Nts., 7/15/07 300,000 311,625
- ----------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts.,
7/15/06 300,000 330,750
------------
2,463,594
- ----------------------------------------------------------------------
CAPITAL GOODS - 2.0%
Burke Industries, Inc., 10% Sr.
Nts., 8/15/07(4) 375,000 387,187
- ----------------------------------------------------------------------
Clark-Schwebel, Inc., 10.50% Sr.
Nts., 4/15/06 725,000 793,875
- ----------------------------------------------------------------------
Communications & Power Industries,
Inc., 12% Sr. Sub. Nts., Series B,
8/1/05 1,050,000 1,176,000
- ----------------------------------------------------------------------
Hydrochem Industrial Services,
Inc., 10.375% Sr. Sub. Nts., 8/1/07 675,000 700,313
- ----------------------------------------------------------------------
Insilco Corp., 10.25% Unsec. Sr.
Sub. Nts., 8/15/07(4) 825,000 868,313
- ----------------------------------------------------------------------
International Wire Group, Inc.,
11.75% Sr. Sub. Nts., Series B,
6/1/05 475,000 522,500
- ----------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub.
Nts., 7/1/07 450,000 451,125
- ----------------------------------------------------------------------
Roller Bearing Co. of America,
Inc., 9.625% Gtd. Sr. Sub. Nts.,
6/15/07(2) 535,000 541,688
- ----------------------------------------------------------------------
Synthetic Industries, Inc., 9.25%
Sr. Sub. Nts., 2/15/07 170,000 180,200
- ----------------------------------------------------------------------
Titan Wheel International, Inc.,
8.75% Sr. Sub. Nts., 4/1/07 150,000 157,875
------------
5,779,076
- ----------------------------------------------------------------------
MEDIA - 11.8%
- ----------------------------------------------------------------------
BROADCASTING - 2.1%
Capstar Broadcasting Partners,
Inc., 9.25% Sr. Sub. Nts., 7/1/07 600,000 616,500
- ----------------------------------------------------------------------
Chancellor Radio Broadcasting Co.,
8.75% Sr. Sub. Nts., 6/15/07 450,000 460,125
- ----------------------------------------------------------------------
Jacor Communications Co., 8.75%
Gtd. Sr. Sub. Nts., 6/15/07(4) 455,000 465,238
- ----------------------------------------------------------------------
Outlet Broadcasting, Inc., 10.875%
Sr. Sub. Nts., 7/15/03(11) 1,000,000 1,062,842
- ----------------------------------------------------------------------
Paxson Communications Corp.,
11.625% Sr. Sub. Nts., 10/1/02 495,000 532,125
- ----------------------------------------------------------------------
Radio One, Inc., 7% Sr. Sub. Nts.,
Series B, 5/15/04(6) 400,000 398,000
- ----------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
10% Sr. Sub. Nts., 9/30/05 100,000 105,750
9% Gtd. Sr. Sub. Nts., 7/15/07 1,300,000 1,332,500
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
BROADCASTING (CONTINUED)
Young Broadcasting, Inc.:
8.75% Sr. Sub. Debs., 6/15/07 $ 650,000 $ 646,750
9% Sr. Sub. Nts., Series B, 1/15/06 425,000 427,125
------------
6,046,955
- ----------------------------------------------------------------------
CABLE TELEVISION - 3.0%
Adelphia Communications Corp.:
10.50% Sr. Unsec. Nts., Series B,
7/15/04 340,000 368,050
9.25% Sr. Nts., 10/1/02 700,000 717,500
9.875% Sr. Nts., Series B, 3/1/07 200,000 212,500
- ----------------------------------------------------------------------
Cablevision Systems Corp.:
10.50% Sr. Sub. Debs., 5/15/16 250,000 291,875
9.875% Sr. Sub. Debs., 4/1/23 450,000 497,250
9.875% Sr. Sub. Nts., 5/15/06 100,000 110,250
- ----------------------------------------------------------------------
EchoStar Communications Corp.,
0%/12.875% Sr. Disc. Nts.,
6/1/04(9) 200,000 184,000
- ----------------------------------------------------------------------
EchoStar DBS Corp., 12.50% Gtd.
Nts., 7/1/02 2,000,000 2,170,000
- ----------------------------------------------------------------------
EchoStar Satellite Broadcasting
Corp., 0%/13.125% Sr. Sec. Disc.
Nts., 3/15/04(9) 1,230,000 1,051,650
- ----------------------------------------------------------------------
FrontierVision Holdings
LP/FrontierVision Holdings Capital
Corp., 0%/11.875% Sr. Disc. Nts.,
9/15/07(9) 135,000 99,900
- ----------------------------------------------------------------------
Helicon Group LP/Helicon Capital
Corp., 11% Sr. Sec. Nts., Series B,
11/1/03(3) 885,000 955,800
- ----------------------------------------------------------------------
Knology Holdings, Inc., Units (each
unit consists of $1,000 principal
amount of 0%/11.875% sr. disc.
nts., 10/15/07 and one warrant to
purchase .003734 shares of
preferred stock)(2)(9)(12) 500,000 275,000
- ----------------------------------------------------------------------
Optel, Inc., 13% Sr. Nts., Series
B, 2/15/05 945,000 1,006,425
- ----------------------------------------------------------------------
Rogers Communications, Inc., 8.75%
Sr. Nts., 7/15/07 CAD 1,000,000 682,409
- ----------------------------------------------------------------------
TCI Satellite Entertainment, Inc.,
10.875% Sr. Sub. Nts., 2/15/07(4) 100,000 105,250
------------
8,727,859
- ----------------------------------------------------------------------
DIVERSIFIED MEDIA - 5.5%
Ackerley Communications, Inc.,
10.75% Sr. Sec. Nts., Series A,
10/1/03 750,000 802,500
- ----------------------------------------------------------------------
GSP I Corp., 10.15% First Mtg.
Bonds, 6/24/10(4) 462,719 453,127
- ----------------------------------------------------------------------
Heritage Media Corp., 8.75% Sr.
Sub. Nts., 2/15/06 160,000 169,600
- ----------------------------------------------------------------------
Hollywood Theaters, Inc., 10.625%
Sr. Sub. Nts., 8/1/07(4) 200,000 213,500
- ----------------------------------------------------------------------
ITT Promedia CVA, 9.125% Sr. Sub.
Nts., 9/15/07(4) DEM 19,775,000 11,589,215
- ----------------------------------------------------------------------
Katz Media Corp., 10.50% Sr. Sub.
Nts., Series B, 1/15/07 425,000 470,688
- ----------------------------------------------------------------------
Lamar Advertising Co.:
8.625% Sr. Sub. Nts., 9/15/07 700,000 722,750
9.625% Sr. Sub. Nts., 12/1/06 815,000 881,219
- ----------------------------------------------------------------------
Outdoor Systems, Inc., 8.875% Sr.
Sub. Nts., 6/15/07 400,000 418,000
- ----------------------------------------------------------------------
Universal Outdoor, Inc., 9.75% Sr.
Sub. Nts., Series B, 10/15/06 250,000 281,250
------------
16,001,849
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
ENTERTAINMENT/FILM - 0.8%
Ascent Entertainment Group, Inc.,
0%/11.875% Sr. Sec. Disc. Nts.,
12/15/04(4)(9) $ 1,000,000 $ 577,500
- ----------------------------------------------------------------------
Imax Corp., 10% Sr. Nts., 3/1/01 1,600,000 1,688,000
------------
2,265,500
- ----------------------------------------------------------------------
PUBLISHING/PRINTING - 0.4%
American Lawyer Media Holdings,
Inc., 9.75% Sr. Nts., 12/15/07(4) 625,000 637,500
- ----------------------------------------------------------------------
Hollinger International Publishing,
Inc., 9.25% Gtd. Sr. Sub. Nts.,
3/15/07 200,000 211,000
- ----------------------------------------------------------------------
Sun Media Corp., 9.50% Sr. Sub.
Nts., 2/15/07 350,000 378,000
------------
1,226,500
- ----------------------------------------------------------------------
OTHER - 1.5%
- ----------------------------------------------------------------------
CONGLOMERATES - 0.1%
Maxxam Group, Inc., 0%/12.25% Sr.
Sec. Disc. Nts., 8/1/03(9) 200,000 199,000
- ----------------------------------------------------------------------
ENVIRONMENTAL - 0.1%
Allied Waste Industries, Inc.,
0%/11.30% Sr. Disc. Nts.,
6/1/07(4)(9) 450,000 317,250
- ----------------------------------------------------------------------
SERVICES - 1.3%
Borg-Warner Security Corp., 9.625%
Sr. Sub. Nts., 3/15/07 100,000 104,500
- ----------------------------------------------------------------------
Coinstar, Inc., 0%/13% Sr. Disc.
Nts., 10/1/06(2)(9) 750,000 618,750
- ----------------------------------------------------------------------
Comforce Operating, Inc., 12% Sr.
Nts., 12/1/07(4) 200,000 202,500
- ----------------------------------------------------------------------
Kindercare Learning Centers, Inc.,
9.50% Sr. Sub. Nts., 2/15/09 150,000 150,000
- ----------------------------------------------------------------------
Oxford Automotive, Inc., 10.125%
Sr. Unsec. Sub. Nts., 6/15/07 1,000,000 1,056,250
- ----------------------------------------------------------------------
Protection One Alarm Monitoring,
Inc.:
0%/13.625% Sr. Disc. Nts.,
6/30/05(9) 600,000 648,000
6.75% Cv. Gtd. Sr. Sub. Nts.,
9/15/03 950,000 1,126,938
------------
3,906,938
- ----------------------------------------------------------------------
RETAIL - 2.8%
- ----------------------------------------------------------------------
SPECIALTY RETAILING - 0.4%
Eye Care Centers of America, Inc.,
12% Sr. Nts., 10/1/03 630,000 683,550
- ----------------------------------------------------------------------
Finlay Fine Jewelry Corp., 10.625%
Sr. Nts., 5/1/03(2) 95,000 100,225
- ----------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub.
Nts., 10/15/07(2) 300,000 307,500
- ----------------------------------------------------------------------
Specialty Retailers, Inc., 8.50%
Gtd. Sr. Nts., 7/15/05 145,000 148,625
------------
1,239,900
- ----------------------------------------------------------------------
SUPERMARKETS - 2.4%
Fleming Cos., Inc.:
10.50% Sr. Sub. Nts., 12/1/04(4) 475,000 499,938
10.625% Sr. Sub. Nts., 7/31/07(4) 1,600,000 1,696,000
- ----------------------------------------------------------------------
Ralph's Grocery Co., 10.45% Sr.
Nts., 6/15/04 1,100,000 1,237,500
- ----------------------------------------------------------------------
Randall's Food Markets, Inc.,
9.375% Sr. Sub. Nts., 7/1/07(4) 1,575,000 1,638,000
- ----------------------------------------------------------------------
Shoppers Food Warehouse Corp.,
9.75% Sr. Nts., 6/15/04(4) 1,000,000 1,025,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
SUPERMARKETS (CONTINUED)
Stater Brothers Holdings, Inc., 9%
Sr. Unsec. Sub. Nts., 7/1/04 $ 750,000 $ 787,500
------------
6,883,938
- ----------------------------------------------------------------------
TECHNOLOGY - 14.0%
- ----------------------------------------------------------------------
INFORMATION TECHNOLOGY - 8.4%
Amphenol Corp., 9.875% Sr. Sub.
Nts., 5/15/07 275,000 292,875
- ----------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/14%
Sr. Disc. Nts., 10/1/07(4)(9) 1,919,000 901,930
- ----------------------------------------------------------------------
Cellular Communications
International, Inc., Zero Coupon
Sr. Disc. Nts., 12.52%, 8/15/00(8) 2,315,000 1,863,575
- ----------------------------------------------------------------------
Cellular, Inc., 0%/11.75% Sr. Sub.
Disc. Nts., 9/1/03(9) 2,000,000 2,015,000
- ----------------------------------------------------------------------
Clearnet Communications, Inc.,
0%/14.75% Sr. Disc. Nts.,
12/15/05(9) 575,000 455,688
- ----------------------------------------------------------------------
Computervision Corp., 11.375% Sr.
Sub. Nts., 8/15/99 155,000 156,744
- ----------------------------------------------------------------------
Concentic Network Corp., Units
(each unit consists of $1,000
principal amount of 12.75% sr.
nts., 12/15/07 and one warrant to
purchase 6.34 shares of common
stock)(4)(12) 615,000 632,681
- ----------------------------------------------------------------------
Consorcio Ecuatoriano de Telecom
SA, 14% Nts., 5/1/02(2) 15,000 15,150
- ----------------------------------------------------------------------
Crown Castle International Corp.,
0%/10.625% Sr. Disc. Nts.,
11/15/07(4)(9) 800,000 502,000
- ----------------------------------------------------------------------
Details, Inc., 10% Sr. Sub. Nts.,
11/15/05(4) 600,000 616,500
- ----------------------------------------------------------------------
Dial Call Communications, Inc.,
0%/12.25% Sr. Disc. Nts.,
4/15/04(9) 1,200,000 1,149,000
- ----------------------------------------------------------------------
DII Group, Inc., 8.50% Sr. Sub.
Nts., 9/15/07(4) 115,000 113,275
- ----------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts.,
3/1/07 600,000 612,000
- ----------------------------------------------------------------------
Geotek Communications, Inc., 0%/15%
Sr. Sec. Disc. Nts., 7/15/05(9) 250,000 146,250
- ----------------------------------------------------------------------
Iridium LLC/Iridium Capital Corp.,
11.25% Sr. Nts., 7/15/05(4) 500,000 492,500
- ----------------------------------------------------------------------
Metrocall, Inc., 9.75% Sr. Sub.
Nts., 11/1/07(4) 175,000 173,688
- ----------------------------------------------------------------------
Microcell Telecommunications, Inc.:
0%/11.125% Sr. Disc. Nts.,
10/15/07(4)(9) CAD 1,085,000 428,384
0%/14% Sr. Disc. Nts., Series B,
6/1/06(9) 1,000,000 675,000
- ----------------------------------------------------------------------
Millicom International Cellular SA,
0%/13.50% Sr. Disc. Nts., 6/1/06(9) 500,000 368,750
- ----------------------------------------------------------------------
Nextel Communications, Inc.:
0%/10.65% Sr. Disc. Nts.,
9/15/07(4)(9) 2,000,000 1,270,000
0%/11.50% Sr. Disc. Nts., 9/1/03(9) 700,000 700,000
0%/9.75% Sr. Disc. Nts.,
10/31/07(4)(9) 1,775,000 1,091,625
- ----------------------------------------------------------------------
Occidente y Caribe Celular SA,
0%/14% Sr. Disc. Nts., Series B,
3/15/04(9) 300,000 226,500
- ----------------------------------------------------------------------
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 245,000 259,700
11.625% Sr. Nts., Series A, 8/15/06 620,000 657,200
- ----------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital
Corp., 14% Sr. Nts., 8/15/04 600,000 654,000
- ----------------------------------------------------------------------
Orion Network Systems, Inc.,
0%/12.50% Sr. Disc. Nts.,
1/15/07(9) 800,000 598,000
- ----------------------------------------------------------------------
Price Communications Cellular
Holdings, Inc., 0%/13.50% Sr. Disc.
Nts., Series A, 8/1/07(2)(9) 1,000,000 635,000
- ----------------------------------------------------------------------
Price Communications Wireless,
Inc., 11.75% Sr. Sub. Nts.,
7/15/07(4) 325,000 354,250
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts.,
10/1/03(9) $ 500,000 $ 515,000
0%/14% Sr. Sub. Disc. Nts.,
11/15/01(9) 2,050,000 2,285,750
10.75% Sr. Nts., 11/1/04 605,000 657,938
- ----------------------------------------------------------------------
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)(2)(9)(12) 1,000,000 380,000
- ----------------------------------------------------------------------
Star Choice Communications, Inc.,
Units (each unit consists of $1,000
principal amount of 13% sr. sec.
nts., 12/15/05 and one warrant to
buy common stock)(12) 700,000 721,000
- ----------------------------------------------------------------------
Teletrac, Inc., 14% Sr. Nts.,
8/1/07(4) 170,000 162,350
- ----------------------------------------------------------------------
Tracor, Inc., 8.50% Sr. Sub. Nts.,
3/1/07 300,000 309,000
- ----------------------------------------------------------------------
Unisys Corp., 11.75% Sr. Nts.,
10/15/04 250,000 286,875
- ----------------------------------------------------------------------
USA Mobile Communications, Inc. II:
14% Sr. Nts., 11/1/04 405,000 449,550
9.50% Sr. Nts., 2/1/04 100,000 98,000
- ----------------------------------------------------------------------
Wavetek Corp., 10.125% Sr. Sub.
Nts., 6/15/07 475,000 486,875
------------
24,409,603
- ----------------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY -
5.6%
American Communications Services,
Inc., 13.75% Sr. Nts., 7/15/07(4) 325,000 386,750
- ----------------------------------------------------------------------
Brooks Fiber Properties, Inc.:
0%/10.875% Sr. Disc. Nts.,
3/1/06(9) 550,000 459,250
0%/11.875% Sr. Disc. Nts.,
11/1/06(9) 420,000 338,100
10% Sr. Nts., 6/1/07 800,000 924,000
- ----------------------------------------------------------------------
BTI Telecom Corp., 10.50% Sr. Nts.,
9/15/07(4) 250,000 256,250
- ----------------------------------------------------------------------
Call-Net Enterprises, Inc.:
0%/9.27% Sr. Disc. Nts., 8/15/07(9) 675,000 460,688
8.375% Sr. Nts., 8/15/07 CAD 100,000 73,383
- ----------------------------------------------------------------------
COLT Telecom Group plc:
10.125% Sr. Nts., 11/30/07 GBP 400,000 671,324
8.875% Sr. Nts., 11/30/07 DEM 250,000 141,734
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)(9)(12) 1,750,000 1,365,000
- ----------------------------------------------------------------------
Comcast UK Cable Partner Ltd.,
0%/11.20% Sr. Disc. Debs.,
11/15/07(9) 575,000 468,625
- ----------------------------------------------------------------------
Diamond Cable Communications plc,
0%/11.75% Sr. Disc. Nts.,
12/15/05(9) 600,000 466,500
- ----------------------------------------------------------------------
GST Telecommunications, Inc.,
0%/13.875% Cv. Sr. Sub. Disc. Nts.,
12/15/05(4)(9) 178,000 136,726
- ----------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr.
Disc. Nts., 12/15/05(9) 775,000 596,750
- ----------------------------------------------------------------------
ICG Holdings, Inc.:
0%/12.50% Gtd. Sr. Disc. Nts.,
5/1/06(9) 115,000 86,825
0%/13.50% Sr. Disc. Nts.,
9/15/05(9) 700,000 570,500
- ----------------------------------------------------------------------
Intermedia Communications, Inc.:
0%/11.25% Sr. Disc. Nts., Series B,
7/15/07(9) 1,465,000 1,051,138
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS/TECHNOLOGY
(CONTINUED)
Intermedia Communications, Inc.:
(Continued)
8.50% Sr. Nts., 1/15/08(4) $ 500,000 $ 502,500
8.875% Sr. Nts., 11/1/07(4) 490,000 504,700
- ----------------------------------------------------------------------
McLeodUSA, Inc., 0%/10.50% Sr.
Disc. Nts., 3/1/07(9) 550,000 398,750
- ----------------------------------------------------------------------
Metronet Communications Corp.,
0%/10.75% Sr. Disc. Nts.,
11/1/07(4)(9) 700,000 432,250
- ----------------------------------------------------------------------
NEXTLINK Communications, Inc.,
9.625% Sr. Nts., 10/1/07 1,100,000 1,144,000
- ----------------------------------------------------------------------
NTL, Inc.:
0%/10.875% Sr. Deferred Coupon
Nts., 10/15/03(9) 100,000 95,000
10% Sr. Nts., 2/15/07 400,000 423,000
- ----------------------------------------------------------------------
Petersburg Long Distance, Inc.:
9% Cv. Sub. Nts., 6/1/06(4) 170,000 176,163
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)(4)(9)(12) 1,150,000 1,098,250
- ----------------------------------------------------------------------
Qwest Communications International,
Inc., 0%/9.47% Sr. Disc. Nts.,
10/15/07(4)(9) 2,100,000 1,428,000
- ----------------------------------------------------------------------
Teleport Communications Group,
Inc., 0%/11.125% Sr. Disc. Nts.,
7/1/07(9) 1,650,000 1,348,875
- ----------------------------------------------------------------------
Telewest Communications plc, 0%/11%
Sr. Disc. Debs., 10/1/07(9) 290,000 226,563
- ----------------------------------------------------------------------
UNIFI Communications, Inc., 14% Sr.
Nts., 3/1/04 260,000 205,400
------------
16,436,994
- ----------------------------------------------------------------------
TRANSPORTATION - 2.1%
- ----------------------------------------------------------------------
RAILROADS - 0.8%
Transtar Holdings LP/Transtar
Capital Corp., 0%/13.375% Sr. Disc.
Nts., Series B, 12/15/03(9) 2,500,000 2,200,000
- ----------------------------------------------------------------------
SHIPPING - 0.8%
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg.
Nts., 6/30/07(4) 1,125,000 1,198,125
Units (each unit consists of $1,000
principal amount of 12% second
priority ship mtg. nts., 6/30/07
and 7.66 warrants)(4)(12) 875,000 988,750
- ----------------------------------------------------------------------
Trico Marine Services, Inc., 8.50%
Gtd. Sr. Nts., 8/1/05(4) 225,000 229,219
------------
2,416,094
- ----------------------------------------------------------------------
TRUCKING - 0.5%
Coach USA, Inc., 9.375% Gtd. Sr.
Sub. Nts., Series B, 7/1/07 960,000 993,600
- ----------------------------------------------------------------------
Road King Infrastructure Finance
(1997) Ltd., 9.50% Gtd. Unsec.
Unsub. Bonds, 7/15/07(2) 200,000 166,000
- ----------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50%
Nts., Series 1993-A, 12/1/11(2) 456,092 377,416
------------
1,537,016
- ----------------------------------------------------------------------
UTILITIES - 0.7%
- ----------------------------------------------------------------------
ELECTRIC UTILITIES - 0.7%
Calpine Corp.:
8.75% Sr. Nts., 7/15/07(4) 545,000 558,625
9.25% Sr. Nts., 2/1/04 135,000 138,375
- ----------------------------------------------------------------------
El Paso Electric Co., 9.40% First
Mtg. Bonds, Series E, 5/1/11 800,000 904,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- ----------------------------------------------------------------------
<S> <C> <C> <C>
ELECTRIC UTILITIES (CONTINUED)
Panda Global Energy Co., 12.50% Sr.
Nts., 4/15/04(2) $ 460,000 $ 420,900
- ----------------------------------------------------------------------
Subic Power Corp., 9.50% Sr. Sec.
Nts., 12/28/08 128,965 123,192
------------
2,145,092
------------
Total Corporate Bonds and Notes
(Cost $161,209,728) 167,452,404
SHARES
- ----------------------------------------------------------------------
COMMON STOCKS - 1.0%
- ----------------------------------------------------------------------
Celcaribe SA(2)(13) 121,950 609,750
- ----------------------------------------------------------------------
CellNet Data Systems, Inc.(13) 4,800 37,200
- ----------------------------------------------------------------------
Coinstar, Inc.(13) 5,250 47,906
- ----------------------------------------------------------------------
ECM Fund, L.P.I.(2) 150 165,375
- ----------------------------------------------------------------------
EchoStar Communications Corp., Cl.
A(13) 4,000 67,000
- ----------------------------------------------------------------------
Equitable Bag, Inc.(2)(13) 3,723 18,615
- ----------------------------------------------------------------------
Grand Union Co.(13) 20,511 43,586
- ----------------------------------------------------------------------
Gulfstream Holding, Inc.(13) 56 --
- ----------------------------------------------------------------------
J. Ray McDermott SA(13) 10,965 471,495
- ----------------------------------------------------------------------
Omnipoint Corp.(2)(13) 46,875 1,040,918
- ----------------------------------------------------------------------
Optel, Inc.(2)(13) 945 10
- ----------------------------------------------------------------------
Station Casinos, Inc.(13) 5,000 50,938
- ----------------------------------------------------------------------
Vail Resorts, Inc.(13) 14,010 363,384
- ----------------------------------------------------------------------
Walter Industries, Inc.(13) 6,455 133,134
------------
Total Common Stocks (Cost
$1,989,139) 3,049,311
- ----------------------------------------------------------------------
PREFERRED STOCKS - 4.6%
- ----------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable Preferred Stock,
Non-Vtg.(2)(13) 455 12,171
- ----------------------------------------------------------------------
BankUnited Capital Trust, 10.25%
Redeemable Trust Preferred
Securities(2) 750,000 774,375
- ----------------------------------------------------------------------
California Federal Bank, 11.50%
Non-Cum., Non-Vtg. 6,000 679,500
- ----------------------------------------------------------------------
CGA Group Ltd., Preferred Stock,
Series A(2)(13) 62,000 1,550,000
- ----------------------------------------------------------------------
Clark USA, Inc., 11.50% Cum.
Preferred Stock(4)(14) 385 409,062
- ----------------------------------------------------------------------
CRIIMI MAE, Inc., 10.875% Cum. Cv.
Preferred Stock, Series B 14,000 478,625
- ----------------------------------------------------------------------
Crown American Realty Trust, 11%
Cum. Non-Vtg. Preferred, Series A 4,500 235,125
- ----------------------------------------------------------------------
EchoStar Communications Corp.,
12.125% Sr. Redeemable Exchangeable
Preferred Stock, Series
B(4)(13)(14) 825 864,188
- ----------------------------------------------------------------------
El Paso Electric Co., 11.40%
Preferred Stock, Series A(14) 9,049 1,002,177
- ----------------------------------------------------------------------
Fidelity Federal Bank FSB Glendale
California, l2% Non-Cum.
Exchangeable Perpetual Preferred
Stock, Series A(2) 20 555
- ----------------------------------------------------------------------
Golden State Bancorp, 8.75% Cv.
Preferred Stock, Series A 6,500 592,313
- ----------------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable Preferred Stock 230 269,100
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
<S> <C> <C> <C>
- ----------------------------------------------------------------------
PREFERRED STOCKS (CONTINUED)
- ----------------------------------------------------------------------
Intermedia Communications, Inc.,
13.50% Exchangeable
Preferred Stock, Series B(14) 280 $ 339,500
- ----------------------------------------------------------------------
Kelley Oil & Gas Corp., $2.625 Cv. 15,300 336,600
- ----------------------------------------------------------------------
Navistar International Corp., $6.00
Cv., Series G 2,500 149,375
- ----------------------------------------------------------------------
NEXTLINK Communications, Inc., 14%
Sr. Exchangeable Preferred(14) 17,669 1,099,895
- ----------------------------------------------------------------------
Prime Retail, Inc., 8.50% Cv.
Preferred Stock, Series B 14,500 348,000
- ----------------------------------------------------------------------
PRIMEDIA, Inc.:
11.625% Preferred Stock, Series
B(14) 8,668 936,144
9.20% Preferred Stock, Series
E(2)(13) 2,500 250,625
- ----------------------------------------------------------------------
SD Warren Co., 14% Cum.
Exchangeable, Series B(13) 22,000 1,083,500
- ----------------------------------------------------------------------
SFX Broadcasting, Inc., 12.625%
Cum., Series E, Non-Vtg.(14) 212 242,210
- ----------------------------------------------------------------------
Spanish Broadcasting Systems, Inc.,
14.25% Cum. Sr. Exchangeable
Preferred Stock, Non-Vtg.(4)(14) 500 531,250
- ----------------------------------------------------------------------
Walden Residential Properties,
Inc.:
9.16% Cv. Preferred Stock, Series B 30,000 870,000
9.20% Sr. Preferred Stock 13,000 333,125
------------
Total Preferred Stocks (Cost
$12,064,850) 13,387,415
- ----------------------------------------------------------------------
OTHER SECURITIES - 0.0%
- ----------------------------------------------------------------------
Intermedia Communications, Inc.,
Depositary Shares representing one
one-hundredth 7% Cum. Cv. Jr.
Preferred Stock, Series E, Non-Vtg.
(4)(13) (Cost $137,505) 5,660 160,602
UNITS
- ----------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES -
0.4%
- ----------------------------------------------------------------------
American Communications Services,
Inc. Wts., Exp. 11/05(2) 475 45,362
- ----------------------------------------------------------------------
American Telecasting, Inc. Wts.,
Exp. 6/99(2) 6,000 60
- ----------------------------------------------------------------------
Ames Department Stores, Inc.,
Litigation Trust(2) 39,658 398
- ----------------------------------------------------------------------
Australis Media Ltd. Wts., Exp.
5/00(2) 125 --
- ----------------------------------------------------------------------
Capital Gaming International, Inc.
Wts., Exp. 2/99(2) 21,112 --
- ----------------------------------------------------------------------
CellNet Data Systems, Inc. Wts.,
Exp. 6/02(2) 1,919 3,838
- ----------------------------------------------------------------------
Cellular Communications
International, Inc. Wts., Exp.
8/03(2) 2,920 49,640
- ----------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 12/49(2) 62,000 31,000
- ----------------------------------------------------------------------
Clearnet Communications, Inc. Wts.,
Exp. 9/05 660 3,795
- ----------------------------------------------------------------------
Eye Care Centers of America, Inc.
Wts., Exp. 10/03(2) 630 2,205
- ----------------------------------------------------------------------
Foamex LP/JPS Automotive Corp.
Wts., Exp. 7/99(2) 500 10,000
- ----------------------------------------------------------------------
Gaylord Container Corp. Wts., Exp.
11/02 14,410 82,857
- ----------------------------------------------------------------------
Geotek Communications, Inc. Wts.,
Exp. 7/05(2) 52,500 52,500
- ----------------------------------------------------------------------
Gothic Energy Corp. Wts., Exp. 9/04 14,000 28,000
- ----------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp.
9/05(2) 5,940 74,250
- ----------------------------------------------------------------------
IHF Capital, Inc. Wts.:
Exp. 11/99(2) 250 40,000
Series I Wts., Exp. 11/99(2) 400 20,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
UNITS NOTE 1
<S> <C> <C> <C>
- ----------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES
(CONTINUED)
- ----------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp.
8/02 950 $ --
- ----------------------------------------------------------------------
Jewel Recovery LP, Participation
Units of Limited Partners' Interest 2,360 --
- ----------------------------------------------------------------------
Microcell Telecommunications, Inc.:
Conditional Wts., Exp. 6/06(2) 3,200 2,000
Wts., Exp. 6/06(2) 3,200 41,600
- ----------------------------------------------------------------------
NEXTLINK Communications, Inc. Wts.,
Exp. 2/09(2) 16,000 160
- ----------------------------------------------------------------------
Occidente y Caribe Celular SA Wts.,
Exp. 3/04(2) 1,200 16,500
- ----------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/00(2) 7,500 166,547
- ----------------------------------------------------------------------
Orion Network Systems, Inc. Wts.,
Exp. 1/07(2) 800 10,000
- ----------------------------------------------------------------------
Price Communications Corp. Wts.,
Exp. 8/07(2) 3,440 34
- ----------------------------------------------------------------------
Protection One, Inc. Wts.:
Exp. 11/03(2) 28,000 357,000
Exp. 6/05(2) 1,600 20,400
- ----------------------------------------------------------------------
Teletrac, Inc. Wts., Exp. 8/07(2) 170 935
- ----------------------------------------------------------------------
Trizec Hahn Corp. Wts., Exp. 7/99 3,970 18,449
- ----------------------------------------------------------------------
UNIFI Communications, Inc. Wts.,
Exp. 3/07(2) 260 390
- ----------------------------------------------------------------------
United International Holdings, Inc.
Wts., Exp. 11/99(2) 1,440 17,280
------------
Total Rights, Warrants and
Certificates (Cost $369,452) 1,095,200
PRINCIPAL
AMOUNT(1)
- ----------------------------------------------------------------------
STRUCTURED INSTRUMENTS - 8.7%
- ----------------------------------------------------------------------
Bear Stearns High Yield Composite
Index Linked Nts., 9%, 8/10/98 $ 15,000,000 15,000,000
- ----------------------------------------------------------------------
Canadian Imperial Bank of Commerce,
U.S. Dollar Nts. Linked to the
Ministry of Finance of the Russian
Federation GKO, Zero Coupon, 9.86%,
9/17/98(8) 1,250,000 1,079,625
- ----------------------------------------------------------------------
Goldman Sachs Group, LP, Taiwanese
Dollar Linked Nts., 5.75%, 6/12/98 40,000 40,392
- ----------------------------------------------------------------------
ING (U.S.) Financial Holdings
Corp., PT Polysindo Linked Nts.,
Zero Coupon, 10.43%, 7/15/98(2)(8) 200,000 180,074
- ----------------------------------------------------------------------
Merrill Lynch & Co., Inc., U.S.
Dollar Nts. Linked to the Ministry
of Finance of Ukraine OVGZ's, Zero
Coupon, 11.52%, 10/19/98(8) 235,000 198,316
- ----------------------------------------------------------------------
Morgan Guaranty Trust Co. of New
York, 2 Times Leveraged Nts. on The
Emerging Markets Bond Index, Zero
Coupon:
5.781%, 1/29/98(8) 4,000,000 4,163,600
5.75%, 2/4/98(8) 1,500,000 1,614,300
5.906%, 5/20/98(8) 500,000 546,150
5.906%, 5/22/98(8) 500,000 517,350
- ----------------------------------------------------------------------
Shoshone Partners Loan Trust, 7.50%
Sr. Nts., 5/31/02(2)(3) 1,979,000 2,098,870
------------
Total Structured Instruments (Cost
$25,091,176) 25,438,677
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
DATE STRIKE CONTRACTS NOTE 1
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
PUT OPTIONS PURCHASED - 0.0%
- -----------------------------------------------------------------------------
The Emerging Bond Market Index Put
Opt. (Cost $8,190) 2/98 $341.01 390 $ 4,758
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(1)
- ---------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS - 25.5%
- ---------------------------------------------------------------
Repurchase agreement with First
Chicago Capital Markets, 6.60%,
dated 12/31/97, to be repurchased
at $74,177,188 on 1/2/98,
collateralized by U.S. Treasury
Bonds, 8%-10.625%,
8/15/15-11/15/21, with a value of
$54,960,145, and U.S. Treasury
Nts., 5.875%-7.50%,
9/30/01-12/31/01, with a value of
$20,712,858 (Cost $74,150,000) $74,150,000 74,150,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$305,080,290) 108.3% 315,552,124
- ---------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (8.3) (24,229,333)
----------- -------------
NET ASSETS 100.0% $291,322,791
----------- -------------
----------- -------------
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
<TABLE>
<S> <C> <C> <C> <C> <C>
ARP - Argentine Peso IDR - Indonesian Rupiah
CAD - Canadian Dollar JPY - Japanese Yen
DEM - German Mark TRL - Turkish Lira
GBP - British Pound Sterling
</TABLE>
2. Identifies issues considered to be illiquid or restricted - See Note 8 of
Notes to Financial Statements.
3. Represents the current interest rate for a variable rate 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 $53,485,828 or 18.36% of the Fund's net
assets as of December 31, 1997.
5. 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.
6. Represents the current interest rate for an increasing rate security.
7. When-issued security to be delivered and settled after December 31, 1997.
8. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
9. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
10. Non-income producing - issuer is in default of interest payment.
11. Securities with an aggregate market value of $3,871,217 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
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.
14. Interest or dividend is paid in kind.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 51.1%
- --------------------------------------------------------------------
GOVERNMENT AGENCY - 36.7%
- --------------------------------------------------------------------
FHLMC/FNMA/SPONSORED - 23.4%
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation
Certificates, Series 1092, Cl. K,
8.50%, 6/15/21 $ 3,000,000 $ 3,265,168
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation
Certificates, Series 151, Cl. F,
9%, 5/15/21 1,000,000 1,085,287
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation
Certificates, Series 1712, Cl. B,
6%, 3/15/09 1,000,000 975,000
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation
Certificates, Series 1714, Cl. M,
7%, 8/15/23 2,000,000 2,010,000
Government National Mortgage Assn.,
Gtd. Multiclass Mtg. Participation
Certificates, Series 26, Cl. B, 6%,
5/25/15 6,499,999 6,327,947
Gtd. Multiclass Mtg. Participation
Certificates, 7%, 4/1/26 4,748,012 4,800,953
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Series 1610, Cl. PM, 6.25%, 4/15/22 5,000,000 4,975,000
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Series 1914, Cl. G, 6.50%, 2/15/24 3,000,000 2,951,250
Interest-Only Stripped Mtg.-Backed
Security, Series 177, Cl. B,
9.063%-10.208%, 7/1/26(2) 42,823,288 12,519,121
- --------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 3/1/11 827,885 833,358
7%, 1/1/13(3) 8,850,000 8,980,006
7%, 1/25/28(3) 45,450,000 45,776,785
7%, 11/1/25 1,173,366 1,186,449
7%, 4/1/04 225,391 225,418
7.50%, 1/1/08 258,228 265,451
7.50%, 1/1/26 4,554,544 4,670,822
7.50%, 4/1/08 223,295 229,541
8%, 5/1/17 605,292 634,177
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
8.75%, 11/25/05 2,773,827 2,922,213
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Trust 1989-17, Cl. E, 10.40%,
4/25/19 1,229,023 1,383,413
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Trust 1997-25, Cl. B, 7%, 12/18/22 1,370,000 1,387,044
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
Trust G93-31, Cl. PN, 7%, 9/25/23 5,000,000 5,163,355
Interest-Only Stripped Mtg.-Backed
Security, Trust 276, Cl. 2,
12.324%, 10/1/24(2) 20,577,744 6,250,490
Principal-Only Stripped Mtg.-Backed
Security, Trust 277-C1, 8.42%,
4/1/27(4) 3,912,338 3,061,405
-------------
121,879,653
- --------------------------------------------------------------------
GNMA/GUARANTEED - 13.3%
Government National Mortgage Assn.:
6%, 8/20/27 11,923,744 12,091,393
6.875%, 10/20/24 1,978,481 2,034,749
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------
<S> <C> <C>
GNMA/GUARANTEED (CONTINUED)
Government National Mortgage Assn.:
(Continued)
6.875%, 10/20/25 $ 3,701,878 $ 3,802,532
7%, 1/1/28(3) 24,025,000 24,201,688
7%, 1/15/09 299,533 306,642
7%, 5/15/09 312,455 319,576
7.50%, 1/15/27 2,922,203 2,995,054
7.50%, 12/1/27(3) 11,000,000 11,268,180
7.50%, 4/15/27 2,962,971 3,036,839
7.50%, 6/15/27 2,961,869 3,035,709
7.50%, 7/15/26 5,876,735 6,025,064
-------------
69,117,426
- --------------------------------------------------------------------
PRIVATE - 14.4%
- --------------------------------------------------------------------
COMMERCIAL - 10.9%
Asset Securitization Corp.:
Commercial Mtg. Pass-Through
Certificates, Series 1997-MD7, Cl.
A6, 8.11%, 1/13/30(5) 500,000 528,047
Interest-Only Stripped Mtg.-Backed
Security, Series 1997-D5, Cl. A6,
7.184%, 2/14/41(2) 3,000,000 3,007,500
Interest-Only Stripped Mtg.-Backed
Security, Series 1997-D5, Cl. PS1,
1.367%, 2/14/41(2) 18,750,000 2,036,133
- --------------------------------------------------------------------
BKB Commercial Mortgage Trust,
Commercial Mtg. Obligations, Series
1997-C1, Cl. C, 7.45%, 10/25/00(6) 810,722 814,523
- --------------------------------------------------------------------
Capital Lease Funding
Securitization LP, Interest-Only
Stripped Mtg.-Backed Security,
Series 1997-CTL1, 10.611%,
6/22/24(2)(6) 33,119,181 1,583,097
- --------------------------------------------------------------------
Commercial Mortgage Acceptance
Corp., Collateralized Mtg.
Obligation, Series 1996-C1, Cl. D,
7.658%, 12/25/20(5)(6) 2,500,000 2,583,594
- --------------------------------------------------------------------
CRIIMI MAE Trust I, Collateralized
Mtg. Obligations, Series 1996-C1,
Cl. A-2, 7.56%, 8/30/05(7) 2,000,000 2,047,188
- --------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates:
Series 1994-C1, Cl. 2-D, 8.70%,
9/25/25(6) 1,500,000 1,556,250
Series 1994-C1, Cl. 2-E, 8.70%,
9/25/25(6) 1,500,000 1,558,050
- --------------------------------------------------------------------
First Union-Lehman Brothers
Commercial Mortgage Trust,
Interest-Only Stripped Mtg.-Backed
Security, Series 1997-C1, 7.083%,
4/18/27(2) 17,027,190 1,327,921
- --------------------------------------------------------------------
General Motors Acceptance Corp.:
Collateralized Mtg. Obligations,
Series 1995-C2, Cl. D, 7.192%,
1/15/08 3,500,000 3,508,750
Interest-Only Stripped Mtg.-Backed
Security, Series 1997-C1, Cl. X,
8.905%, 7/15/27(2) 19,479,477 1,960,122
- --------------------------------------------------------------------
GS Mortgage Securities Corp. II,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-CL1, Cl. F, 7.353%,
7/13/30 1,000,000 1,018,125
Series 1997-CL1, Cl. F, 7.823%,
7/13/30 4,000,000 4,143,750
- --------------------------------------------------------------------
Merrill Lynch Mortgage Investors,
Inc., Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. D, 7.42%,
4/25/28 2,000,000 2,039,531
Series 1997-C2, Cl. D, 7.075%,
12/10/29 4,000,000 3,988,750
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL (CONTINUED)
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. D-1, 7.51%,
2/15/28(5)(6) $ 1,000,000 $ 1,016,563
Series 1997-XL1, Cl. F, 7.42%,
10/3/30(5) 2,500,000 2,510,938
- --------------------------------------------------------------------
NationsCommercial Corp., NB
Commercial Mtg. Pass-Through
Certificates:
Series-DMC, Cl. B, 8.562%,
8/12/11(6) 1,600,000 1,697,000
Series-DMC, Cl. C, 8.921%,
8/12/11(7) 3,500,000 3,737,344
- --------------------------------------------------------------------
Potomac Gurnee Financial Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 1, Cl. C, 7.217%,
12/21/26(6) 250,000 255,825
Series 1, Cl. D, 7.683%,
12/21/26(6) 500,000 515,800
- --------------------------------------------------------------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates:
Series 1994-C1, Cl. C, 8%, 6/25/26 1,500,000 1,530,900
Series 1995-C1, Cl. D, 6.90%,
2/25/27 3,000,000 2,987,119
- --------------------------------------------------------------------
Structured Asset Securities Corp.:
Commercial Mtg. Pass-Through
Certificates, Series 1997-LLI, Cl.
E, 7.30%, 10/20/34 4,000,000 4,027,500
Multiclass Pass-Through
Certificates, Series 1996-C3, Cl.
C, 7.375%, 6/25/30(5)(6) 3,000,000 3,029,063
Multiclass Pass-Through
Certificates, Series 1996-CFL, Cl.
D, 7.034%, 2/25/28 1,800,000 1,800,000
-------------
56,809,383
- --------------------------------------------------------------------
MANUFACTURED HOUSING - 0.1%
Green Tree Financial Corp., Series
1994-6, Cl. A3, 7.70%, 1/15/20 606,220 608,494
- --------------------------------------------------------------------
MULTI-FAMILY - 0.5%
Countrywide Funding Corp., Mtg.
Pass-Through Certificates, Series
1993-12, Cl. B1, 6.625%, 2/25/24 1,000,000 971,044
- --------------------------------------------------------------------
Merrill Lynch Trust, Collateralized
Mtg. Obligations, Gtd. Multiclass
Mtg. Participation Certificates,
Series 43, Cl. E, 6.50%, 8/27/15 500,000 497,810
- --------------------------------------------------------------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates,
Series 1991-M5, Cl. A, 9%, 3/25/17 1,226,291 1,240,916
-------------
2,709,770
- --------------------------------------------------------------------
OTHER - 0.1%
GE Capital Mortgage Services, Inc.,
Series 1994-14, Cl. A1, 6.50%,
4/25/24 68,492 68,256
- --------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VI:
Interest-Only Stripped Mtg.-Backed
Security, Series 1987-3, Cl. B,
7.102%, 10/23/17(2) 111,586 31,820
Principal-Only Stripped Mtg.-Backed
Security, Series 1987-3, Cl. A,
15.181%, 10/23/17(4) 113,751 96,866
-------------
196,942
- --------------------------------------------------------------------
RESIDENTIAL - 2.8%
Contimortgage Home Equity Loan
Trust, Series 1995-2, Cl. A2,
7.95%, 4/15/10 25,452 25,437
- --------------------------------------------------------------------
CS First Boston Mortgage Securities
Corp., Mtg. Pass-Through
Certificates, Series 1997-C1, Cl.
E, 7.50%, 3/1/11(6) 4,500,000 4,658,850
- --------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1,
8.116%, 7/25/06(5)(6) 4,024,000 4,225,602
- --------------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-HF1, Cl. E, 7.55%,
7/15/29(6) 1,500,000 1,518,984
Series 1997-WF1, Cl. E, 7.49%,
5/15/09(6) 1,000,000 1,008,750
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------
<S> <C> <C>
RESIDENTIAL (CONTINUED)
NationsBank Trust, Lease
Pass-Through Certificates, Series
1997A-1, 7.442%, 1/10/11(5) $ 2,500,000 $ 2,604,688
- --------------------------------------------------------------------
Ryland Mortgage Securities Corp.
III, Sub. Bonds, Series 1992-A, Cl.
1A, 8.268%, 3/29/30(5) 346,586 352,435
-------------
14,394,746
-------------
Total Mortgage-Backed Obligations
(Cost $263,590,350) 265,716,414
- --------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 24.8%
- --------------------------------------------------------------------
U.S. Treasury Bonds:
10.375%, 11/15/09(8) 500,000 625,156
10.375%, 11/15/12 500,000 664,844
12.75%, 11/15/10 1,000,000 1,427,501
7.25%, 5/15/16 33,000,000 37,578,783
9.25%, 2/15/16 8,300,000 11,259,473
- --------------------------------------------------------------------
U.S. Treasury Nts.:
5.75%, 11/30/02 3,667,000 3,671,587
6.375%, 8/15/02 14,250,000 14,624,077
6.50%, 10/15/06 8,840,000 9,259,909
6.625%, 5/15/07 4,000,000 4,236,252
6.75%, 6/30/99(9) 22,150,000 22,503,027
7.25%, 5/15/04 1,000,000 1,079,688
7.25%, 8/15/04 13,665,000 14,775,295
7.50%, 11/15/01 3,150,000 3,341,955
7.875%, 1/15/98 1,900,000 1,902,377
9.25%, 8/15/98(9) 2,000,000 2,044,376
-------------
Total U.S. Government Obligations
(Cost $124,042,603) 128,994,300
</TABLE>
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS -
0.7%
- -------------------------------------------------------------------------
Lithuania (Republic of) Bonds,
7.125%, 7/22/02(6) 950,000 930,990
- -------------------------------------------------------------------------
Ontario, Canada (Province of)
Bonds, 8%, 10/17/01 750,000 798,300
- -------------------------------------------------------------------------
PT Hutama Karya Medium-Term Nts.,
Zero Coupon, 27.053%, 3/17/98(10) IDR 1,000,000,000 168,151
- -------------------------------------------------------------------------
South Africa (Republic of) Bonds:
Series 150, 12%, 2/28/05 ZAR 4,777,350 906,523
Series 162, 12.50%, 1/15/02 ZAR 3,665,780 724,547
Series 175, 9%, 10/15/02 ZAR 905,340 154,973
-------------
Total Foreign Government
Obligations (Cost $3,878,519) 3,683,484
- -------------------------------------------------------------------------
LOAN PARTICIPATIONS - 0.2%
- -------------------------------------------------------------------------
Colombia (Republic of) 1989-1990
Integrated Loan Facility Bonds,
6.75%, 7/1/01 (Cost
$1,085,369)(5)(6) 1,143,214 1,091,770
- -------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES - 0.4%
- -------------------------------------------------------------------------
Dade County, FL Educational
Facilities Authority:
Exchangeable Revenue Bonds,
University of Miami, Prerefunded,
MBIA Insured, 7.65%, 4/1/10 175,000 192,019
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- -------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES
(CONTINUED)
- -------------------------------------------------------------------------
Dade County, FL Educational
Facilities Authority: (Continued)
Revenue Bonds, University of Miami,
MBIA Insured, 7.65%, 4/1/10 $ 205,000 $ 223,144
Taxable Exchange Revenue Bonds,
University of Miami, MBIA Insured,
7.65%, 4/1/10 120,000 130,621
- -------------------------------------------------------------------------
Pinole, CA Redevelopment Agency Tax
Allocation Taxable Bonds, Pinole
Vista Redevelopment, Series B,
8.35%, 8/1/17 670,000 712,887
- -------------------------------------------------------------------------
Port of Portland, OR Special
Obligation Taxable Revenue Bonds,
PAMCO Project, 9.20%, 5/15/22 500,000 607,190
-------------
Total Municipal Bonds and Notes
(Cost $1,664,376) 1,865,861
- -------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 34.4%
- -------------------------------------------------------------------------
BASIC INDUSTRY - 1.3%
- -------------------------------------------------------------------------
CHEMICALS - 0.4%
Quantum Chemical Corp., 10.375%
First Mtg. Nts., 6/1/03 2,100,000 2,203,589
- -------------------------------------------------------------------------
PAPER - 0.9%
Boise Cascade Corp., 9.90% Nts.,
3/15/00 750,000 803,701
- -------------------------------------------------------------------------
Fletcher Challenge Capital Canada,
Inc., 7.75% Nts., 6/20/06 1,800,000 1,943,305
- -------------------------------------------------------------------------
Potlatch Corp., 9.46% Medium-Term
Nts., 4/2/02 500,000 559,844
- -------------------------------------------------------------------------
Scotia Pacific Holding Co., 7.95%
Timber Collateralized Nts., 7/20/15 1,412,832 1,466,254
-------------
4,773,104
- -------------------------------------------------------------------------
CONSUMER RELATED - 3.1%
- -------------------------------------------------------------------------
CONSUMER PRODUCTS - 1.3%
Harman International Industries,
Inc., 7.32% Nts., 7/1/07 5,000,000 5,218,230
- -------------------------------------------------------------------------
Procter & Gamble Co., 9.36% Debs.,
Series A, 1/1/21 500,000 644,266
- -------------------------------------------------------------------------
Toro Co., 7.125% Nts., 6/15/07 1,000,000 1,030,664
-------------
6,893,160
- -------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO - 0.5%
Bass America, Inc., 6.75% Gtd.
Nts., 8/1/99 750,000 762,071
- -------------------------------------------------------------------------
Coca-Cola Enterprises, Inc., 6.95%
Debs., 11/15/26 1,000,000 1,015,027
- -------------------------------------------------------------------------
Gruma SA de CV, 7.625% Bonds,
10/15/07(7) 700,000 689,261
-------------
2,466,359
- -------------------------------------------------------------------------
HEALTHCARE - 0.2%
Roche Holdings, Inc., 2.75% Bonds,
4/14/00 1,250,000 1,171,875
- -------------------------------------------------------------------------
HOTEL/GAMING - 0.9%
Circus Circus Enterprises, Inc.,
6.75% Nts., 7/15/03 375,000 373,046
- -------------------------------------------------------------------------
Hilton Hotels Corp., 7.95% Sr.
Nts., 4/15/07 4,000,000 4,306,608
-------------
4,679,654
- -------------------------------------------------------------------------
TEXTILE/APPAREL - 0.2%
Fruit of the Loom, Inc., 7% Debs.,
3/15/11 1,097,000 1,081,372
- -------------------------------------------------------------------------
ENERGY - 3.9%
- -------------------------------------------------------------------------
BP America, Inc., 10.875% Nts.,
8/1/01 CAD 1,000,000 808,427
- -------------------------------------------------------------------------
Coastal Corp., 8.75% Sr. Nts.,
5/15/99 500,000 516,919
- -------------------------------------------------------------------------
Colorado International Gas Corp.,
10% Sr. Debs., 6/15/05 500,000 604,269
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
<S> <C> <C> <C>
- -------------------------------------------------------------------------
ENERGY (CONTINUED)
- -------------------------------------------------------------------------
Eastern Energy Ltd., 6.75% Sr.
Nts., 12/1/06(7) $ 2,000,000 $ 2,013,104
- -------------------------------------------------------------------------
Enron Corp., 9.875% Debs., 6/15/03 375,000 434,418
- -------------------------------------------------------------------------
Enterprise Oil plc, 6.70% Sr. Nts.,
9/15/07 4,000,000 4,108,420
- -------------------------------------------------------------------------
Global Marine, Inc., 7.125% Nts.,
9/1/07(6) 8,000,000 8,080,000
- -------------------------------------------------------------------------
HNG Internorth/Enron Corp., 9.625%
Debs., 3/15/06 500,000 600,241
- -------------------------------------------------------------------------
McDermott, Inc., 9.375% Nts.,
3/15/02 400,000 425,942
- -------------------------------------------------------------------------
Mitchell Energy & Development
Corp., 9.25% Sr. Nts., 1/15/02 55,000 60,515
- -------------------------------------------------------------------------
Saga Petroleum ASA, 7.25% Debs.,
9/23/27 1,000,000 1,026,844
- -------------------------------------------------------------------------
Texaco Capital, Inc., 8.875% Gtd.
Debs., 9/1/21 500,000 626,775
- -------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875%
Debs., 1/1/21 750,000 997,500
-------------
20,303,374
- -------------------------------------------------------------------------
FINANCIAL SERVICES - 10.6%
- -------------------------------------------------------------------------
BANKS & THRIFTS - 1.3%
Banco Ganadero SA, 9.75%
Medium-Term Nts., 8/26/99(7) 125,000 127,344
- -------------------------------------------------------------------------
BankAmerica Corp., 7.75% Sub. Nts.,
7/15/02 750,000 793,961
- -------------------------------------------------------------------------
Banque Centrale de Tunisie, 7.50%
Nts., 9/19/07 900,000 846,802
- -------------------------------------------------------------------------
Chase Manhattan Corp. (New),
10.125% Sub. Nts., 11/1/00 750,000 827,285
- -------------------------------------------------------------------------
Citicorp Capital I, 7.933% Gtd.
Bonds, 2/15/27 2,000,000 2,138,990
- -------------------------------------------------------------------------
First Chicago Corp.:
11.25% Sub. Nts., 2/20/01 750,000 857,208
9% Sub. Nts., 6/15/99 150,000 156,123
- -------------------------------------------------------------------------
First Fidelity Bancorp, 8.50% Sub.
Capital Nts., 4/1/98 850,000 854,519
- -------------------------------------------------------------------------
Suntrust Banks, Inc., 8.875% Debs.,
2/1/98 500,000 501,029
-------------
7,103,261
- -------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 5.6%
Aeltus CBO II Ltd./Aeltus CBO II
Corp., 7.982% Sr. Sec. Sub. Bonds,
8/6/09(6) 5,000,000 5,062,500
- -------------------------------------------------------------------------
American General Finance Corp.,
5.875% Sr. Nts., 7/1/00 196,000 194,883
- -------------------------------------------------------------------------
Fleet Mtg. Group, Inc., 6.50% Nts.,
9/15/99 500,000 503,650
- -------------------------------------------------------------------------
Ford Motor Credit Co., 6.75% Nts.,
8/15/08 1,000,000 1,012,842
- -------------------------------------------------------------------------
Guangdong Enterprises Holdings
Ltd., 8.875% Sr. Nts., 5/22/07(7) 610,000 563,829
- -------------------------------------------------------------------------
Household Finance Corp., 8.95%
Debs., 9/15/99 500,000 522,488
- -------------------------------------------------------------------------
Household International BV, 6% Gtd.
Sr. Nts., 3/15/99 131,000 131,269
- -------------------------------------------------------------------------
HSBC Americas Capital Trust II,
8.38% Capital Securities,
5/15/27(7) 3,000,000 3,198,993
- -------------------------------------------------------------------------
Merrill Lynch & Co., Inc.:
6.56% Nts., 12/16/07 2,000,000 2,010,162
6.875% Nts., 3/1/03 750,000 770,451
- -------------------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co., 7% Debs., 10/1/13 1,000,000 1,018,604
- -------------------------------------------------------------------------
Norsk Hydro AS, 8.75% Bonds,
10/23/01 1,000,000 1,077,500
- -------------------------------------------------------------------------
Penske Truck Leasing Co. LP, 7.75%
Sr. Nts., 5/15/99 1,000,000 1,023,932
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- -------------------------------------------------------------------------
<S> <C> <C> <C>
DIVERSIFIED FINANCIAL (CONTINUED)
Rank Group Finance plc, 6.75% Gtd.
Nts., 11/30/04 $ 3,000,000 $ 3,010,500
- -------------------------------------------------------------------------
Salomon, Inc., 7.30% Nts., 5/15/02 1,000,000 1,035,115
- -------------------------------------------------------------------------
SunAmerica, Inc., 9.95% Debs.,
2/1/12 3,000,000 3,765,333
- -------------------------------------------------------------------------
U.S. Leasing International, Inc.,
6.625% Sr. Nts., 5/15/03 750,000 761,647
- -------------------------------------------------------------------------
Washington Mutual Capital I, 8.375%
Gtd. Bonds, 6/1/27 3,000,000 3,271,428
-------------
28,935,126
- -------------------------------------------------------------------------
INSURANCE - 3.7%
Aetna Services, Inc., 7.125% Nts.,
8/15/06 1,000,000 1,031,609
- -------------------------------------------------------------------------
Allmerica Capital I, 8.207% Debs.,
2/3/27 2,000,000 2,209,596
- -------------------------------------------------------------------------
CNA Financial Corp., 6.25% Nts.,
11/15/03 2,195,000 2,166,584
- -------------------------------------------------------------------------
Liberty Mutual Insurance Co.,
7.697% Nts., 10/15/2097(6) 7,000,000 7,359,044
- -------------------------------------------------------------------------
Prudential Insurance Co. of
America:
6.875% Nts., 4/15/03(7) 3,000,000 3,035,838
7.65% Surplus Nts., 7/1/07(7) 3,000,000 3,186,858
- -------------------------------------------------------------------------
SunAmerica, Inc., 9% Sr. Nts.,
1/15/99 196,000 201,222
-------------
19,190,751
- -------------------------------------------------------------------------
MANUFACTURING - 0.5%
- -------------------------------------------------------------------------
AUTOMOTIVE - 0.5%
Chrysler Corp., 7.40% Debs.,
8/1/2097 2,000,000 2,141,498
- -------------------------------------------------------------------------
Johnson Controls, Inc., 7.70%
Debs., 3/1/15 500,000 564,073
-------------
2,705,571
- -------------------------------------------------------------------------
MEDIA - 4.2%
- -------------------------------------------------------------------------
CABLE TELEVISION - 0.5%
TKR Cable I, Inc., 10.50% Sr.
Debs., 10/30/07 2,200,000 2,445,617
- -------------------------------------------------------------------------
DIVERSIFIED MEDIA - 3.4%
GSP I Corp., 10.15% First Mtg.
Bonds, 6/24/10(7) 1,110,527 1,087,506
- -------------------------------------------------------------------------
News America Holdings, Inc.,
10.125% Gtd. Sr. Debs., 10/15/12 500,000 591,928
- -------------------------------------------------------------------------
Time Warner Entertainment Co. LP,
8.375% Sr. Debs., 3/15/23 1,295,000 1,481,516
- -------------------------------------------------------------------------
Time Warner, Inc., 9.15% Debs.,
2/1/23 12,000,000 14,791,788
-------------
17,952,738
- -------------------------------------------------------------------------
ENTERTAINMENT/FILM - 0.1%
Columbia Pictures Entertainment,
Inc., 9.875% Sr. Sub. Nts., 2/1/98 500,000 501,292
- -------------------------------------------------------------------------
PUBLISHING/PRINTING - 0.2%
Reed Elsevier, Inc., 6.625% Nts.,
10/15/23(7) 600,000 587,754
- -------------------------------------------------------------------------
Reed Publishing (USA), Inc., 7.66%
Medium-Term Nts., 2/19/99 500,000 508,750
-------------
1,096,504
- -------------------------------------------------------------------------
OTHER - 3.0%
- -------------------------------------------------------------------------
CONGLOMERATES - 0.2%
Tenneco, Inc. (New):
10.20% Debs., 3/15/08 400,000 512,797
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- -------------------------------------------------------------------------
<S> <C> <C> <C>
CONGLOMERATES (CONTINUED)
Tenneco, Inc. (New): (Continued)
8.075% Nts., 10/1/02 $ 650,000 $ 696,023
-------------
1,208,820
- -------------------------------------------------------------------------
SERVICES - 2.8%
Archer Daniels Midland Co., 7.125%
Debs., 3/1/13 750,000 800,963
- -------------------------------------------------------------------------
Comcast Cable Communications, Inc.,
8.125% Unsec. Nts., 5/1/04 5,000,000 5,404,590
- -------------------------------------------------------------------------
ENSCO International, Inc.:
6.75% Nts., 11/15/07 5,000,000 5,035,175
7.20% Nts., 11/15/27 3,000,000 3,055,386
-------------
14,296,114
- -------------------------------------------------------------------------
RETAIL - 1.0%
- -------------------------------------------------------------------------
SPECIALTY RETAILING - 1.0%
Staples, Inc., 7.125% Sr. Nts.,
8/15/07 5,000,000 5,104,230
- -------------------------------------------------------------------------
TECHNOLOGY - 3.4%
- -------------------------------------------------------------------------
INFORMATION TECHNOLOGY - 0.8%
U.S. Cellular Corp., 7.25% Nts.,
8/15/07 4,000,000 4,088,556
- -------------------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY -
2.6%
Bell Cablemedia plc, 0%/11.95% Sr.
Disc. Nts., 7/15/04(11) 2,100,000 1,984,500
- -------------------------------------------------------------------------
Shaw Communications, Inc., 8.54%
Debs., 9/30/27 CAD 3,000,000 1,948,549
- -------------------------------------------------------------------------
U S West Capital Funding, Inc.:
7.30% Gtd. Unsec. Nts., 1/15/07 5,000,000 5,194,145
7.95% Gtd. Bonds, 2/1/2097 4,000,000 4,446,788
-------------
13,573,982
</TABLE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------
TRANSPORTATION - 1.4%
- --------------------------------------------------------------------
AIR TRANSPORTATION - 1.2%
UAL Corp., 9.125% Debs., 1/15/12 5,000,000 6,015,535
- --------------------------------------------------------------------
RAILROADS - 0.2%
Kansas City Southern Industries,
Inc., 6.625% Nts., 3/1/05 750,000 758,272
- --------------------------------------------------------------------
Union Pacific Corp., 9.65%
Medium-Term Nts., 4/17/00 400,000 429,143
-------------
1,187,415
- --------------------------------------------------------------------
UTILITIES - 2.0%
- --------------------------------------------------------------------
ELECTRIC UTILITIES - 0.9%
Cleveland Electric Illuminating
Co./Toledo Edison Co., 7.13% Sec.
Nts., Series B, 7/1/07 3,000,000 3,173,586
- --------------------------------------------------------------------
Long Island Lighting Co., 7% Nts.,
3/1/04 150,000 151,842
- --------------------------------------------------------------------
Public Service Co. of Colorado,
8.75% First Mtg. Bonds, 3/1/22 750,000 828,344
- --------------------------------------------------------------------
South Carolina Electric & Gas Co.,
9% Mtg. Bonds, 7/15/06 500,000 583,366
-------------
4,737,138
- --------------------------------------------------------------------
GAS UTILITIES - 0.5%
Consolidated Natural Gas Co.,
6.625% Debs., 12/1/13 1,000,000 1,018,392
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------
<S> <C> <C>
GAS UTILITIES (CONTINUED)
National Fuel Gas Co., 7.75% Debs.,
2/1/04 $ 500,000 $ 532,226
- --------------------------------------------------------------------
Texas Gas Transmission Corp.,
8.625% Nts., 4/1/04 500,000 555,629
- --------------------------------------------------------------------
Washington Gas Light Co., 8.75%
First Mtg. Bonds, 7/1/19 500,000 518,978
-------------
2,625,225
- --------------------------------------------------------------------
TELEPHONE UTILITIES - 0.6%
Alltel Corp., 6.50% Debs., 11/1/13 1,000,000 1,003,891
- --------------------------------------------------------------------
GTE Corp.:
8.85% Debs., 3/1/98 750,000 753,043
9.375% Debs., 12/1/00 500,000 541,604
- --------------------------------------------------------------------
Northern Telecom Ltd., 6.875% Nts.,
10/1/02 500,000 513,475
-------------
2,812,013
-------------
Total Corporate Bonds and Notes
(Cost $175,107,227) 179,152,375
SHARES
- --------------------------------------------------------------------
PREFERRED STOCKS - 0.6%
- --------------------------------------------------------------------
Allstate Financing I, 7.95% Gtd.
Quarterly Income Preferred
Securities, Series A (Cost
$3,000,000) 120,000 3,112,500
PRINCIPAL
AMOUNT(1)
- --------------------------------------------------------------------
STRUCTURED INSTRUMENTS - 0.9%
- --------------------------------------------------------------------
Canadian Imperial Bank of Commerce
(New York Branch) Canadian Dollar
Three Month Banker's Acceptance
Linked Maximum Rate Nts., 8.66%,
4/13/98 $ 500,000 494,700
- --------------------------------------------------------------------
Canadian Imperial Bank of Commerce,
U.S. Dollar Nts. Linked to the
Ministry of Finance of the Russian
Federation GKO, Zero Coupon,
9.857%, 9/17/98(10) 2,300,000 1,986,510
- --------------------------------------------------------------------
Goldman Sachs Group, LP:
South Korean Won Linked Nts.,
5.60%, 1/20/98 100,000 103,530
Taiwanese Dollar Linked Nts.,
5.75%, 6/12/98 200,000 201,960
- --------------------------------------------------------------------
Lehman Brothers Holdings, Inc.
Greek Drachma/Swiss Franc Linked
Nts., Zero Coupon, 14.709%,
1/15/98(10) 800,000 832,000
- --------------------------------------------------------------------
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)(6) 1,000,000 1,172,800
- --------------------------------------------------------------------
Morgan Guaranty Trust Co. of New
York, Japanese Government Bond 193
Currency Protected Bank Nts.,
8.14%, 4/29/98 10,000 5,871
-------------
Total Structured Instruments (Cost
$4,976,564) 4,797,371
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
<S> <C> <C>
- --------------------------------------------------------------------
REPURCHASE AGREEMENTS - 2.6%
- --------------------------------------------------------------------
Repurchase agreement with Smith,
Barney, Harris, Upham & Co., Inc.,
6.625%, dated 12/31/97, to be
repurchased at $13,504,969 on
1/2/98, collateralized by U.S.
Treasury Bonds, 8.875%-11.25%,
2/15/15-2/15/19, with a value of
$13,829,656 (Cost $13,500,000) $ 13,500,000 $ 13,500,000
- --------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$590,845,008) 115.7% 601,914,075
- --------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (15.7) (81,836,047)
--------------- -------------
NET ASSETS 100.0% $520,078,028
--------------- -------------
--------------- -------------
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
<TABLE>
<S> <C> <C> <C> <C> <C>
CAD - Canadian Dollar IDR - Indonesian Rupiah
ZAR - South African Rand
</TABLE>
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, 1997.
4. 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.
5. Represents the current interest rate for a variable rate security.
6. Identifies issues considered to be illiquid or restricted - See Note 8 of
Notes to Financial Statements.
7. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $20,275,019 or 3.90% of the Fund's net
assets as of December 31, 1997.
8. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See Note 5 of Notes to Financial
Statements.
9. Securities with an aggregate market value of $2,349,157 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
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.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 88.0%
- ---------------------------------------------------------------
CONSUMER CYCLICALS - 13.5%
- ---------------------------------------------------------------
LEISURE & ENTERTAINMENT - 3.5%
CKE Restaurants, Inc. 273,500 $11,521,187
- ---------------------------------------------------------------
Landry's Seafood Restaurants,
Inc.(1) 340,000 8,160,000
- ---------------------------------------------------------------
Outback Steakhouse, Inc.(1) 150,000 4,312,500
- ---------------------------------------------------------------
Signature Resorts, Inc.(1) 320,000 7,000,000
------------
30,993,687
- ---------------------------------------------------------------
RETAIL: GENERAL - 2.1%
Jones Apparel Group, Inc.(1) 219,600 9,442,800
- ---------------------------------------------------------------
Nautica Enterprises, Inc.(1) 130,000 3,022,500
- ---------------------------------------------------------------
North Face, Inc. (The)(1) 165,000 3,630,000
- ---------------------------------------------------------------
Vans, Inc.(1) 150,000 2,268,750
------------
18,364,050
- ---------------------------------------------------------------
RETAIL: SPECIALTY - 7.9%
Cendant Corp.(1) 570,310 19,604,406
- ---------------------------------------------------------------
Fred Meyer, Inc.(1) 170,000 6,183,750
- ---------------------------------------------------------------
General Nutrition Cos., Inc. 550,000 18,700,000
- ---------------------------------------------------------------
Linens 'N Things, Inc.(1) 300,500 13,109,312
- ---------------------------------------------------------------
Petco Animal Supplies, Inc.(1) 330,000 7,920,000
- ---------------------------------------------------------------
TJX Cos., Inc. 120,000 4,125,000
------------
69,642,468
- ---------------------------------------------------------------
CONSUMER NON-CYCLICALS - 16.7%
- ---------------------------------------------------------------
HEALTHCARE/DRUGS - 3.0%
BioChem Pharma, Inc.(1) 360,000 7,515,000
- ---------------------------------------------------------------
Dura Pharmaceuticals, Inc.(1) 230,000 10,551,250
- ---------------------------------------------------------------
Human Genome Sciences, Inc.(1) 120,000 4,770,000
- ---------------------------------------------------------------
Incyte Pharmaceuticals, Inc.(1) 62,800 2,826,000
- ---------------------------------------------------------------
Nuerocrine Biosciences, Inc.(1) 105,000 826,875
------------
26,489,125
- ---------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES -
12.5%
AmeriSource Health Corp., Cl. A(1) 136,600 8,025,250
- ---------------------------------------------------------------
Covance, Inc.(1) 300,000 5,962,500
- ---------------------------------------------------------------
ESC Medical Systems Ltd.(1) 292,100 11,318,875
- ---------------------------------------------------------------
FPA Medical Management, Inc.(1) 460,000 8,567,500
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(1) 340,000 9,435,000
- ---------------------------------------------------------------
Integ, Inc.(1) 111,500 446,000
- ---------------------------------------------------------------
McKesson Corp. 70,000 7,573,125
- ---------------------------------------------------------------
MedPartners, Inc.(1) 175,000 3,915,625
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/SUPPLIES & SERVICES
(CONTINUED)
Parexel International Corp.(1) 235,000 $ 8,695,000
- ---------------------------------------------------------------
Pediatrix Medical Group, Inc.(1) 200,000 8,550,000
- ---------------------------------------------------------------
PhyCor, Inc.(1) 159,000 4,293,000
- ---------------------------------------------------------------
Quintiles Transnational Corp.(1) 150,000 5,737,500
- ---------------------------------------------------------------
Renal Treatment Centers, Inc.(1) 405,000 14,630,625
- ---------------------------------------------------------------
Total Renal Care Holdings, Inc.(1) 454,333 12,494,157
------------
109,644,157
- ---------------------------------------------------------------
HOUSEHOLD GOODS - 1.2%
Blyth Industries, Inc.(1) 352,500 10,552,969
- ---------------------------------------------------------------
ENERGY - 5.6%
- ---------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 5.6%
Calpine Corp.(1) 232,500 3,458,437
- ---------------------------------------------------------------
Coflexip SA, Sponsored ADR 80,000 4,440,000
- ---------------------------------------------------------------
Cooper Cameron Corp.(1) 80,000 4,880,000
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 153,800 7,401,625
- ---------------------------------------------------------------
Global Industries Ltd.(1) 300,000 5,100,000
- ---------------------------------------------------------------
Halliburton Co. 200,000 10,387,500
- ---------------------------------------------------------------
Nabors Industries, Inc.(1) 200,000 6,287,500
- ---------------------------------------------------------------
Santa Fe International Corp. 180,000 7,323,750
------------
49,278,812
- ---------------------------------------------------------------
FINANCIAL - 11.9%
- ---------------------------------------------------------------
BANKS - 1.4%
Providian Financial Corp. 120,000 5,422,500
- ---------------------------------------------------------------
TCF Financial Corp. 200,000 6,787,500
------------
12,210,000
- ---------------------------------------------------------------
DIVERSIFIED FINANCIAL - 3.7%
Affiliated Managers Group, Inc.(1) 190,000 5,510,000
- ---------------------------------------------------------------
Arm Financial Group, Inc., Cl. A 300,000 7,912,500
- ---------------------------------------------------------------
Associates First Capital Corp., Cl.
A 161,000 11,451,125
- ---------------------------------------------------------------
C.I.T. Group, Inc., Cl. A(1) 234,700 7,569,075
------------
32,442,700
- ---------------------------------------------------------------
INSURANCE - 6.8%
ACE Ltd. 50,000 4,825,000
- ---------------------------------------------------------------
CapMAC Holdings, Inc. 100,600 3,495,850
- ---------------------------------------------------------------
Conseco, Inc. 300,000 13,631,250
- ---------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 250,000 10,312,500
- ---------------------------------------------------------------
Executive Risk, Inc. 135,000 9,424,687
- ---------------------------------------------------------------
EXEL Ltd. 70,000 4,436,250
- ---------------------------------------------------------------
Frontier Insurance Group, Inc. 200,000 4,575,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
INSURANCE (CONTINUED)
Travelers Property Casualty Corp.,
Cl. A 200,000 $ 8,800,000
------------
59,500,537
- ---------------------------------------------------------------
INDUSTRIAL - 12.5%
- ---------------------------------------------------------------
INDUSTRIAL SERVICES - 10.0%
AccuStaff, Inc.(1) 330,000 7,590,000
- ---------------------------------------------------------------
Affiliated Computer Services, Inc.,
Cl. A(1) 200,000 5,262,500
- ---------------------------------------------------------------
Allied Waste Industries, Inc.(1) 604,300 14,087,744
- ---------------------------------------------------------------
American Disposal Services, Inc.(1) 175,400 6,402,100
- ---------------------------------------------------------------
Cambridge Technology Partners,
Inc.(1) 486,600 20,254,725
- ---------------------------------------------------------------
CIBER, Inc.(1) 231,300 13,415,400
- ---------------------------------------------------------------
Newpark Resources, Inc.(1) 346,800 6,069,000
- ---------------------------------------------------------------
U.S. Rentals, Inc.(1) 181,500 4,265,250
- ---------------------------------------------------------------
United Rentals, Inc.(1) 125,000 2,414,063
- ---------------------------------------------------------------
USA Waste Services, Inc.(1) 196,600 7,716,550
------------
87,477,332
- ---------------------------------------------------------------
MANUFACTURING - 2.5%
Tyco International Ltd. 410,000 18,475,625
- ---------------------------------------------------------------
U.S. Filter Corp.(1) 108,600 3,251,213
------------
21,726,838
- ---------------------------------------------------------------
TECHNOLOGY - 27.8%
- ---------------------------------------------------------------
COMPUTER HARDWARE - 1.3%
Telxon Corp. 480,000 11,460,000
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 16.6%
Aspen Technologies, Inc.(1) 315,700 10,812,725
- ---------------------------------------------------------------
Cap Gemini SA 105,000 8,613,479
- ---------------------------------------------------------------
Citrix Systems, Inc.(1) 240,000 18,240,000
- ---------------------------------------------------------------
Compuware Corp.(1) 310,000 9,920,000
- ---------------------------------------------------------------
Harbinger Corp.(1) 276,500 7,776,563
- ---------------------------------------------------------------
HBO & Co. 380,000 18,240,000
- ---------------------------------------------------------------
Hypercom Corp.(1) 183,200 2,587,700
- ---------------------------------------------------------------
JDA Software Group, Inc.(1) 400,000 14,000,000
- ---------------------------------------------------------------
Oracle Corp.(1) 100,000 2,231,250
- ---------------------------------------------------------------
Rogue Wave Software, Inc.(1) 150,000 1,659,375
- ---------------------------------------------------------------
Saville Systems Ireland plc,
Sponsored ADR(1) 450,000 18,675,000
- ---------------------------------------------------------------
Synopsys, Inc.(1) 275,000 9,831,250
- ---------------------------------------------------------------
USWeb Corp.(1) 310,000 2,906,250
- ---------------------------------------------------------------
Versant Object Technology Corp.(1) 225,000 3,107,813
- ---------------------------------------------------------------
Visio Corp.(1) 440,000 16,885,000
------------
145,486,405
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
ELECTRONICS - 2.4%
Lernout & Hauspie Speech Products
NV(1) 177,500 $ 8,253,750
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(1) 185,000 6,983,750
- ---------------------------------------------------------------
Waters Corp.(1) 150,000 5,643,750
------------
20,881,250
- ---------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY -
7.5%
Advanced Fibre Communications,
Inc.(1) 110,000 3,203,750
- ---------------------------------------------------------------
Allen Telecom, Inc.(1) 121,200 2,234,625
- ---------------------------------------------------------------
Comverse Technology, Inc.(1) 120,000 4,680,000
- ---------------------------------------------------------------
Newbridge Networks Corp.(1) 210,000 7,323,750
- ---------------------------------------------------------------
Nextel Communications, Inc., Cl.
A(1) 350,000 9,100,000
- ---------------------------------------------------------------
Pacific Gateway Exchange, Inc.(1) 50,000 2,690,625
- ---------------------------------------------------------------
Scientific-Atlanta, Inc. 170,000 2,847,500
- ---------------------------------------------------------------
Tel-Save Holdings, Inc.(1) 130,000 2,583,750
- ---------------------------------------------------------------
Teledata Communications Ltd.(1) 234,800 4,285,100
- ---------------------------------------------------------------
Tellabs, Inc.(1) 170,000 8,988,750
- ---------------------------------------------------------------
Uniphase Corp.(1) 203,000 8,399,125
- ---------------------------------------------------------------
WinStar Communications, Inc. 380,000 9,476,250
------------
65,813,225
------------
Total Common Stocks (Cost
$605,998,270) 771,963,555
PRINCIPAL
AMOUNT
- ---------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND
NOTES - 0.3%
- ---------------------------------------------------------------
United Waste Systems, Inc., 4.50%
Cv. Sub. Nts., 6/1/01 (Cost
$2,000,000)(2) $ 2,000,000 2,775,000
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS - 12.2%
- ---------------------------------------------------------------
Repurchase agreement with Smith,
Barney, Harris, Upham & Co., Inc.,
6.625%, dated 12/31/97, to be
repurchased at $107,289,474 on
1/2/98, collateralized by U.S.
Treasury Bonds, 8.875%-11.25%,
2/15/15-2/15/19, with a value of
$109,868,933 (Cost $107,250,000) 107,250,000 107,250,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$715,248,270) 100.5% 881,988,555
- ---------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (0.5) (4,181,082 )
------------ ------------
NET ASSETS 100.0% $877,807,473
------------ ------------
------------ ------------
</TABLE>
1. Non-income producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $2,775,000 or 0.32% of the Fund's net
assets as of December 31, 1997.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 78.9%
- ---------------------------------------------------------------
BASIC MATERIALS - 2.2%
- ---------------------------------------------------------------
CHEMICALS - 2.2%
Crompton & Knowles Corp. 38,200 $ 1,012,300
- ---------------------------------------------------------------
Ferro Corp. 80,000 1,945,000
- ---------------------------------------------------------------
Morton International, Inc. 127,000 4,365,625
- ---------------------------------------------------------------
Praxair, Inc. 45,600 2,052,000
- ---------------------------------------------------------------
Scotts Co. (The), Cl. A(1) 56,000 1,694,000
------------
11,068,925
- ---------------------------------------------------------------
CONSUMER CYCLICALS - 14.0%
- ---------------------------------------------------------------
AUTOS & HOUSING - 2.4%
Arvin Industries, Inc. 54,300 1,808,869
- ---------------------------------------------------------------
Autoliv, Inc. 54,889 1,797,615
- ---------------------------------------------------------------
Centex Corp. 39,000 2,454,562
- ---------------------------------------------------------------
Furniture Brands International,
Inc.(1) 60,100 1,232,050
- ---------------------------------------------------------------
Magna International, Inc., Cl. A 22,000 1,381,875
- ---------------------------------------------------------------
Pulte Corp. 22,000 919,875
- ---------------------------------------------------------------
Toll Brothers, Inc.(1) 90,000 2,407,500
------------
12,002,346
- ---------------------------------------------------------------
LEISURE & ENTERTAINMENT - 1.5%
Callaway Golf Co. 82,200 2,347,837
- ---------------------------------------------------------------
Carnival Corp., Cl. A 75,000 4,153,125
- ---------------------------------------------------------------
Disney (Walt) Co. 7,000 693,437
------------
7,194,399
- ---------------------------------------------------------------
MEDIA - 1.5%
Chancellor Media Corp.(1) 30,000 2,238,750
- ---------------------------------------------------------------
New York Times Co. 78,000 5,157,750
------------
7,396,500
- ---------------------------------------------------------------
RETAIL: GENERAL - 4.1%
CVS Corp. 114,500 7,335,156
- ---------------------------------------------------------------
Dayton Hudson Corp. 30,000 2,025,000
- ---------------------------------------------------------------
Federated Department Stores,
Inc.(1) 65,000 2,799,062
- ---------------------------------------------------------------
Jones Apparel Group, Inc.(1) 76,500 3,289,500
- ---------------------------------------------------------------
Nautica Enterprises, Inc.(1) 62,000 1,441,500
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(1) 95,800 3,364,975
------------
20,255,193
- ---------------------------------------------------------------
RETAIL: SPECIALTY - 4.5%
Bed Bath & Beyond, Inc.(1) 21,000 808,500
- ---------------------------------------------------------------
Cendant Corp.(1) 110,000 3,781,250
- ---------------------------------------------------------------
Ethan Allen Interiors, Inc. 70,500 2,718,656
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
RETAIL: SPECIALTY (CONTINUED)
Gap, Inc. 25,500 $ 903,656
- ---------------------------------------------------------------
Intimate Brands, Inc., Cl. A 95,000 2,285,937
- ---------------------------------------------------------------
Nine West Group, Inc.(1) 43,600 1,130,875
- ---------------------------------------------------------------
Ross Stores, Inc. 60,000 2,182,500
- ---------------------------------------------------------------
Stride Rite Corp. 35,000 420,000
- ---------------------------------------------------------------
Tiffany & Co. 44,000 1,586,750
- ---------------------------------------------------------------
TJX Cos., Inc. 92,000 3,162,500
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(1) 75,500 3,161,562
------------
22,142,186
- ---------------------------------------------------------------
CONSUMER NON-CYCLICALS - 14.0%
- ---------------------------------------------------------------
FOOD - 4.3%
Hershey Foods Corp. 20,000 1,238,750
- ---------------------------------------------------------------
JP Foodservice, Inc.(1) 32,600 1,204,162
- ---------------------------------------------------------------
Kroger Co.(1) 49,000 1,809,937
- ---------------------------------------------------------------
McCormick & Co., Inc., Non-Vtg. 13,000 364,000
- ---------------------------------------------------------------
Richfood Holdings, Inc. 87,200 2,463,400
- ---------------------------------------------------------------
Safeway, Inc.(1) 152,000 9,614,000
- ---------------------------------------------------------------
Smithfield Foods, Inc.(1) 82,000 2,706,000
- ---------------------------------------------------------------
Suiza Foods Corp.(1) 29,750 1,771,984
------------
21,172,233
- ---------------------------------------------------------------
HEALTHCARE/DRUGS - 3.8%
Biogen, Inc.(1) 26,000 945,750
- ---------------------------------------------------------------
Lilly (Eli) & Co. 74,180 5,164,782
- ---------------------------------------------------------------
Pfizer, Inc. 90,000 6,710,625
- ---------------------------------------------------------------
Schering-Plough Corp. 92,800 5,765,200
------------
18,586,357
- ---------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES -
4.5%
Becton, Dickinson & Co. 25,000 1,250,000
- ---------------------------------------------------------------
HealthCare COMPARE Corp.(1) 70,800 3,619,650
- ---------------------------------------------------------------
HEALTHSOUTH Corp.(1) 88,000 2,442,000
- ---------------------------------------------------------------
Lincare Holdings, Inc.(1) 82,700 4,713,900
- ---------------------------------------------------------------
Medtronic, Inc. 35,000 1,830,937
- ---------------------------------------------------------------
Minimed, Inc.(1) 46,800 1,819,350
- ---------------------------------------------------------------
Oxford Health Plans, Inc.(1) 54,800 852,825
- ---------------------------------------------------------------
Renal Treatment Centers, Inc.(1) 50,000 1,806,250
- ---------------------------------------------------------------
VISX, Inc.(1) 11,000 243,375
- ---------------------------------------------------------------
WellPoint Health Networks, Inc.(1) 88,400 3,734,900
------------
22,313,187
- ---------------------------------------------------------------
HOUSEHOLD GOODS - 0.2%
Blyth Industries, Inc.(1) 25,000 748,437
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
TOBACCO - 1.2%
Philip Morris Cos., Inc. 102,000 $ 4,621,875
- ---------------------------------------------------------------
RJR Nabisco Holdings Corp. 40,000 1,500,000
------------
6,121,875
- ---------------------------------------------------------------
ENERGY - 5.8%
- ---------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 3.8%
BJ Services Co.(1) 25,000 1,798,437
- ---------------------------------------------------------------
ENSCO International, Inc. 68,000 2,278,000
- ---------------------------------------------------------------
Global Marine, Inc.(1) 100,000 2,450,000
- ---------------------------------------------------------------
Halliburton Co. 89,800 4,663,987
- ---------------------------------------------------------------
Nabors Industries, Inc.(1) 53,900 1,694,481
- ---------------------------------------------------------------
Smith International, Inc.(1) 38,000 2,332,250
- ---------------------------------------------------------------
Varco International, Inc.(1) 166,200 3,562,913
------------
18,780,068
- ---------------------------------------------------------------
OIL-INTEGRATED - 2.0%
Camco International, Inc. 48,500 3,088,844
- ---------------------------------------------------------------
Mobil Corp. 18,200 1,313,813
- ---------------------------------------------------------------
Phillips Petroleum Co. 33,000 1,604,625
- ---------------------------------------------------------------
Royal Dutch Petroleum Co., NY
Shares 10,000 541,875
- ---------------------------------------------------------------
Texaco, Inc. 29,000 1,576,875
- ---------------------------------------------------------------
USX-Marathon Group 58,000 1,957,500
------------
10,083,532
- ---------------------------------------------------------------
FINANCIAL - 17.8%
- ---------------------------------------------------------------
BANKS - 5.6%
Banc One Corp. 127,262 6,911,917
- ---------------------------------------------------------------
BankBoston Corp. 23,000 2,160,563
- ---------------------------------------------------------------
Barnett Banks, Inc. 38,000 2,731,250
- ---------------------------------------------------------------
Chase Manhattan Corp. (New) 15,640 1,712,580
- ---------------------------------------------------------------
Credito Italiano 1,320,000 4,072,746
- ---------------------------------------------------------------
Fleet Financial Group, Inc. 20,000 1,498,750
- ---------------------------------------------------------------
Greenpoint Financial Corp. 12,000 870,750
- ---------------------------------------------------------------
Societe Generale 21,500 2,930,586
- ---------------------------------------------------------------
Star Banc Corp. 43,500 2,495,813
- ---------------------------------------------------------------
State Street Corp. 39,200 2,280,950
------------
27,665,905
- ---------------------------------------------------------------
DIVERSIFIED FINANCIAL - 8.1%
Associates First Capital Corp., Cl.
A 55,000 3,911,875
- ---------------------------------------------------------------
Countrywide Credit Industries, Inc. 10,000 428,750
- ---------------------------------------------------------------
Fannie Mae 36,000 2,054,250
- ---------------------------------------------------------------
Finova Group, Inc. 60,800 3,021,000
- ---------------------------------------------------------------
Franklin Resources, Inc. 23,100 2,008,256
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED FINANCIAL (CONTINUED)
Freddie Mac 60,000 $ 2,516,250
- ---------------------------------------------------------------
Green Tree Financial Corp. 128,000 3,352,000
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 44,000 3,209,250
- ---------------------------------------------------------------
MGIC Investment Corp. 32,200 2,141,300
- ---------------------------------------------------------------
Money Store, Inc. (The) 40,000 840,000
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 40,200 2,376,825
- ---------------------------------------------------------------
Price (T. Rowe) Associates, Inc. 30,500 1,917,688
- ---------------------------------------------------------------
Schwab (Charles) Corp. 30,000 1,258,125
- ---------------------------------------------------------------
Travelers Group, Inc. 203,499 10,963,509
------------
39,999,078
- ---------------------------------------------------------------
INSURANCE - 4.1%
ACE Ltd. 25,800 2,489,700
- ---------------------------------------------------------------
Allstate Corp. 27,500 2,499,063
- ---------------------------------------------------------------
Conseco, Inc. 90,000 4,089,375
- ---------------------------------------------------------------
Equitable Cos., Inc. 69,000 3,432,750
- ---------------------------------------------------------------
Executive Risk, Inc. 40,000 2,792,500
- ---------------------------------------------------------------
Progressive Corp. 15,000 1,798,125
- ---------------------------------------------------------------
SunAmerica, Inc. 78,500 3,355,875
------------
20,457,388
- ---------------------------------------------------------------
INDUSTRIAL - 5.9%
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.7%
Emerson Electric Co. 37,000 2,088,188
- ---------------------------------------------------------------
General Electric Co. 18,000 1,320,750
------------
3,408,938
- ---------------------------------------------------------------
INDUSTRIAL MATERIALS - 0.7%
Rayonier, Inc. 32,400 1,379,025
- ---------------------------------------------------------------
Southdown, Inc. 36,900 2,177,100
------------
3,556,125
- ---------------------------------------------------------------
INDUSTRIAL SERVICES - 0.7%
Corrections Corp. of America(1) 55,000 2,038,438
- ---------------------------------------------------------------
Kent Electronics Corp.(1) 56,000 1,407,000
------------
3,445,438
- ---------------------------------------------------------------
MANUFACTURING - 2.3%
Aeroquip-Vickers, Inc. 35,000 1,717,188
- ---------------------------------------------------------------
AGCO Corp. 25,200 737,100
- ---------------------------------------------------------------
American Standard Cos., Inc.(1) 50,000 1,915,625
- ---------------------------------------------------------------
Illinois Tool Works, Inc. 45,000 2,705,625
- ---------------------------------------------------------------
MascoTech, Inc. 97,000 1,782,375
- ---------------------------------------------------------------
Sealed Air Corp.(1) 38,000 2,346,500
------------
11,204,413
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 1.5%
Canadian Pacific Ltd. (New) 90,000 $ 2,452,500
- ---------------------------------------------------------------
Kansas City Southern Industries,
Inc. 153,000 4,857,750
------------
7,310,250
- ---------------------------------------------------------------
TECHNOLOGY - 18.2%
- ---------------------------------------------------------------
COMPUTER HARDWARE - 5.7%
Adaptec, Inc.(1) 167,200 6,207,300
- ---------------------------------------------------------------
Cabletron Systems, Inc.(1) 87,000 1,305,000
- ---------------------------------------------------------------
Compaq Computer Corp. 82,000 4,627,875
- ---------------------------------------------------------------
EMC Corp.(1) 84,000 2,304,750
- ---------------------------------------------------------------
Gateway 2000, Inc.(1) 80,600 2,629,575
- ---------------------------------------------------------------
International Business Machines
Corp. 37,000 3,868,813
- ---------------------------------------------------------------
Quantum Corp.(1) 40,000 802,500
- ---------------------------------------------------------------
Seagate Technology, Inc.(1) 180,000 3,465,000
- ---------------------------------------------------------------
Sun Microsystems, Inc.(1) 36,000 1,435,500
- ---------------------------------------------------------------
Western Digital Corp.(1) 85,000 1,365,313
------------
28,011,626
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 7.3%
BMC Software, Inc.(1) 58,400 3,832,500
- ---------------------------------------------------------------
Computer Associates International,
Inc. 39,000 2,062,125
- ---------------------------------------------------------------
First Data Corp. 93,000 2,720,250
- ---------------------------------------------------------------
Gartner Group, Inc., Cl. A(1) 91,000 3,389,750
- ---------------------------------------------------------------
HBO & Co. 65,000 3,120,000
- ---------------------------------------------------------------
Microsoft Corp.(1) 69,000 8,918,250
- ---------------------------------------------------------------
Network Associates, Inc.(1) 75,900 4,013,213
- ---------------------------------------------------------------
Peoplesoft, Inc.(1) 130,800 5,101,200
- ---------------------------------------------------------------
Structural Dynamics Research
Corp.(1) 60,600 1,363,500
- ---------------------------------------------------------------
Sungard Data Systems, Inc.(1) 54,000 1,674,000
------------
36,194,788
- ---------------------------------------------------------------
ELECTRONICS - 2.4%
Analog Devices, Inc.(1) 28,333 784,470
- ---------------------------------------------------------------
LSI Logic Corp.(1) 50,000 987,500
- ---------------------------------------------------------------
Sanmina Corp.(1) 49,000 3,319,750
- ---------------------------------------------------------------
Teradyne, Inc.(1) 30,000 960,000
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(1) 48,200 1,819,550
- ---------------------------------------------------------------
Waters Corp.(1) 100,000 3,762,500
------------
11,633,770
- ---------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY -
2.8%
Ascend Communications, Inc.(1) 25,750 630,875
- ---------------------------------------------------------------
Newbridge Networks Corp.(1) 30,000 1,046,250
- ---------------------------------------------------------------
Pairgain Technologies, Inc.(1) 85,000 1,646,875
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS-TECHNOLOGY
(CONTINUED)
Tellabs, Inc.(1) 128,200 $ 6,778,575
- ---------------------------------------------------------------
WorldCom, Inc. 125,000 3,781,250
------------
13,883,825
- ---------------------------------------------------------------
UTILITIES - 1.0%
- ---------------------------------------------------------------
ELECTRIC UTILITIES - 0.6%
American Electric Power Co., Inc. 11,550 596,269
- ---------------------------------------------------------------
CalEnergy, Inc.(1) 59,500 1,710,625
- ---------------------------------------------------------------
CMS Energy Corp. 16,200 713,813
------------
3,020,707
- ---------------------------------------------------------------
TELEPHONE UTILITIES - 0.4%
Cincinnati Bell, Inc. 23,600 731,600
- ---------------------------------------------------------------
LCI International, Inc.(1) 42,000 1,291,500
------------
2,023,100
------------
Total Common Stocks (Cost
$298,431,087) 389,680,589
PRINCIPAL
AMOUNT
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS - 20.5%
- ---------------------------------------------------------------
Repurchase agreement with Smith,
Barney, Harris, Upham & Co., Inc.,
6.625%, dated 12/31/97, to be
repurchased at $101,537,358 on
1/2/98, collateralized by U.S.
Treasury Bonds, 8.875%-11.25%,
2/15/15-2/15/19, with a value of
$103,978,524 (Cost $101,500,000) $101,500,000 101,500,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$399,931,087) 99.4% 491,180,589
- ---------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.6 2,725,385
------------ ------------
NET ASSETS 100.0% $493,905,974
------------ ------------
------------ ------------
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 48.2%
- ---------------------------------------------------------------
BASIC MATERIALS - 2.2%
- ---------------------------------------------------------------
CHEMICALS - 0.9%
Bayer AG, Sponsored ADR 51,000 $ 1,906,069
- ---------------------------------------------------------------
Ecolab, Inc.(1) 14,000 776,125
- ---------------------------------------------------------------
IMC Global, Inc. 47,700 1,562,175
- ---------------------------------------------------------------
Potash Corp. of Saskatchewan, Inc. 20,000 1,660,000
------------
5,904,369
- ---------------------------------------------------------------
METALS - 0.9%
Alumax, Inc.(2) 58,000 1,972,000
- ---------------------------------------------------------------
Brush Wellman, Inc. 78,000 1,911,000
- ---------------------------------------------------------------
De Beers Consolidated Mines Ltd.,
ADR 52,300 1,068,881
- ---------------------------------------------------------------
Oregon Metallurgical Corp.(2) 30,000 1,001,250
------------
5,953,131
- ---------------------------------------------------------------
PAPER - 0.4%
Aracruz Celulose SA, Sponsored ADR 66,499 955,923
- ---------------------------------------------------------------
MacMillan Bloedel Ltd. 103,880 1,077,986
- ---------------------------------------------------------------
MacMillan Bloedel Ltd. 24,200 257,125
------------
2,291,034
- ---------------------------------------------------------------
CONSUMER CYCLICALS - 9.3%
- ---------------------------------------------------------------
AUTOS & HOUSING - 0.7%
Dana Corp. 33,000 1,567,500
- ---------------------------------------------------------------
General Motors Corp.(1) 5,000 303,125
- ---------------------------------------------------------------
IRSA Inversiones y Representaciones
SA 357,510 1,330,181
- ---------------------------------------------------------------
Toll Brothers, Inc.(2) 46,000 1,230,500
------------
4,431,306
- ---------------------------------------------------------------
LEISURE & ENTERTAINMENT - 4.5%
Alaska Air Group, Inc.(1)(2) 54,000 2,092,500
- ---------------------------------------------------------------
AMR Corp.(1)(2) 21,500 2,762,750
- ---------------------------------------------------------------
Berjaya Sports Toto Berhad 410,000 1,049,929
- ---------------------------------------------------------------
Brunswick Corp. 36,000 1,091,250
- ---------------------------------------------------------------
Callaway Golf Co. 22,500 642,656
- ---------------------------------------------------------------
Cheesecake Factory (The)(2) 30,000 915,000
- ---------------------------------------------------------------
Circus Circus Enterprises, Inc.(2) 83,000 1,701,500
- ---------------------------------------------------------------
Cracker Barrel Old Country Store,
Inc.(1) 70,000 2,336,250
- ---------------------------------------------------------------
Disney (Walt) Co.(1) 5,000 495,312
- ---------------------------------------------------------------
Global Motorsport Group, Inc.(2) 59,000 685,875
- ---------------------------------------------------------------
International Game Technology(1) 100,000 2,525,000
- ---------------------------------------------------------------
Mirage Resorts, Inc.(2) 47,500 1,080,625
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
LEISURE & ENTERTAINMENT (CONTINUED)
Nintendo Co. Ltd. 32,000 $ 3,150,258
- ---------------------------------------------------------------
Outback Steakhouse, Inc.(1)(2) 26,800 770,500
- ---------------------------------------------------------------
Primadonna Resorts, Inc.(2) 48,000 801,000
- ---------------------------------------------------------------
Shangri-La Asia Ltd. 535,000 452,262
- ---------------------------------------------------------------
Shimano, Inc. 85,000 1,568,976
- ---------------------------------------------------------------
SkyWest, Inc.(1) 60,000 1,777,500
- ---------------------------------------------------------------
Time Warner, Inc. 23,000 1,426,000
- ---------------------------------------------------------------
West Marine, Inc.(1)(2) 73,000 1,633,384
------------
28,958,527
- ---------------------------------------------------------------
MEDIA - 1.3%
CBS Corp.(1) 113,026 3,327,203
- ---------------------------------------------------------------
Comcast Corp., Cl. A Special(1) 57,000 1,799,062
- ---------------------------------------------------------------
South China Morning Post Holdings
Ltd. 1,706,000 1,199,972
- ---------------------------------------------------------------
U S West Media Group(2) 72,000 2,079,000
------------
8,405,237
- ---------------------------------------------------------------
RETAIL: GENERAL - 1.0%
Cone Mills Corp.(2) 261,000 2,022,750
- ---------------------------------------------------------------
Dayton Hudson Corp. 20,000 1,350,000
- ---------------------------------------------------------------
Federated Department Stores,
Inc.(2) 41,000 1,765,562
- ---------------------------------------------------------------
Neiman-Marcus Group, Inc.(2) 50,500 1,527,625
------------
6,665,937
- ---------------------------------------------------------------
RETAIL: SPECIALTY - 1.8%
AutoZone, Inc.(1)(2) 60,000 1,740,000
- ---------------------------------------------------------------
Books-A-Million, Inc.(2) 300,000 1,743,750
- ---------------------------------------------------------------
Circuit City Stores, Inc. - CarMax
Group(2) 65,000 585,000
- ---------------------------------------------------------------
Costco Cos., Inc.(1)(2) 14,900 664,912
- ---------------------------------------------------------------
General Nutrition Cos., Inc.(1) 75,000 2,550,000
- ---------------------------------------------------------------
Gymboree Corp.(1)(2) 61,900 1,694,512
- ---------------------------------------------------------------
Movie Gallery, Inc.(2) 80,000 235,000
- ---------------------------------------------------------------
Toys 'R' Us, Inc.(2) 73,000 2,294,937
------------
11,508,111
- ---------------------------------------------------------------
CONSUMER NON-CYCLICALS - 7.9%
- ---------------------------------------------------------------
BEVERAGES - 0.3%
Diageo plc 200,000 1,837,915
- ---------------------------------------------------------------
FOOD - 0.7%
Chiquita Brands International, Inc. 90,000 1,468,125
- ---------------------------------------------------------------
Groupe Danone 10,413 1,860,743
- ---------------------------------------------------------------
Nestle SA, Sponsored ADR 12,000 900,482
------------
4,229,350
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/DRUGS - 3.3%
Abbott Laboratories 33,000 $ 2,163,562
- ---------------------------------------------------------------
American Home Products Corp. 38,500 2,945,250
- ---------------------------------------------------------------
Astra AB Free, Series A 80,000 1,386,375
- ---------------------------------------------------------------
BioChem Pharma, Inc.(2) 46,500 970,687
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 11,000 1,040,875
- ---------------------------------------------------------------
Genzyme Corp. (General
Division)(1)(2) 72,000 1,998,000
- ---------------------------------------------------------------
Johnson & Johnson(1) 40,000 2,635,000
- ---------------------------------------------------------------
Mylan Laboratories, Inc.(1) 95,000 1,989,062
- ---------------------------------------------------------------
Novartis AG 2,106 3,422,040
- ---------------------------------------------------------------
SmithKline Beecham plc, ADR 46,000 2,366,125
------------
20,916,976
- ---------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES -
2.6%
Acuson Corp.(2) 48,000 795,000
- ---------------------------------------------------------------
Alternative Living Services,
Inc.(2) 73,000 2,158,062
- ---------------------------------------------------------------
Apache Medical Systems, Inc.(2) 287,000 367,719
- ---------------------------------------------------------------
Biomet, Inc. 80,000 2,050,000
- ---------------------------------------------------------------
Boston Scientific Corp.(2) 16,000 734,000
- ---------------------------------------------------------------
Innovasive Devices, Inc.(2) 110,000 1,003,750
- ---------------------------------------------------------------
Manor Care, Inc.(1) 34,985 1,224,475
- ---------------------------------------------------------------
MedPartners, Inc.(2) 100,000 2,237,500
- ---------------------------------------------------------------
Oxford Health Plans, Inc.(2) 42,000 653,625
- ---------------------------------------------------------------
United Healthcare Corp.(1) 41,000 2,037,187
- ---------------------------------------------------------------
United States Surgical Corp. 51,000 1,494,937
- ---------------------------------------------------------------
WellPoint Health Networks,
Inc.(1)(2) 39,981 1,689,197
------------
16,445,452
- ---------------------------------------------------------------
HOUSEHOLD GOODS - 0.2%
Wella AG 1,550 1,094,801
- ---------------------------------------------------------------
Wella AG, Preference 200 146,826
------------
1,241,627
- ---------------------------------------------------------------
TOBACCO - 0.8%
Imperial Tobacco Group plc 220,000 1,386,416
- ---------------------------------------------------------------
Philip Morris Cos., Inc. 73,500 3,330,469
- ---------------------------------------------------------------
PT Hanjaya Mandala Sampoerna 492,000 385,245
------------
5,102,130
- ---------------------------------------------------------------
ENERGY - 3.6%
- ---------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 1.0%
Global Marine, Inc.(1)(2) 54,000 1,323,000
- ---------------------------------------------------------------
Transocean Offshore, Inc.(1) 43,000 2,072,062
- ---------------------------------------------------------------
Weatherford Enterra, Inc.(1)(2) 33,000 1,443,750
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
ENERGY SERVICES & PRODUCERS
(CONTINUED)
Western Atlas, Inc.(1)(2) 19,000 $ 1,406,000
------------
6,244,812
- ---------------------------------------------------------------
OIL-INTEGRATED - 2.6%
Atlantic Richfield Co. 32,000 2,564,000
- ---------------------------------------------------------------
Enron Corp. 35,000 1,454,688
- ---------------------------------------------------------------
Kerr-McGee Corp. 30,000 1,899,375
- ---------------------------------------------------------------
Occidental Petroleum Corp. 41,000 1,201,813
- ---------------------------------------------------------------
Ranger Oil Ltd. 161,213 1,098,397
- ---------------------------------------------------------------
Royal Dutch Petroleum Co., NY
Shares 30,800 1,668,975
- ---------------------------------------------------------------
Talisman Energy, Inc.(2) 43,900 1,342,138
- ---------------------------------------------------------------
Total SA, Sponsored ADR 17,501 971,306
- ---------------------------------------------------------------
Unocal Corp. 62,000 2,406,375
- ---------------------------------------------------------------
YPF SA, Cl. D, ADR 62,000 2,119,625
------------
16,726,692
- ---------------------------------------------------------------
FINANCIAL - 7.8%
- ---------------------------------------------------------------
BANKS - 4.6%
ABN Amro Holding NV 66,000 1,285,993
- ---------------------------------------------------------------
Akbank T.A.S. 3,721,215 327,890
- ---------------------------------------------------------------
Banco Frances del Rio de la Plata
SA 100,050 928,634
- ---------------------------------------------------------------
Chase Manhattan Corp. (New)(1) 72,000 7,884,000
- ---------------------------------------------------------------
Credit Suisse Group 5,500 852,216
- ---------------------------------------------------------------
Credito Italiano 485,000 1,496,426
- ---------------------------------------------------------------
Deutsche Bank AG 12,000 839,579
- ---------------------------------------------------------------
Fleet Financial Group, Inc. 5,000 374,688
- ---------------------------------------------------------------
NationsBank Corp. 120,000 7,297,500
- ---------------------------------------------------------------
PNC Bank Corp. 32,000 1,826,000
- ---------------------------------------------------------------
Societe Generale 21,200 2,889,694
- ---------------------------------------------------------------
UBS, Bearer 880 1,274,251
- ---------------------------------------------------------------
Wells Fargo & Co. 5,800 1,968,738
------------
29,245,609
- ---------------------------------------------------------------
DIVERSIFIED FINANCIAL - 1.5%
American Express Co.(1) 30,400 2,713,200
- ---------------------------------------------------------------
Freddie Mac 34,000 1,425,875
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc.(1) 36,000 2,625,750
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 45,800 2,707,925
------------
9,472,750
- ---------------------------------------------------------------
INSURANCE - 1.7%
ACE Ltd.(1) 31,500 3,039,750
- ---------------------------------------------------------------
Cigna Corp. 7,500 1,297,969
- ---------------------------------------------------------------
Equitable Cos., Inc.(1) 35,100 1,746,225
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
INSURANCE (CONTINUED)
Everest Reinsurance Holdings, Inc. 8,300 $ 342,375
- ---------------------------------------------------------------
Skandia Forsakrings AB 36,000 1,699,191
- ---------------------------------------------------------------
UNUM Corp. 48,600 2,642,625
------------
10,768,135
- ---------------------------------------------------------------
INDUSTRIAL - 3.8%
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.6%
General Electric Co.(1) 6,800 498,950
- ---------------------------------------------------------------
Methode Electronics, Inc., Cl. A(1) 100,000 1,625,000
- ---------------------------------------------------------------
Rockwell International Corp. 36,300 1,896,675
------------
4,020,625
- ---------------------------------------------------------------
INDUSTRIAL MATERIALS - 0.5%
Owens Corning 60,000 2,047,500
- ---------------------------------------------------------------
Wolverine Tube, Inc.(2) 40,000 1,240,000
------------
3,287,500
- ---------------------------------------------------------------
INDUSTRIAL SERVICES - 0.3%
Calgon Carbon Corp. 101,000 1,085,750
- ---------------------------------------------------------------
Children's Comprehensive Services,
Inc.(2) 40,000 740,000
- ---------------------------------------------------------------
UNOVA, Inc.(2) 4,800 78,900
------------
1,904,650
- ---------------------------------------------------------------
MANUFACTURING - 1.2%
AGCO Corp. 72,000 2,106,000
- ---------------------------------------------------------------
Citic Pacific Ltd. 55,000 218,630
- ---------------------------------------------------------------
Cognex Corp.(2) 48,000 1,308,000
- ---------------------------------------------------------------
Eaton Corp. 9,000 803,250
- ---------------------------------------------------------------
Hutchison Whampoa Ltd. 35,000 219,533
- ---------------------------------------------------------------
Tenneco, Inc. 48,000 1,896,000
- ---------------------------------------------------------------
Westinghouse Air Brake Co. 50,000 1,281,250
------------
7,832,663
- ---------------------------------------------------------------
TRANSPORTATION - 1.2%
Burlington Northern Santa Fe Corp. 31,000 2,881,063
- ---------------------------------------------------------------
Canadian National Railway Co. 23,000 1,081,677
- ---------------------------------------------------------------
Spartan Motors, Inc. 130,000 804,375
- ---------------------------------------------------------------
Stolt-Nielsen SA 64,200 1,360,238
- ---------------------------------------------------------------
Stolt-Nielsen SA, Sponsored ADR 17,650 386,094
- ---------------------------------------------------------------
Transportacion Maritima Mexicana SA
de CV, Sponsored ADR, L Shares(2) 130,000 958,750
------------
7,472,197
- ---------------------------------------------------------------
TECHNOLOGY - 11.4%
- ---------------------------------------------------------------
AEROSPACE/DEFENSE - 0.4%
Lockheed Martin Corp. 18,000 1,773,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
AEROSPACE/DEFENSE (CONTINUED)
Raytheon Co., Cl. A 15,502 $ 764,442
------------
2,537,442
- ---------------------------------------------------------------
COMPUTER HARDWARE - 2.4%
Cabletron Systems, Inc.(2) 95,000 1,425,000
- ---------------------------------------------------------------
Canon, Inc. 40,000 935,233
- ---------------------------------------------------------------
Hewlett-Packard Co. 39,000 2,437,500
- ---------------------------------------------------------------
International Business Machines
Corp. 55,000 5,750,938
- ---------------------------------------------------------------
Iomega Corp.(1)(2) 92,000 1,144,250
- ---------------------------------------------------------------
Quantum Corp.(2) 9,900 198,619
- ---------------------------------------------------------------
Xerox Corp.(1) 42,700 3,151,794
------------
15,043,334
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 3.1%
America Online, Inc.(1)(2) 22,850 2,037,934
- ---------------------------------------------------------------
Computer Associates International,
Inc.(1) 75,962 4,016,517
- ---------------------------------------------------------------
Electronic Arts, Inc.(1)(2) 38,500 1,455,781
- ---------------------------------------------------------------
First Data Corp. 75,000 2,193,750
- ---------------------------------------------------------------
Inference Corp., Cl. A(2) 160,000 630,000
- ---------------------------------------------------------------
Novell, Inc.(2) 200,000 1,500,000
- ---------------------------------------------------------------
Rational Software Corp.(2) 133,000 1,512,875
- ---------------------------------------------------------------
Sabre Group Holdings, Inc.(1)(2) 66,100 1,908,638
- ---------------------------------------------------------------
SELECT Software Tools Ltd., ADR(2) 150,000 843,750
- ---------------------------------------------------------------
Symantec Corp.(1)(2) 67,364 1,477,798
- ---------------------------------------------------------------
Synopsys, Inc.(2) 15,000 536,250
- ---------------------------------------------------------------
Transition Systems, Inc.(2) 65,000 1,438,125
------------
19,551,418
- ---------------------------------------------------------------
ELECTRONICS - 3.9%
CAE, Inc. 131,066 1,025,800
- ---------------------------------------------------------------
Credence Systems Corp.(2) 29,100 862,088
- ---------------------------------------------------------------
Dynatech Corp.(2) 40,000 1,875,000
- ---------------------------------------------------------------
General Motors Corp., Cl. H 27,000 997,313
- ---------------------------------------------------------------
Input/Output, Inc.(1)(2) 138,000 4,096,875
- ---------------------------------------------------------------
Intel Corp.(1) 130,000 9,132,500
- ---------------------------------------------------------------
Keyence Corp. 7,700 1,142,968
- ---------------------------------------------------------------
LSI Logic Corp.(2) 75,000 1,481,250
- ---------------------------------------------------------------
Nokia Corp., A Shares, Sponsored
ADR(1) 9,800 686,000
- ---------------------------------------------------------------
Novellus Systems, Inc.(1)(2) 8,400 271,425
- ---------------------------------------------------------------
SGS-Thomson Microelectronics
NV(1)(2) 17,500 1,068,594
- ---------------------------------------------------------------
Teradyne, Inc.(2) 15,000 480,000
- ---------------------------------------------------------------
Xilinx, Inc.(2) 45,000 1,577,813
------------
24,697,626
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS-TECHNOLOGY -
1.6%
Airtouch Communications, Inc.(1)(2) 59,000 $ 2,452,188
- ---------------------------------------------------------------
Cisco Systems, Inc.(1)(2) 36,000 2,007,000
- ---------------------------------------------------------------
ECI Telecommunications Ltd.(1) 59,000 1,504,500
- ---------------------------------------------------------------
MCI Communications Corp. 57,000 2,440,313
- ---------------------------------------------------------------
Newbridge Networks Corp.(1)(2) 18,500 645,188
- ---------------------------------------------------------------
QUALCOMM, Inc.(2) 19,000 959,500
- ---------------------------------------------------------------
Tellabs, Inc.(2) 7,000 370,125
------------
10,378,814
- ---------------------------------------------------------------
UTILITIES - 2.2%
- ---------------------------------------------------------------
ELECTRIC UTILITIES - 1.2%
Allegheny Energy, Inc. 42,000 1,365,000
- ---------------------------------------------------------------
Houston Industries, Inc. 80,000 2,135,000
- ---------------------------------------------------------------
PacifiCorp 60,000 1,638,750
- ---------------------------------------------------------------
Southern Co. 60,000 1,552,500
- ---------------------------------------------------------------
Union Electric Co. 18,500 800,125
------------
7,491,375
- ---------------------------------------------------------------
TELEPHONE UTILITIES - 1.0%
BCE, Inc. 40,000 1,332,500
- ---------------------------------------------------------------
Qwest Communications International,
Inc.(2) 20,000 1,190,000
- ---------------------------------------------------------------
SBC Communications, Inc. 19,000 1,391,750
- ---------------------------------------------------------------
Telecomunicacoes Brasileiras SA 6,860,000 697,667
- ---------------------------------------------------------------
U S West Communications Group(1) 44,000 1,985,500
------------
6,597,417
------------
Total Common Stocks (Cost
$223,270,684) 307,164,161
- ---------------------------------------------------------------
PREFERRED STOCKS - 0.0%
- ---------------------------------------------------------------
Time Warner, Inc., 10.25%
Exchangeable Preferred, Series M
(Cost $0)(3) 1 1,183
- ---------------------------------------------------------------
OTHER SECURITIES - 0.1%
- ---------------------------------------------------------------
Pantry Pride, Inc., $14.875
Exchangeable, Series B (Cost
$782,000)(4) 8,000 803,000
UNITS
- ---------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES -
0.1%
- ---------------------------------------------------------------
American Telecasting, Inc. Wts.,
Exp. 6/99(4) 6,000 60
- ---------------------------------------------------------------
Gaylord Container Corp. Wts., Exp.
11/02 9,232 53,084
- ---------------------------------------------------------------
IHF Capital, Inc., Series I Wts.,
Exp. 11/99(4) 1,000 50,000
- ---------------------------------------------------------------
PerSeptive Biosystems, Inc. Wts.,
Exp. 9/03 249 700
- ---------------------------------------------------------------
Terex Corp. Rts., Exp. 5/02(4) 4,000 81,000
------------
Total Rights, Warrants and
Certificates (Cost $20,772) 184,844
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(5) NOTE 1
<S> <C> <C>
- ---------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS - 1.7%
- ---------------------------------------------------------------
Government National Mortgage Assn.:
7%, 1/1/28(6) $ 6,000,000 $ 6,043,140
8%, 4/15/23 2,848,896 2,966,727
8%, 7/15/22 1,256,791 1,310,344
- ---------------------------------------------------------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates,
Series 1994-C2, Cl. E, 8%, 4/25/25 673,355 679,496
------------
Total Mortgage-Backed Obligations
(Cost $10,886,646) 10,999,707
</TABLE>
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 9.1%
- --------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS:
7.26%, 11/15/18(10) 18,600,000 5,308,384
7.10%, 11/15/18(10) 24,500,000 6,977,992
7.31%, 8/15/19(10) 26,800,000 7,295,228
- --------------------------------------------------------------------
U.S. Treasury Nts.:
5.875%, 9/30/02 15,000,000 15,093,765
6.25%, 2/15/07 8,800,000 9,086,009
6.375%, 8/15/02 5,000,000 5,131,255
9.25%, 8/15/98 9,000,000 9,199,692
------------
Total U.S. Government Obligations
(Cost $53,411,213) 58,092,325
- --------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS -
15.9%
- --------------------------------------------------------------------
ARGENTINA - 6.6%
Argentina (Republic of) Bonds,
Bonos de Consolidacion de Deudas,
Series I, 5.66%, 4/1/01(7) 2,103,652 1,982,009
- --------------------------------------------------------------------
Argentina (Republic of) Floating
Rate Bonds, Series L, 6.69%,
3/31/05(7) 8,880,000 7,958,700
- --------------------------------------------------------------------
Argentina (Republic of) Nts.,
9.50%, 11/30/02(7) 15,000,000 14,906,250
- --------------------------------------------------------------------
Argentina (Republic of) Par Bonds,
5.50%, 3/31/23(8) 23,750,000 17,470,975
------------
42,317,934
- --------------------------------------------------------------------
AUSTRALIA - 0.6%
Queensland Treasury Corp.
Exchangeable Gtd. Nts., 10.50%,
5/15/03 AUD 1,800,000 1,414,755
- --------------------------------------------------------------------
Treasury Corp. of Victoria Gtd.
Bonds, 8.25%, 10/15/03 AUD 3,000,000 2,164,829
------------
3,579,584
- --------------------------------------------------------------------
BRAZIL - 1.3%
Brazil (Federal Republic of) Par
Bonds, 5.25%, 4/15/24(8) 11,500,000 8,308,750
- --------------------------------------------------------------------
CANADA - 2.4%
Canada (Government of) Bonds:
8.50%, 4/1/02 CAD 1,500,000 1,171,955
8.75%, 12/1/05 CAD 12,200,000 10,251,018
9.75%, 12/1/01 CAD 3,000,000 2,418,333
9.75%, 6/1/01 CAD 2,000,000 1,589,161
------------
15,430,467
- --------------------------------------------------------------------
DENMARK - 0.9%
Denmark (Kingdom of) Bonds, 8%,
3/15/06 DKK 32,100,000 5,431,095
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(5) NOTE 1
<S> <C> <C> <C>
- --------------------------------------------------------------------
GREAT BRITAIN - 1.2%
United Kingdom Treasury Bonds,
6.75%, 11/26/04 GBP 2,680,000 $ 4,490,982
- --------------------------------------------------------------------
United Kingdom Treasury Nts., 13%,
7/14/00 GBP 1,590,000 2,986,545
------------
7,477,527
- --------------------------------------------------------------------
IRELAND - 0.3%
Ireland (Government of) Bonds,
9.25%, 7/11/03 IEP 1,110,000 1,890,321
- --------------------------------------------------------------------
MEXICO - 0.6%
United Mexican States
Collateralized Fixed Rate Par
Bonds, Series A, 6.25%, 12/31/19 4,450,000 3,726,875
- --------------------------------------------------------------------
NEW ZEALAND - 1.0%
New Zealand (Government of) Bonds,
8%, 2/15/01 NZD 10,440,000 6,159,839
- --------------------------------------------------------------------
PHILIPPINES - 0.4%
Philippines (Republic of) Bonds,
8.60%, 6/15/27 1,500,000 1,383,750
- --------------------------------------------------------------------
Philippines (Republic of) Par
Bonds, Series B, 6.50%,
12/1/17(4)(8) 1,675,000 1,417,469
------------
2,801,219
- --------------------------------------------------------------------
POLAND - 0.3%
Poland (Republic of) Bonds, 15%,
10/12/99 PLZ 9,000,000 2,236,265
- --------------------------------------------------------------------
SOUTH AFRICA - 0.3%
Eskom Depositary Receipts, Series
E168, 11%, 6/1/08 ZAR 12,570,000 2,178,925
------------
Total Foreign Government
Obligations (Cost $95,796,002) 101,538,801
</TABLE>
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND
NOTES - 8.5%
- ----------------------------------------------------------------
BASIC MATERIALS - 1.2%
- ----------------------------------------------------------------
CHEMICALS - 0.4%
Harris Chemical North America,
Inc., 10.75% Gtd. Sr. Sub. Nts.,
10/15/03 100,000 107,250
- ----------------------------------------------------------------
Laroche Industries, Inc., 9.50% Sr.
Sub. Nts., 9/15/07(9) 500,000 495,000
- ----------------------------------------------------------------
NL Industries, Inc., 11.75% Sr.
Sec. Nts., 10/15/03 85,000 94,562
- ----------------------------------------------------------------
Quantum Chemical Corp., 10.375%
First Mtg. Nts., 6/1/03 500,000 524,664
- ----------------------------------------------------------------
Sterling Chemicals, Inc., 11.75%
Sr. Unsec. Sub. Nts., 8/15/06 1,115,000 1,142,875
-------------
2,364,351
- ----------------------------------------------------------------
METALS - 0.3%
AK Steel Corp., 9.125% Sr. Nts.,
12/15/06 1,150,000 1,184,500
- ----------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts.,
12/1/07(9) 500,000 515,000
-------------
1,699,500
- ----------------------------------------------------------------
PAPER - 0.5%
APP International Finance Co. BV,
11.75% Gtd. Sec. Nts., 10/1/05 500,000 461,250
- ----------------------------------------------------------------
Aracruz Celulose SA, 10.375% Debs.,
1/31/02 430,000 439,675
- ----------------------------------------------------------------
Gaylord Container Corp., 9.75% Sr.
Nts., 6/15/07 500,000 487,500
- ----------------------------------------------------------------
Pacific Lumber Co., 10.50% Sr.
Nts., 3/1/03 425,000 439,875
- ----------------------------------------------------------------
Riverwood International Corp.,
10.625% Sr. Unsec. Nts., 8/1/07 500,000 510,000
- ----------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts.,
Series B, 12/15/04 750,000 836,250
-------------
3,174,550
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(5) NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICALS - 3.1%
- ----------------------------------------------------------------
AUTOS & HOUSING - 0.7%
Cambridge Industries, Inc., 10.25%
Sr. Sub. Nts., 7/15/07(9) $ 500,000 $ 525,000
- ----------------------------------------------------------------
Chrysler Financial Corp., 13.25%
Nts., 10/15/99 500,000 559,926
- ----------------------------------------------------------------
Coleman Escrow Corp., Zero Coupon
Sr. First Priority Disc. Nts.,
11.13%, 5/15/01(10) 770,000 513,975
- ----------------------------------------------------------------
Hayes Wheels International, Inc.,
11% Sr. Sub. Nts., 7/15/06 500,000 560,000
- ----------------------------------------------------------------
Icon Health & Fitness, Inc., 13%
Sr. Sub. Nts., Series B, 7/15/02 1,000,000 1,122,500
- ----------------------------------------------------------------
Kaufman & Broad Home Corp., 7.75%
Sr. Nts., 10/15/04 500,000 497,500
- ----------------------------------------------------------------
Samsonite Corp., 11.125% Sr. Sub.
Nts., 7/15/05 345,000 388,125
-------------
4,167,026
- ----------------------------------------------------------------
LEISURE & ENTERTAINMENT - 0.7%
Casino America, Inc., 12.50% Sr.
Nts., 8/1/03 250,000 272,812
- ----------------------------------------------------------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 315,000 322,087
9.75% Sr. Sub. Nts., 6/1/02 350,000 361,375
- ----------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd.
First Mtg. Nts., 12/1/03 755,000 815,400
- ----------------------------------------------------------------
HMH Properties, Inc., 8.875% Sr.
Nts., 7/15/07 750,000 793,125
- ----------------------------------------------------------------
Imax Corp., 10% Sr. Nts., 3/1/01 600,000 633,000
- ----------------------------------------------------------------
Rio Hotel & Casino, Inc., 9.50%
Gtd. Sr. Sub. Nts., 4/15/07 750,000 796,875
- ----------------------------------------------------------------
Station Casinos, Inc., 10.125% Sr.
Sub. Nts., 3/15/06 445,000 471,700
-------------
4,466,374
- ----------------------------------------------------------------
MEDIA - 1.5%
American Telecasting, Inc.,
0%/14.50% Sr. Disc. Nts.,
6/15/04(11) 229,000 76,715
- ----------------------------------------------------------------
Cablevision Systems Corp., 9.875%
Sr. Sub. Nts., 5/15/06 250,000 275,625
- ----------------------------------------------------------------
Capstar Broadcasting Partners,
Inc., 9.25% Sr. Sub. Nts., 7/1/07 400,000 411,000
- ----------------------------------------------------------------
EchoStar Communications Corp.,
0%/12.875% Sr. Disc. Nts.,
6/1/04(11) 540,000 496,800
- ----------------------------------------------------------------
Helicon Group LP/Helicon Capital
Corp., 11% Sr. Sec. Nts., Series B,
11/1/03 550,000 594,000
- ----------------------------------------------------------------
Lamar Advertising Co., 9.625% Sr.
Sub. Nts., 12/1/06 150,000 162,187
- ----------------------------------------------------------------
Outlet Broadcasting, Inc., 10.875%
Sr. Sub. Nts., 7/15/03 1,000,000 1,062,842
- ----------------------------------------------------------------
Rogers Cablesystems Ltd., 10%
Second Priority Sr. Sec. Debs.,
12/1/07 1,000,000 1,105,000
- ----------------------------------------------------------------
SCI Television, Inc., 11% Sr. Sec.
Nts., 6/30/05(4) 500,000 528,365
- ----------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8.75% Sr. Sub. Nts., 12/15/07 500,000 502,500
9% Gtd. Sr. Sub. Nts., 7/15/07 450,000 461,250
- ----------------------------------------------------------------
TCI Satellite Entertainment, Inc.,
10.875% Sr. Sub. Nts., 2/15/07(9) 200,000 210,500
- ----------------------------------------------------------------
Time Warner Entertainment LP,
10.15% Sr. Nts., 5/1/12 500,000 651,878
- ----------------------------------------------------------------
Time Warner, Inc., 9.125% Debs.,
1/15/13 500,000 598,423
- ----------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr.
Debs., 10/30/07 1,000,000 1,111,644
- ----------------------------------------------------------------
Universal Outdoor, Inc., 9.75% Sr.
Sub. Nts., Series B, 10/15/06 500,000 562,500
- ----------------------------------------------------------------
Young Broadcasting, Inc., 8.75% Sr.
Sub. Debs., 6/15/07 900,000 895,500
-------------
9,706,729
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(5) NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
RETAIL: GENERAL - 0.1%
CMI Industries, Inc., 9.50% Sr.
Sub. Nts., 10/1/03(4) $ 25,000 $ 24,688
- ----------------------------------------------------------------
Dan River, Inc., 10.125% Sr. Sub.
Nts., 12/15/03 500,000 536,875
-------------
561,563
- ----------------------------------------------------------------
RETAIL: SPECIALTY - 0.1%
Finlay Fine Jewelry Corp., 10.625%
Sr. Nts., 5/1/03(4) 750,000 791,250
- ----------------------------------------------------------------
CONSUMER NON-CYCLICALS - 0.9%
- ----------------------------------------------------------------
FOOD - 0.6%
Fleming Cos., Inc.:
10.50% Sr. Sub. Nts., 12/1/04(9) 300,000 315,750
10.625% Sr. Sub. Nts., 7/31/07(9) 800,000 848,000
- ----------------------------------------------------------------
Ralph's Grocery Co., 10.45% Sr.
Nts., 6/15/04 850,000 956,250
- ----------------------------------------------------------------
Randall's Food Markets, Inc.,
9.375% Sr. Sub. Nts., 7/1/07(9) 800,000 832,000
- ----------------------------------------------------------------
RJR Nabisco, Inc., 8.625%
Medium-Term Nts., 12/1/02 500,000 532,428
- ----------------------------------------------------------------
Stater Brothers Holdings, Inc., 9%
Sr. Unsec. Sub. Nts., 7/1/04 500,000 525,000
-------------
4,009,428
- ----------------------------------------------------------------
HEALTHCARE/DRUGS - 0.0%
Integrated Health Services, Inc.,
9.50% Sr. Sub. Nts., 9/15/07(9) 220,000 226,600
- ----------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES -
0.1%
Genesis Health Ventures, Inc.,
9.25% Sr. Sub. Nts., 10/1/06 340,000 348,075
- ----------------------------------------------------------------
Magellan Health Services, Inc.,
11.25% Sr. Sub. Nts., Series A,
4/15/04 355,000 395,381
-------------
743,456
- ----------------------------------------------------------------
HOUSEHOLD GOODS - 0.2%
Revlon Worldwide Corp., Zero Coupon
Sr. Sec. Disc. Nts.:
Series B, 13.17%, 3/15/98(10) 500,000 494,888
10.09%, 3/15/01(10) 1,000,000 695,000
-------------
1,189,888
- ----------------------------------------------------------------
ENERGY - 0.1%
- ----------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.1%
J. Ray McDermott SA, 9.375% Sr.
Sub. Bonds, 7/15/06 750,000 807,188
- ----------------------------------------------------------------
FINANCIAL - 0.3%
- ----------------------------------------------------------------
BANKS - 0.1%
First Chicago Corp.:
11.25% Sub. Nts., 2/20/01 250,000 285,736
9% Sub. Nts., 6/15/99 250,000 260,205
-------------
545,941
- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL - 0.2%
Saul (B.F.) Real Estate Investment
Trust, 11.625% Sr. Sec. Nts.,
Series B, 4/1/02 950,000 1,021,250
- ----------------------------------------------------------------
INDUSTRIAL - 0.6%
- ----------------------------------------------------------------
INDUSTRIAL MATERIALS - 0.2%
American Standard Cos., Inc.,
10.875% Sr. Nts., 5/15/99(4) 500,000 527,500
- ----------------------------------------------------------------
Building Materials Corp. of
America, 8.625% Sr. Nts., Series B,
12/15/06 100,000 103,500
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(5) NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL MATERIALS (CONTINUED)
Triangle Pacific Corp., 10.50% Sr.
Nts., 8/1/03 $ 850,000 $ 896,750
-------------
1,527,750
- ----------------------------------------------------------------
INDUSTRIAL SERVICES - 0.0%
Allied Waste North America, Inc.,
10.25% Sr. Sub. Nts., 12/1/06 285,000 314,213
- ----------------------------------------------------------------
MANUFACTURING - 0.3%
International Wire Group, Inc.,
11.75% Sr. Sub. Nts., Series B,
6/1/05 500,000 550,000
- ----------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub.
Nts., 7/1/07 500,000 501,250
- ----------------------------------------------------------------
Synthetic Industries, Inc., 9.25%
Sr. Sub. Nts., 2/15/07 80,000 84,800
- ----------------------------------------------------------------
Terex Corp., 13.25% Sr. Sec. Nts.,
5/15/02 665,000 761,425
-------------
1,897,475
- ----------------------------------------------------------------
TRANSPORTATION - 0.1%
Navigator Gas Transport plc, 10.50%
First Priority Ship Mtg. Nts.,
6/30/07(9) 500,000 532,500
- ----------------------------------------------------------------
TECHNOLOGY - 1.6%
- ----------------------------------------------------------------
AEROSPACE/DEFENSE - 0.2%
America West Airlines, Inc., 10.75%
Sr. Nts., 9/1/05 925,000 994,375
- ----------------------------------------------------------------
Amtran, Inc., 10.50% Sr. Nts.,
8/1/04(9) 500,000 522,500
-------------
1,516,875
- ----------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY -
1.4%
Call-Net Enterprises, Inc.,
0%/13.25% Sr. Disc. Nts.,
12/1/04(11) 800,000 733,000
- ----------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr.
Disc. Nts., 12/15/05(11) 500,000 385,000
- ----------------------------------------------------------------
ICG Holdings, Inc., 0%/13.50% Sr.
Disc. Nts., 9/15/05(11) 800,000 652,000
- ----------------------------------------------------------------
Intermedia Communications, Inc.,
8.50% Sr. Nts., 1/15/08(9) 500,000 502,500
- ----------------------------------------------------------------
Millicom International Cellular SA,
0%/13.50% Sr. Disc. Nts.,
6/1/06(11) 750,000 553,125
- ----------------------------------------------------------------
NTL, Inc., 0%/10.875% Sr. Deferred
Coupon Nts., 10/15/03(11) 500,000 475,000
- ----------------------------------------------------------------
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 590,000 625,400
11.625% Sr. Nts., Series A, 8/15/06 110,000 116,600
- ----------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital
Corp., 14% Sr. Nts., 8/15/04 200,000 218,000
- ----------------------------------------------------------------
PriCellular Wireless Corp., 14% Sr.
Sub. Disc. Nts., 11/15/01 1,000,000 1,115,000
- ----------------------------------------------------------------
Teleport Communications Group,
Inc., 0%/11.125% Sr. Disc. Nts.,
7/1/07(11) 1,500,000 1,226,250
- ----------------------------------------------------------------
Telewest Communications plc:
0%/11% Sr. Disc. Debs., 10/1/07(11) 1,000,000 781,250
9.625% Sr. Debs., 10/1/06 500,000 521,250
- ----------------------------------------------------------------
USA Mobile Communications, Inc. II,
9.50% Sr. Nts., 2/1/04 1,000,000 980,000
-------------
8,884,375
- ----------------------------------------------------------------
UTILITIES - 0.7%
- ----------------------------------------------------------------
ELECTRIC UTILITIES - 0.5%
California Energy, Inc., 10.25% Sr.
Disc. Nts., 1/15/04 750,000 810,000
- ----------------------------------------------------------------
Calpine Corp.:
10.50% Sr. Nts., 5/15/06(4) 800,000 876,000
8.75% Sr. Nts., 7/15/07(9) 400,000 410,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(5) NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
ELECTRIC UTILITIES (CONTINUED)
First PV Funding Corp.:
10.15% Lease Obligation Bonds,
Series 1986B, 1/15/16(4) $ 741,000 $ 787,313
10.15% Lease Obligation Bonds,
Series 1986B, 1/15/16 18,000 18,000
-------------
2,901,313
- ----------------------------------------------------------------
GAS UTILITIES - 0.2%
Beaver Valley II Funding Corp., 9%
Second Lease Obligation Bonds,
6/1/17(4) 989,000 1,092,845
-------------
Total Non-Convertible Corporate
Bonds and Notes (Cost $51,489,616) 54,142,440
- ----------------------------------------------------------------
CORPORATE BONDS AND NOTES - 0.2%
- ----------------------------------------------------------------
Kaiser Aluminum & Chemical Corp.,
12.75% Sr. Sub. Nts., 2/1/03 (Cost
$1,043,750) 1,000,000 1,072,500
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS - 16.9%
- ----------------------------------------------------------------
Repurchase agreement with Smith,
Barney, Harris, Upham & Co., Inc.,
6.625%, dated 12/31/97, to be
repurchased at $107,839,676 on
1/2/98, collateralized by U.S.
Treasury Bonds, 8.875%-11.25%,
2/15/15-2/15/19, with a value of
$110,432,364 (Cost $107,800,000) 107,800,000 107,800,000
- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$544,500,683) 100.7% 641,798,961
- ----------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (0.7) (4,254,131)
------------ -------------
NET ASSETS 100.0% $637,544,830
------------ -------------
------------ -------------
</TABLE>
1. A sufficient amount of securities has been designated to cover outstanding
written call options, as follows:
<TABLE>
<CAPTION>
SHARES
SUBJECT EXPIRATION EXERCISE PREMIUM MARKET VALUE
TO CALL DATE PRICE RECEIVED NOTE 1
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ACE Ltd. 6,200 2/23 $ 90.00 $ 26,163 $ 50,375
AMR Corp. 5,000 5/18 120.00 62,348 73,750
Airtouch Communications, Inc. 14,000 1/20 40.00 20,579 31,500
Alaska Air Group, Inc. 11,000 1/20 35.00 14,304 38,500
America Online, Inc. 6,000 4/20 90.00 65,818 60,750
American Express Co. 7,600 4/18 90.00 39,671 40,850
AutoZone, Inc. 12,000 6/22 35.00 13,890 9,000
CBS Corp. 22,500 7/20 35.00 44,324 28,125
Chase Manhattan Corp., New 9,000 3/23 125.00 62,728 15,750
Cisco Systems, Inc. 8,000 4/18 63.38 42,759 36,000
Comcast Corp., 20,000 1/19 20.00 17,099 225,000
Computer Associates International,
Inc. 10,000 1/20 53.38 37,199 33,750
Costco Cos., Inc. 10,000 4/20 40.00 43,449 17,500
Costco Cos., Inc. 4,900 4/20 45.00 11,184 18,375
Cracker Barrel Old Country Store,
Inc. 14,000 3/23 35.00 20,579 22,750
Disney (Walt) Co. 5,000 1/20 90.00 6,725 45,625
ECI Telecommunications Ltd. 14,000 2/23 35.00 32,829 3,500
Ecolab, Inc. 6,000 4/20 55.00 18,569 27,000
Electronic Arts, Inc. 14,700 3/23 45.00 43,658 25,725
Equitable Cos., Inc. 11,000 1/19 35.00 21,669 165,000
General Electric Co. 6,800 3/23 80.00 18,495 10,200
General Motors Corp. 5,000 3/23 70.00 26,099 10,000
General Nutrition Cos., Inc. 15,000 7/20 40.00 42,674 34,687
Genzyme Corp. (General Division) 13,000 4/20 35.00 40,234 6,500
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
1. Outstanding written call options (continued)
<TABLE>
<CAPTION>
SHARES
SUBJECT EXPIRATION EXERCISE PREMIUM MARKET VALUE
TO CALL DATE PRICE RECEIVED NOTE 1
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Global Marine, Inc. 8,400 1/19 $ 25.00 $ 20,747 $ 9,450
Global Marine, Inc. 8,400 4/20 35.00 31,247 7,350
Gymboree Corp. 8,000 7/21 30.00 33,759 22,000
Input/Output, Inc. 27,000 2/23 30.00 53,188 72,563
Intel Corp. 17,000 1/19 97.50 53,931 1,063
Intel Corp. 7,000 4/18 115.00 17,289 875
International Game Technology 20,000 4/20 25.00 31,899 52,500
Iomega Corp. 20,000 2/24 17.50 20,324 5,000
Johnson & Johnson 9,000 7/20 70.00 32,354 30,375
Manor Care, Inc. 8,800 7/21 40.00 20,635 15,400
Merrill Lynch & Co., Inc. 2,600 1/19 60.00 7,397 32,500
Merrill Lynch & Co., Inc. 7,200 4/20 80.00 33,983 25,200
Methode Electronics, Inc. 18,000 4/20 30.00 19,709 1,125
Mylan Laboratories, Inc. 11,500 7/21 25.00 28,404 17,250
Newbridge Networks Corp. 7,800 3/23 70.00 41,690 975
Newbridge Networks Corp. 2,900 6/22 65.00 4,263 544
Nokia Corp., A Shares, Sponsored
ADR 9,800 1/20 85.00 70,754 1,225
Novellus Systems, Inc. 8,400 3/23 57.50 95,421 525
Outback Steakhouse, Inc. 10,000 2/23 30.00 17,943 11,875
Outback Steakhouse, Inc. 10,000 5/18 35.00 8,780 8,125
SGS-Thomson Microelectronics NV 1,800 4/20 100.00 16,145 450
Sabre Group Holdings, Inc. 6,400 5/18 40.00 14,608 1,200
SkyWest, Inc. 13,000 4/20 22.50 20,734 97,500
Symantec Corp. 17,600 1/19 20.00 54,470 45,100
Symantec Corp. 17,600 4/18 25.00 43,471 36,300
Symantec Corp. 17,600 7/20 30.00 58,870 34,100
Transocean Offshore, Inc. 7,000 2/23 60.00 36,539 4,375
U S West Communications Group 10,000 4/21 47.50 20,324 13,750
United Healthcare Corp. 8,200 6/23 60.00 25,378 15,375
Weatherford Enterra, Inc. 5,000 3/23 50.00 11,566 7,186
WellPoint Health Networks, Inc. 2,300 1/19 50.00 12,581 432
West Marine, Inc. 13,800 1/20 30.00 20,285 1,725
Western Atlas, Inc. 4,800 3/23 85.00 26,855 50,400
Xerox Corp. 8,000 4/20 90.00 19,260 5,500
----------- -------------
$ 1,797,849 $ 1,659,525
----------- -------------
----------- -------------
</TABLE>
2. Non-income producing security.
3. Interest or dividend is paid in kind.
4. Identifies issues considered to be illiquid or restricted - See Note 6 of
Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
5. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
<TABLE>
<S> <C> <C> <C> <C> <C>
AUD - Australian Dollar IEP - Irish Punt
CAD - Canadian Dollar NZD - New Zealand Dollar
DKK - Danish Krone PLZ - Polish Zloty
GBP - British Pound Sterling ZAR - South African Rand
</TABLE>
6. When-issued security to be delivered and settled after December 31, 1997.
7. Represents the current interest rate for a variable rate security.
8. Represents the current interest rate for an increasing rate security.
9. 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 $5,935,350 or 0.93% of the Fund's net
assets as of December 31, 1997.
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.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 75.0%
- ---------------------------------------------------------------
BASIC MATERIALS - 1.3%
- ---------------------------------------------------------------
CHEMICALS - 0.5%
Minerals Technologies, Inc. 100,000 $ 4,543,750
- ---------------------------------------------------------------
GOLD & PLATINUM - 0.4%
Newmont Mining Corp. 120,500 3,539,687
- ---------------------------------------------------------------
METALS - 0.4%
Cia de Minas Buenaventura SA,
Sponsored ADR 46,000 736,000
- ---------------------------------------------------------------
De Beers Consolidated Mines Ltd.,
ADR 150,400 3,073,800
------------
3,809,800
- ---------------------------------------------------------------
CONSUMER CYCLICALS - 14.3%
- ---------------------------------------------------------------
AUTOS & HOUSING - 3.1%
Brazil Realty SA, GDR(1) 60,000 1,236,534
- ---------------------------------------------------------------
Brisa-Auto Estradas de Portugal
SA(2) 70,300 2,521,088
- ---------------------------------------------------------------
IRSA Inversiones y Representaciones
SA 1,714,678 6,379,770
- ---------------------------------------------------------------
Porsche AG, Preference 11,000 18,475,643
- ---------------------------------------------------------------
Solidere, GDR(1) 110,000 1,443,750
------------
30,056,785
- ---------------------------------------------------------------
LEISURE & ENTERTAINMENT - 5.7%
Callaway Golf Co. 220,800 6,306,600
- ---------------------------------------------------------------
Corporacion Interamericana de
Entretenimiento SA, Cl. B(2) 434,200 3,371,566
- ---------------------------------------------------------------
Granada Group plc 406,200 6,215,772
- ---------------------------------------------------------------
International Game Technology 350,000 8,837,500
- ---------------------------------------------------------------
Nintendo Co. Ltd. 300,000 29,533,670
- ---------------------------------------------------------------
Resorts World Berhad 563,000 949,080
------------
55,214,188
- ---------------------------------------------------------------
MEDIA - 4.2%
Canal Plus 80,100 14,899,261
- ---------------------------------------------------------------
Grupo Televisa SA, Sponsored GDR(1) 267,100 10,333,431
- ---------------------------------------------------------------
Havas SA 200,000 14,395,277
- ---------------------------------------------------------------
Reed International plc 33,200 333,227
------------
39,961,196
- ---------------------------------------------------------------
RETAIL: GENERAL - 1.2%
Credit Saison Co. Ltd. 290,000 7,181,912
- ---------------------------------------------------------------
PT Matahari Putra Prima(2) 542,000 46,019
- ---------------------------------------------------------------
Sonae Investimentos 118,000 4,777,910
------------
12,005,841
- ---------------------------------------------------------------
RETAIL: SPECIALTY - 0.1%
Giordano International Ltd. 2,100,000 725,001
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
RETAIL: SPECIALTY (CONTINUED)
Wolford AG 4,550 $ 275,140
------------
1,000,141
- ---------------------------------------------------------------
CONSUMER NON-CYCLICALS - 13.5%
- ---------------------------------------------------------------
BEVERAGES - 2.6%
Cadbury Schweppes plc 1,000,000 10,094,545
- ---------------------------------------------------------------
Cia Cervejaria Brahma, Preference 4,700,000 3,158,546
- ---------------------------------------------------------------
Diageo plc 700,000 6,432,701
- ---------------------------------------------------------------
Fraser & Neave Ltd. 127,000 550,228
- ---------------------------------------------------------------
South African Breweries Ltd. 178,900 4,411,516
------------
24,647,536
- ---------------------------------------------------------------
FOOD - 3.3%
Cresud SA, Sponsored ADR(2) 95,000 1,876,250
- ---------------------------------------------------------------
Dairy Farm International Holdings
Ltd. 7,080,216 7,646,633
- ---------------------------------------------------------------
Disco SA, Sponsored ADR(2) 93,200 4,188,175
- ---------------------------------------------------------------
Great Atlantic & Pacific Tea Co.,
Inc. (The) 593,300 17,613,594
------------
31,324,652
- ---------------------------------------------------------------
HEALTHCARE/DRUGS - 4.0%
Amgen, Inc.(2) 150,000 8,118,750
- ---------------------------------------------------------------
BioChem Pharma, Inc.(2) 198,900 4,152,037
- ---------------------------------------------------------------
Genzyme Corp. (General Division)(2) 200,000 5,550,000
- ---------------------------------------------------------------
Gilead Sciences, Inc.(2) 72,700 2,780,775
- ---------------------------------------------------------------
Glaxo Wellcome plc, Sponsored ADR 200,000 9,575,000
- ---------------------------------------------------------------
Novartis AG 5,000 8,124,502
------------
38,301,064
- ---------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES -
1.3%
Gehe AG 69,990 3,542,235
- ---------------------------------------------------------------
United States Surgical Corp. 307,000 8,998,937
------------
12,541,172
- ---------------------------------------------------------------
HOUSEHOLD GOODS - 2.3%
Wella AG, Preference 29,900 21,950,532
- ---------------------------------------------------------------
TOBACCO - 0.0%
PT Gudang Garam 79,500 125,625
- ---------------------------------------------------------------
PT Hanjaya Mandala Sampoerna 100,000 78,302
------------
203,927
- ---------------------------------------------------------------
ENERGY - 2.0%
- ---------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 1.6%
Coflexip SA, Sponsored ADR 70,000 3,885,000
- ---------------------------------------------------------------
Global Marine, Inc.(2) 100,000 2,450,000
- ---------------------------------------------------------------
Transocean Offshore, Inc. 120,818 5,821,917
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
ENERGY SERVICES & PRODUCERS
(CONTINUED)
Western Atlas, Inc.(2) 49,300 $ 3,648,200
------------
15,805,117
- ---------------------------------------------------------------
OIL-INTEGRATED - 0.4%
British Petroleum Co. plc, ADR 51,818 4,129,247
- ---------------------------------------------------------------
FINANCIAL - 17.6%
- ---------------------------------------------------------------
BANKS - 14.1%
Amalgamated Banks of South Africa
Ltd. 150,000 863,069
- ---------------------------------------------------------------
Banco Bradesco SA, Preference 655,260,951 6,458,550
- ---------------------------------------------------------------
Banco Espirito Santo e Comercial de
Lisboa SA 90,000 2,681,235
- ---------------------------------------------------------------
Banco Frances del Rio de la Plata
SA, Sponsored ADR 63,250 1,731,469
- ---------------------------------------------------------------
Banco Latinoamericano de
Exportaciones SA, Cl. E 66,100 2,734,887
- ---------------------------------------------------------------
Banco Pinto & Sotto Mayor SA 131,700 1,887,626
- ---------------------------------------------------------------
Banco Rio de la Plata SA, ADR(2) 223,300 3,126,200
- ---------------------------------------------------------------
Bankers Trust New York Corp. 40,000 4,497,500
- ---------------------------------------------------------------
Banque Libanaise Pour Le Comm SAL,
GDR, Cl. B(2) 50,000 907,500
- ---------------------------------------------------------------
Barclays plc 97,000 2,582,394
- ---------------------------------------------------------------
Cie Financiere de Paribas, Series A 180,300 15,674,711
- ---------------------------------------------------------------
Credito Italiano 4,000,000 12,341,654
- ---------------------------------------------------------------
Deutsche Bank AG 150,000 10,494,743
- ---------------------------------------------------------------
Industrial Finance Corp. 1,048,000 161,068
- ---------------------------------------------------------------
Istituto Bancario San Paolo di
Torino 1,000,000 9,558,843
- ---------------------------------------------------------------
Long-Term Credit Bank of Japan Ltd.
(The) 2,043,000 3,283,983
- ---------------------------------------------------------------
National Westminster Bank plc 487,600 8,099,201
- ---------------------------------------------------------------
Northern Trust Corp. 7,600 530,100
- ---------------------------------------------------------------
PT Pan Indonesia Bank 2,908,500 370,422
- ---------------------------------------------------------------
Societe Generale 97,000 13,221,713
- ---------------------------------------------------------------
UBS, Bearer 20,000 28,960,249
- ---------------------------------------------------------------
Unibanco-Uniao de Bancos
Brasileiros SA, Sponsored GDR
Representing 500 Units of one
Preferred Share of Unibanco and one
Preferred Share of Unibanco
Holdings SA(2) 145,500 4,683,281
------------
134,850,398
- ---------------------------------------------------------------
DIVERSIFIED FINANCIAL - 3.1%
American Express Co. 24,500 2,186,625
- ---------------------------------------------------------------
Associates First Capital Corp., Cl.
A 160,000 11,380,000
- ---------------------------------------------------------------
Fannie Mae 150,000 8,559,375
- ---------------------------------------------------------------
First NIS Regional Fund(1)(2) 180,000 3,105,000
- ---------------------------------------------------------------
Housing Development Finance Corp.
Ltd.(3) 22,290 1,749,542
- ---------------------------------------------------------------
Industrial Credit & Investment
Corp. of India Ltd., GDR(1) 162,500 2,112,500
- ---------------------------------------------------------------
ING Groep NV 10,500 442,328
------------
29,535,370
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
INSURANCE - 0.4%
American International Group, Inc. 23,700 $ 2,577,375
- ---------------------------------------------------------------
Reinsurance Australia Corp. Ltd. 577,000 1,503,815
------------
4,081,190
- ---------------------------------------------------------------
INDUSTRIAL - 6.7%
- ---------------------------------------------------------------
INDUSTRIAL SERVICES - 5.4%
Adecco SA 40,000 11,614,266
- ---------------------------------------------------------------
Atos SA(2) 50,000 6,449,616
- ---------------------------------------------------------------
Grupo Elektra SA de CV, CPO 1,461,000 2,577,017
- ---------------------------------------------------------------
IHC Caland NV 45,000 2,335,210
- ---------------------------------------------------------------
Rentokil Group plc 2,500,000 11,065,332
- ---------------------------------------------------------------
UNOVA, Inc.(2) 49,300 810,369
- ---------------------------------------------------------------
VBH Holding AG 247,000 3,296,918
- ---------------------------------------------------------------
WPP Group plc 3,000,000 13,303,080
------------
51,451,808
- ---------------------------------------------------------------
MANUFACTURING - 1.0%
Powerscreen International plc 738,303 7,379,944
- ---------------------------------------------------------------
Societe BIC SA 35,932 2,623,885
------------
10,003,829
- ---------------------------------------------------------------
TRANSPORTATION - 0.3%
Guangshen Railway Co. Ltd.,
Sponsored ADR 220,200 2,958,938
- ---------------------------------------------------------------
TECHNOLOGY - 16.6%
- ---------------------------------------------------------------
AEROSPACE/DEFENSE - 1.3%
Rolls-Royce plc 3,164,038 12,234,373
- ---------------------------------------------------------------
COMPUTER HARDWARE - 2.6%
International Business Machines
Corp. 100,000 10,456,250
- ---------------------------------------------------------------
Iomega Corp.(2) 700,000 8,706,250
- ---------------------------------------------------------------
Sun Microsystems, Inc.(2) 142,000 5,662,250
------------
24,824,750
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 4.2%
Cap Gemini SA 300,000 24,609,940
- ---------------------------------------------------------------
First Data Corp. 87,000 2,544,750
- ---------------------------------------------------------------
Microsoft Corp.(2) 58,000 7,496,500
- ---------------------------------------------------------------
Misys plc 194,914 5,869,030
------------
40,520,220
- ---------------------------------------------------------------
ELECTRONICS - 3.4%
Intel Corp. 20,000 1,405,000
- ---------------------------------------------------------------
Keyence Corp. 27,500 4,082,030
- ---------------------------------------------------------------
National Semiconductor Corp.(2) 350,000 9,078,125
- ---------------------------------------------------------------
Sony Corp. 200,000 17,843,259
------------
32,408,414
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS-TECHNOLOGY -
5.1%
Alcatel Alsthom SA 150,000 $19,074,573
- ---------------------------------------------------------------
Cisco Systems, Inc.(2) 61,650 3,436,988
- ---------------------------------------------------------------
Newbridge Networks Corp.(2) 80,000 2,790,000
- ---------------------------------------------------------------
QUALCOMM, Inc.(2) 231,400 11,685,700
- ---------------------------------------------------------------
SK Telecom Co. Ltd. 8,457 2,586,698
- ---------------------------------------------------------------
Telecom Italia Mobile SpA 2,000,000 9,236,444
------------
48,810,403
- ---------------------------------------------------------------
UTILITIES - 3.0%
- ---------------------------------------------------------------
TELEPHONE UTILITIES - 3.0%
CPT Telefonica del Peru SA, Cl. B 3,400,031 7,595,917
- ---------------------------------------------------------------
Portugal Telecom SA 375,000 17,419,621
- ---------------------------------------------------------------
Videsh Sanchar Nigam Ltd., GDR 250,000 3,506,250
------------
28,521,788
------------
Total Common Stocks (Cost
$617,877,896) 719,236,116
- ---------------------------------------------------------------
PREFERRED STOCKS - 0.3%
- ---------------------------------------------------------------
Marschollek, Lautenschlaeger und
Partner AG, Non-Vtg. Preferred
Stock
(Cost $1,603,264) 13,257 3,428,452
UNITS
- ---------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES -
0.0%
- ---------------------------------------------------------------
Banco Bradesco SA, Preference, Rts.
Exp. 2/98 28,015,796 --
- ---------------------------------------------------------------
American Satellite Network, Inc.
Wts., Exp. 6/99 6,250 --
- ---------------------------------------------------------------
PT Pan Indonesia Bank Wts., Exp.
6/00 415,500 3,685
------------
Total Rights, Warrants and
Certificates (Cost $0) 3,685
PRINCIPAL
AMOUNT
- ---------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 7.7%
- ---------------------------------------------------------------
U.S. Treasury Bonds:
STRIPS, 6.98%, 11/15/18(4)(5) $ 86,770,000 24,763,898
STRIPS, 6.93%, 8/15/19(5) 180,000,000 48,997,800
------------
Total U.S. Government Obligations
(Cost $61,980,756) 73,761,698
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS - 17.3%
- ---------------------------------------------------------------
Repurchase agreement with Smith,
Barney, Harris, Upham & Co., Inc.,
6.625%, dated 12/31/97, to be
repurchased at $165,760,987 on
1/2/98, collateralized by U.S.
Treasury Bonds, 8.875%-11.25%,
2/15/15-2/15/19, with a value of
$169,746,221
(Cost $165,700,000) 165,700,000 165,700,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$847,161,916) 100.3% 962,129,951
- ---------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (0.3) (3,019,731 )
------------ ------------
NET ASSETS 100.0% $959,110,220
------------ ------------
------------ ------------
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES 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 $18,231,215 or 1.90% of the Fund's net
assets as of December 31, 1997.
2. Non-income producing security.
3. Identifies issues considered to be illiquid or restricted - See Note 7 of
Notes to Financial Statements.
4. Securities with an aggregate market value of $8,561,910 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
5. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
Distribution of investments by country of issue, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
COUNTRY MARKET VALUE PERCENT
- ------------------------------------------------------------
United States $411,474,565 42.8%
- ------------------------------------------------------------
France 114,833,976 11.9
- ------------------------------------------------------------
Great Britain 97,313,846 10.1
- ------------------------------------------------------------
Japan 61,924,854 6.4
- ------------------------------------------------------------
Germany 61,188,523 6.4
- ------------------------------------------------------------
Switzerland 48,699,017 5.1
- ------------------------------------------------------------
Italy 31,136,942 3.2
- ------------------------------------------------------------
Portugal 29,287,479 3.0
- ------------------------------------------------------------
Argentina 17,301,863 1.8
- ------------------------------------------------------------
Mexico 16,282,015 1.7
- ------------------------------------------------------------
Brazil 15,536,910 1.6
- ------------------------------------------------------------
South Africa 8,348,385 0.9
- ------------------------------------------------------------
Peru 8,331,917 0.9
- ------------------------------------------------------------
Singapore 8,196,861 0.9
- ------------------------------------------------------------
India 7,368,292 0.8
- ------------------------------------------------------------
Canada 4,152,037 0.4
- ------------------------------------------------------------
Russia 3,105,000 0.3
- ------------------------------------------------------------
China 2,958,938 0.3
- ------------------------------------------------------------
The Netherlands 2,777,538 0.3
- ------------------------------------------------------------
Panama 2,734,888 0.3
- ------------------------------------------------------------
Korea, Republic of (South) 2,586,698 0.3
- ------------------------------------------------------------
Lebanon 2,351,250 0.2
- ------------------------------------------------------------
Australia 1,503,815 0.2
- ------------------------------------------------------------
Malaysia 949,080 0.1
- ------------------------------------------------------------
Hong Kong 725,001 0.1
- ------------------------------------------------------------
Indonesia 624,053 0.1
- ------------------------------------------------------------
Austria 275,140 0.0
- ------------------------------------------------------------
Thailand 161,068 0.0
------------- -------
Total $962,129,951 100.0%
------------- -------
------------- -------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 22.6%
- --------------------------------------------------------------------------
GOVERNMENT AGENCY - 18.7%
- --------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED - 9.2%
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation
Certificates, Series 151, Cl. F,
9%, 5/15/21 $ 1,500,000 $ 1,627,931
Interest-Only Stripped Mtg.-Backed
Security, Series 177, Cl. B,
13.03%, 7/1/26(2) 11,852,995 3,465,149
- --------------------------------------------------------------------------
Federal National Mortgage Assn.:
6.375%, 8/15/07 AUD 1,250,000 819,614
7%, 1/1/13(3) 10,000,000 10,146,900
7%, 9/26/00 NZD 1,120,000 632,904
7.50%, 8/1/25 928,642 952,350
Interest-Only Stripped Mtg.-Backed
Security, Trust 249, Cl. 2, 4.99%,
10/25/23(2) 3,728,368 1,138,318
Sr. Unsub. Medium-Term Nts., 6.50%,
7/10/02 AUD 430,000 287,024
-------------
19,070,190
- --------------------------------------------------------------------------
GNMA/GUARANTEED - 9.5%
Government National Mortgage Assn.:
6.875%, 11/20/25 556,633 571,679
7%, 1/1/28(3) 10,000,000 10,071,900
7.50%, 2/15/27 4,591,784 4,706,257
8%, 11/15/25 2,508,396 2,601,934
8%, 5/15/26 1,652,123 1,713,202
-------------
19,664,972
- --------------------------------------------------------------------------
PRIVATE - 3.9%
- --------------------------------------------------------------------------
COMMERCIAL - 2.8%
Amresco Commercial Mortgage Funding
I Corp., Multiclass Mtg. Pass-
Through Certificates, Series
1997-C1, Cl. E, 7%, 6/17/29(4) 100,000 92,438
- --------------------------------------------------------------------------
Asset Securitization Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-D5, Cl. B1, 6.93%,
2/14/41 300,000 273,984
Series 1997-D5, Cl. B2, 6.93%,
2/14/41 250,000 223,906
- --------------------------------------------------------------------------
CRIIMI MAE Trust I, Collateralized
Mtg. Obligations, Series 1996-C1,
Cl. A-2, 7.56%, 8/30/05(5) 100,000 102,359
- --------------------------------------------------------------------------
CS First Boston Mortgage Securities
Corp., Mtg. Pass-Through
Certificates, Series 1997-C2, Cl.
F, 7.46%, 1/17/35 150,000 140,859
- --------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, Series 1994-C1, Cl.
2-G, 8.70%, 9/25/25(4) 153,594 157,695
- --------------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-CHL1, 8.116%,
2/25/11(4)(6) 600,000 510,780
Series 1997-CHL1, 8.116%,
5/25/08(4)(6) 350,000 355,005
- --------------------------------------------------------------------------
General Motors Acceptance Corp.,
Collateralized Mtg. Obligations:
Series 1997-C1, Cl. G, 7.414%,
11/15/11 440,000 411,400
Series 1997-C2, Cl. F, 6.75%,
4/16/29 250,000 214,297
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL (CONTINUED)
General Motors Acceptance Corp.,
Interest-Only Stripped Mtg.-Backed
Security, Series 1997-C1, Cl. X,
8.91%, 7/15/27(2) $ 4,295,474 $ 432,232
- --------------------------------------------------------------------------
Merrill Lynch Mortgage Investors,
Inc., Mtg. Pass-Through
Certificates, Series 1995-C2, Cl.
D, 8.189%, 6/15/21(6) 367,685 375,958
- --------------------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. F, 7.51%,
2/15/28(4)(6) 162,744 131,111
Series 1997-HF1, Cl. F, 6.86%,
2/15/10(4) 150,000 136,688
Series 1997-RR, Cl. D, 7.74%,
4/30/39 50,000 48,250
Series 1997-RR, Cl. F, 7.74%,
4/30/39 300,000 235,125
Series 1997-XL1, Cl. G, 7.695%,
10/3/30(6) 290,000 282,569
- --------------------------------------------------------------------------
NationsCommercial Corp., NB
Commercial Mtg. Pass-Through
Certificates, Series-DMC, Cl. C,
8.921%, 8/12/11(5) 200,000 213,563
- --------------------------------------------------------------------------
Nykredit AS, Mtg.-Backed Security,
Series ANN, 6%, 10/1/26 DKK 3,243,000 461,546
- --------------------------------------------------------------------------
Realkredit Danmark, Mtg.-Backed
Security, 6%, 10/1/26 DKK 3,245,000 461,120
- --------------------------------------------------------------------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%,
12/25/20 121,210 121,133
Series 1993-C1, Cl. D, 9.45%,
5/25/24 91,000 91,825
Series 1994-C2, Cl. E, 8%, 4/25/25 210,423 212,342
- --------------------------------------------------------------------------
Structured Asset Securities Corp.:
Commercial Mtg. Pass-Through
Certificates, Series 1997-LLI, Cl.
F, 7.30%, 4/12/12(4) 200,000 185,813
Multiclass Pass-Through
Certificates, Series 1995-C4, Cl.
E, 8.77%, 6/25/26(4)(6) 46,290 47,765
-------------
5,919,763
- --------------------------------------------------------------------------
MULTI-FAMILY - 0.8%
Mortgage Capital Funding, Inc.:
Commercial Mtg. Pass-Through
Certificates, Series 1997-MC1, Cl.
F, 7.452%, 5/20/07(4) 63,720 60,693
Multifamily Mtg. Pass-Through
Certificates, Series 1996-MC1, Cl.
G, 7.15%, 6/15/06(5) 800,000 760,250
- --------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Series 1996-CL, Cl.
F, 9.19%, 1/20/28(6) 1,000,000 869,375
-------------
1,690,318
- --------------------------------------------------------------------------
RESIDENTIAL - 0.3%
CS First Boston Mortgage Securities
Corp., Mtg. Pass-Through
Certificates:
Series 1997-C1, Cl. F, 7.50%,
6/20/13(4) 100,000 97,000
Series 1997-C1, Cl. G, 7.50%,
6/20/14(4) 100,000 92,470
Series 1997-C1, Cl. H, 7.50%,
8/20/14(4) 60,000 47,376
Series 1997-C2, Cl. H, 7.46%,
1/17/35 100,000 79,969
- --------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Series 1996-B, Cl.
1, 7.136%, 4/25/26 393,408 277,845
-------------
594,660
-------------
Total Mortgage-Backed Obligations
(Cost $46,435,758) 46,939,903
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS - 29.3%
- --------------------------------------------------------------------------
U.S. Treasury Bonds:
10.75%, 2/15/03 $ 5,600,000 $ 6,828,506
11.25%, 2/15/15 690,000 1,081,360
11.625%, 11/15/02 1,085,000 1,352,860
11.625%, 11/15/04 7,215,000 9,573,410
11.875%, 11/15/03 2,495,000 3,245,840
13.125%, 5/15/01 2,800,000 3,428,253
6%, 2/15/26(7) 730,000 729,316
6.50%, 11/15/26 3,170,000 3,384,967
6.875%, 8/15/25(8) 1,100,000 1,226,501
8.125%, 8/15/19 163,000 204,056
9.375%, 2/15/06 900,000 1,107,844
- --------------------------------------------------------------------------
U.S. Treasury Nts.:
10.75%, 5/15/03 8,568,000 10,522,584
14.25%, 2/15/02 400,000 523,875
6.25%, 10/31/01(8)(9) 6,985,000 7,109,424
6.25%, 2/15/03 3,325,000 3,401,894
7.25%, 5/15/04 935,000 1,009,508
7.50%, 10/31/99 1,750,000 1,804,689
7.50%, 5/15/02 4,020,000 4,293,867
-------------
Total U.S. Government Obligations
(Cost $60,289,411) 60,828,754
- --------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS -
20.1%
- --------------------------------------------------------------------------
ARGENTINA - 1.8%
Argentina (Republic of) Bonds:
5%, 12/20/02 JPY 60,000,000 429,692
Bonos de Consolidacion de Deudas,
Series I, 5.66%, 4/1/01(6) 143,934 135,611
- --------------------------------------------------------------------------
Argentina (Republic of) Floating
Rate Bonds, Series L, 6.69%,
3/31/05(6) 172,800 154,872
- --------------------------------------------------------------------------
Argentina (Republic of) Nts.,
Series REGS, 11.75%, 2/12/07 ARP 440,000 416,976
- --------------------------------------------------------------------------
Argentina (Republic of) Par Bonds,
5.50%, 3/31/23(10) 770,000 566,427
- --------------------------------------------------------------------------
Argentina (Republic of) Unsec.
Unsub. Medium-Term Nts.:
5.50%, 3/27/01 JPY 170,000,000 1,290,614
8.75%, 7/10/02 ARP 320,000 277,651
- --------------------------------------------------------------------------
Banco Hipotecario Nacional
(Argentina) Medium-Term Nts.,
10.625%, 8/7/06(9) 400,000 406,000
-------------
3,677,843
- --------------------------------------------------------------------------
AUSTRALIA - 1.8%
New South Wales Treasury Corp. Gtd.
Bonds, 8%, 12/1/01 AUD 1,610,000 1,126,815
- --------------------------------------------------------------------------
Queensland Treasury Corp.
Exchangeable Gtd. Nts.:
8%, 8/14/01 AUD 1,858,000 1,301,406
8%, 9/14/07 AUD 1,560,000 1,141,743
- --------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd.
Bonds, 8.25%, 10/15/03 AUD 115,000 82,985
-------------
3,652,949
- --------------------------------------------------------------------------
BRAZIL - 1.4%
Banco Estado Minas Gerais, 8.25%,
2/10/00 250,000 238,125
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
BRAZIL (CONTINUED)
Brazil (Federal Republic of)
Capitalization Bonds, 8%, 4/15/14 $ 2,753,727 $ 2,163,397
- --------------------------------------------------------------------------
Brazil (Federal Republic of)
Eligible Interest Bonds, 6.69%,
4/15/06(6) 686,000 593,390
-------------
2,994,912
- --------------------------------------------------------------------------
BULGARIA - 0.2%
Bulgaria (Republic of) Front-Loaded
Interest Reduction Bearer Bonds,
Tranche A, 2.30%, 7/28/12(10) 510,000 311,100
- --------------------------------------------------------------------------
Bulgaria (Republic of) Interest
Arrears Bonds, 6.69%, 7/28/11(6) 160,000 117,200
-------------
428,300
- --------------------------------------------------------------------------
CANADA - 1.2%
Canada (Government of) Bonds:
9.75%, 6/1/01 CAD 1,995,000 1,585,188
Series A-33, 11.50%, 9/1/00 CAD 1,100,000 886,169
-------------
2,471,357
- --------------------------------------------------------------------------
COLOMBIA - 0.2%
Financiera Energetica Nacional SA
Nts., 9.375%, 6/15/06 500,000 504,688
- --------------------------------------------------------------------------
DENMARK - 0.5%
Denmark (Kingdom of) Bonds, 7%,
11/10/24 DKK 5,880,000 958,015
- --------------------------------------------------------------------------
ECUADOR - 0.3%
Ecuador (Republic of) Disc. Bonds,
6.688%, 2/28/25(6) 300,000 226,500
- --------------------------------------------------------------------------
Ecuador (Republic of) Past Due
Interest Bonds, 6.688%, 2/27/15(6) 601,458 393,955
-------------
620,455
- --------------------------------------------------------------------------
GERMANY - 0.5%
Germany (Republic of) Bonds, Series
94, 6.25%, 1/4/24 DEM 1,630,000 952,503
- --------------------------------------------------------------------------
GREAT BRITAIN - 1.3%
United Kingdom Treasury Nts.:
7.25%, 3/30/98 GBP 805,000 1,324,549
7.75%, 9/8/06 GBP 730,000 1,308,496
-------------
2,633,045
- --------------------------------------------------------------------------
HUNGARY - 0.5%
Hungary (Government of) Bonds:
Series 98-I, 23.50%, 5/17/98 HUF 160,000,000 793,312
Series 99-G, 16.50%, 7/24/99 HUF 44,000,000 208,991
-------------
1,002,303
- --------------------------------------------------------------------------
IRELAND - 0.4%
Ireland (Government of) Bonds,
9.25%, 7/11/03 IEP 255,000 434,263
- --------------------------------------------------------------------------
National Treasury Management Agency
(Irish Government) Bonds, 8%,
8/18/06 IEP 235,000 390,495
-------------
824,758
- --------------------------------------------------------------------------
ITALY - 1.3%
Italy (Republic of) Treasury Bonds,
Buoni del Tesoro Poliennali:
10.50%, 4/1/00 ITL 550,000,000 346,862
10.50%, 4/1/05 ITL 600,000,000 438,293
12%, 1/1/02 ITL 1,535,000,000 1,079,191
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
ITALY (CONTINUED)
Italy (Republic of) Treasury Bonds,
Buoni del Tesoro Poliennali:
(Continued)
9%, 10/1/03 ITL 1,360,000,000 $ 907,310
-------------
2,771,656
- --------------------------------------------------------------------------
JORDAN - 0.2%
Hashemite (Kingdom of Jordan) Disc.
Bonds, 6.875%, 12/23/23(6) 500,000 417,031
- --------------------------------------------------------------------------
MEXICO - 1.9%
Banco Nacional de Comercio Exterior
SNC International Finance BV Gtd.
Registered Bonds, 11.25%, 5/30/06 265,000 295,475
- --------------------------------------------------------------------------
United Mexican States Bonds:
10.375%, 1/29/03 DEM 725,000 441,723
11.375%, 9/15/16 880,000 998,800
16.50%, 9/1/08(4) GBP 20,000 48,704
- --------------------------------------------------------------------------
United Mexican States
Collateralized Fixed Rate Par
Bonds:
Series B, 6.25%, 12/31/19 600,000 502,500
Series W-A, 6.25%, 12/31/19 250,000 209,375
Series W-B, 6.25%, 12/31/19 1,600,000 1,340,000
- --------------------------------------------------------------------------
United Mexican States Petroleos
Mexicanos Gtd. Unsec. Unsub. Nts.,
7.875%, 3/2/99 CAD 200,000 141,682
-------------
3,978,259
- --------------------------------------------------------------------------
NEW ZEALAND - 1.1%
New Zealand (Government of) Bonds,
7%, 7/15/09 NZD 3,795,000 2,213,013
- --------------------------------------------------------------------------
NORWAY - 0.4%
Norway (Government of) Bonds,
9.50%, 10/31/02 NOK 4,680,000 750,673
- --------------------------------------------------------------------------
PANAMA - 0.1%
Panama (Government of) Past Due
Interest Debs., 6.89%, 7/17/16(6) 225,968 184,447
- --------------------------------------------------------------------------
PERU - 0.1%
Peru (Republic of) Front-Loaded
Interest Reduction Bonds, 3.25%,
3/7/17(6) 455,000 269,588
- --------------------------------------------------------------------------
PHILIPPINES - 0.0%
Philippines (Republic of) Par
Bonds, Series B, 6.50%,
12/1/17(4)(10) 110,000 93,088
- --------------------------------------------------------------------------
POLAND - 0.9%
Poland (Republic of) Bonds:
14%, 2/12/00 PLZ 2,160,000 515,930
15%, 10/12/99 PLZ 1,100,000 273,321
16%, 2/12/99 PLZ 2,150,000 559,562
16%, 6/12/98 PLZ 650,000 176,518
- --------------------------------------------------------------------------
Poland (Republic of) Past Due
Interest Bonds, 4%, 10/27/14(10) 440,000 381,150
-------------
1,906,481
- --------------------------------------------------------------------------
RUSSIA - 0.5%
City of St. Petersburg Sr. Unsub.
Nts., 9.50%, 6/18/02(5) 180,000 164,925
- --------------------------------------------------------------------------
Ministry of Finance (Russian
Government) Unsec. Unsub. Bonds,
10%, 6/26/07(5) 320,000 297,280
- --------------------------------------------------------------------------
Russia (Government of) Bonds, 22%,
4/28/99(11) RUR 1,585,000,000 227,391
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
RUSSIA (CONTINUED)
SBS Agro Finance BV Bonds, 10.25%,
7/21/00 $ 339,000 $ 300,015
-------------
989,611
- --------------------------------------------------------------------------
SOUTH AFRICA - 0.7%
South Africa (Republic of) Bonds:
Series 150, 12%, 2/28/05 ZAR 3,605,570 684,172
Series 162, 12.50%, 1/15/02 ZAR 1,950,240 385,468
Series 175, 9%, 10/15/02 ZAR 2,046,800 350,365
-------------
1,420,005
- --------------------------------------------------------------------------
SPAIN - 0.9%
Spain (Kingdom of) Gtd. Bonds,
Bonos y Obligacion del Estado:
10.30%, 6/15/02 ESP 21,500,000 170,029
10.50%, 10/30/03 ESP 59,550,000 491,550
11.45%, 8/30/98 ESP 12,000,000 82,034
12.25%, 3/25/00 ESP 141,000,000 1,070,298
-------------
1,813,911
- --------------------------------------------------------------------------
SWEDEN - 0.4%
Sweden (Kingdom of) Bonds, Series
1037, 8%, 8/15/07 SEK 6,300,000 910,933
- --------------------------------------------------------------------------
TURKEY - 0.4%
Turkey (Republic of) Treasury
Bills, Zero Coupon, 92.27%,
3/4/98(12) TRL 232,300,000,000 938,223
- --------------------------------------------------------------------------
VENEZUELA - 1.1%
Venezuela (Republic of) Bonds,
9.25%, 9/15/27 970,000 871,545
- --------------------------------------------------------------------------
Venezuela (Republic of)
Collateralized Par Bonds, Series
W-A, 6.75%, 3/31/20 1,000,000 870,000
- --------------------------------------------------------------------------
Venezuela (Republic of) Disc.
Bonds, Series DL, 6.75%,
12/18/07(6) 476,190 428,274
- --------------------------------------------------------------------------
Venezuela (Republic of) New Money
Bonds, Series A, 6.91%, 12/18/05(6) 250,000 223,750
-------------
2,393,569
-------------
Total Foreign Government
Obligations (Cost $43,127,415) 41,771,616
- --------------------------------------------------------------------------
LOAN PARTICIPATIONS - 0.6%
- --------------------------------------------------------------------------
GS Moskovskaya, 19% Nts.,
6/12/98(4) 265,000 258,879
- --------------------------------------------------------------------------
Jamaica (Government of) 1990
Refinancing Agreement Nts., Tranche
A, 6.56%, 10/16/00(4)(6) 37,500 35,625
- --------------------------------------------------------------------------
Russian (Government of) Principal
Loans Debs., 6.719%,
6/2/98(3)(4)(6) 1,535,000 949,781
-------------
Total Loan Participations (Cost
$1,252,430) 1,244,285
- --------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 28.2%
- --------------------------------------------------------------------------
BASIC INDUSTRY - 2.9%
- --------------------------------------------------------------------------
CHEMICALS - 1.0%
ClimaChem, Inc., 10.75% Gtd. Sr.
Unsec. Nts., 12/1/07(5) 150,000 155,250
- --------------------------------------------------------------------------
Harris Chemical North America,
Inc., 10.75% Gtd. Sr. Sub. Nts.,
10/15/03 100,000 107,250
- --------------------------------------------------------------------------
ICO, Inc., 10.375% Sr. Nts., 6/1/07 50,000 53,875
- --------------------------------------------------------------------------
ISP Holdings, Inc., 9% Sr. Nts.,
Series B, 10/15/03 55,000 57,269
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
CHEMICALS (CONTINUED)
Laroche Industries, Inc., 9.50% Sr.
Sub. Nts., 9/15/07(5) $ 150,000 $ 148,500
- --------------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr.
Sec. Nts., 10/15/03 140,000 155,750
- --------------------------------------------------------------------------
PCI Chemicals Canada, Inc., 9.25%
Sr. Nts., 10/15/07(5) 175,000 173,250
- --------------------------------------------------------------------------
Pioneer Americas Acquisition Corp.,
9.25% Sr. Nts., 6/15/07 200,000 202,500
- --------------------------------------------------------------------------
Polytama International Finance BV,
11.25% Gtd. Sec. Nts., 6/15/07 170,000 126,650
- --------------------------------------------------------------------------
Sovereign Specialty Chemicals,
Inc., 9.50% Sr. Sub. Nts.,
8/1/07(5) 425,000 437,750
- --------------------------------------------------------------------------
Sterling Chemicals Holdings, Inc.,
0%/13.50% Sr. Disc. Nts.,
8/15/08(13) 200,000 123,000
- --------------------------------------------------------------------------
Sterling Chemicals, Inc.:
11.25% Sr. Sub. Nts., 4/1/07 50,000 50,250
11.75% Sr. Unsec. Sub. Nts.,
8/15/06(8) 200,000 205,000
-------------
1,996,294
- --------------------------------------------------------------------------
CONTAINERS - 0.1%
Consumers International, Inc.,
10.25% Sr. Sec. Nts., 4/1/05(4) 250,000 275,000
- --------------------------------------------------------------------------
METALS/MINING - 0.2%
Centaur Mining & Exploration Ltd.,
11% Gtd. Sr. Nts., 12/1/07(4) 100,000 100,750
- --------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts.,
12/1/07(5) 225,000 231,750
-------------
332,500
- --------------------------------------------------------------------------
PAPER - 1.1%
Asia Pulp & Paper International
Finance Co., Zero Coupon Asian
Currency Nts., 14.46%, 1/23/98(12) IDR 200,000,000 36,425
- --------------------------------------------------------------------------
Fletcher Challenge Finance U.S.A.,
Inc., 8.05% Debs., 6/15/03 NZD 80,000 44,890
- --------------------------------------------------------------------------
Fletcher Challenge Ltd.:
10% Cv. Unsec. Sub. Nts., 4/30/05 NZD 60,000 37,102
14.50% Cv. Sub. Nts., 9/30/00 NZD 60,000 39,251
- --------------------------------------------------------------------------
Florida Coast Paper Co. LLC, 12.75%
First Mtg. Nts., 6/1/03 130,000 138,450
- --------------------------------------------------------------------------
Four M Corp., 12% Sr. Nts., Series
B, 6/1/06(4) 125,000 133,125
- --------------------------------------------------------------------------
Gaylord Container Corp., 9.75% Sr.
Nts., 6/15/07 200,000 195,000
- --------------------------------------------------------------------------
Indah Kiat International Finance
Co. BV, 11.375% Gtd. Sec. Nts.,
6/15/99 205,000 198,850
- --------------------------------------------------------------------------
Pacific Lumber Co., 10.50% Sr.
Nts., 3/1/03 365,000 377,775
- --------------------------------------------------------------------------
Pindo Deli Finance Mauritius Ltd.,
10.75% Gtd. Nts., 10/1/07(4) 125,000 108,125
- --------------------------------------------------------------------------
Repap New Brunswick, Inc., 9.063%
First Priority Sr. Sec. Nts.,
7/15/00(6) 200,000 198,000
- --------------------------------------------------------------------------
Riverwood International Corp.,
10.625% Sr. Unsec. Nts., 8/1/07 450,000 459,000
- --------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts.,
Series B, 12/15/04 200,000 223,000
- --------------------------------------------------------------------------
U.S. Timberlands Co. LP, 9.625% Sr.
Nts., 11/15/07 150,000 156,000
-------------
2,344,993
- --------------------------------------------------------------------------
STEEL - 0.5%
AK Steel Corp., 9.125% Sr. Nts.,
12/15/06 350,000 360,500
- --------------------------------------------------------------------------
Algoma Steel, Inc., 12.375% First
Mtg. Nts., 7/15/05 300,000 348,000
- --------------------------------------------------------------------------
Bar Technologies, Inc., 13.50% Sr.
Sec. Nts., 4/1/01 100,000 109,250
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
STEEL (CONTINUED)
Keystone Consolidated Industries,
Inc., 9.625% Sr. Nts., 8/1/07(5) $ 200,000 $ 201,750
-------------
1,019,500
- --------------------------------------------------------------------------
CONSUMER RELATED - 4.2%
- --------------------------------------------------------------------------
CONSUMER PRODUCTS - 1.2%
Coleman Escrow Corp., Zero Coupon
Sr. First Priority Disc. Nts.,
11.13%, 5/15/01(12) 305,000 203,587
- --------------------------------------------------------------------------
Dyersburg Corp., 9.75% Sr. Unsec.
Sub. Nts., 9/1/07 75,000 78,750
- --------------------------------------------------------------------------
Holmes Products Corp., 9.875% Gtd.
Nts., 11/15/07(5) 200,000 204,500
- --------------------------------------------------------------------------
Icon Fitness Corp., 0%/14% Sr.
Disc. Nts., 11/15/06(4)(13) 200,000 114,000
- --------------------------------------------------------------------------
Icon Health & Fitness, Inc., 13%
Sr. Sub. Nts., Series B, 7/15/02 300,000 336,750
- --------------------------------------------------------------------------
IHF Holdings, Inc., 0%/15% Sr. Sub.
Disc. Nts., Series B, 11/15/04(13) 250,000 218,750
- --------------------------------------------------------------------------
Indorayon International Finance Co.
BV, 10% Gtd. Unsec. Unsub. Nts.,
3/29/01(4) 100,000 89,000
- --------------------------------------------------------------------------
MacAndrews & Forbes Holdings, Inc.,
13% Sub. Debs., 3/1/99(4) 131,000 132,146
- --------------------------------------------------------------------------
Pillowtex Corp., 9% Sr. Sub. Nts.,
12/15/07(5) 200,000 206,000
- --------------------------------------------------------------------------
Revlon Worldwide Corp., Zero Coupon
Sr. Sec. Disc. Nts., 10.88%,
3/15/01(12) 450,000 312,750
- --------------------------------------------------------------------------
Samsonite Corp., 11.125% Sr. Sub.
Nts., 7/15/05 137,000 154,125
- --------------------------------------------------------------------------
Sealy Mattress Co., 9.875% Sr. Sub.
Nts., 12/15/07(5) 100,000 103,000
- --------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr.
Sub. Nts., 12/15/05(4) 100,000 120,500
- --------------------------------------------------------------------------
Vitro SA, 13% Nts., 12/7/99(6) MXP 438,000 119,483
- --------------------------------------------------------------------------
Williams (J. B.) Holdings, Inc.,
12% Sr. Nts., 3/1/04 100,000 106,500
-------------
2,499,841
- --------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO - 0.2%
CFP Holdings, Inc., 11.625% Gtd.
Sr. Nts., Series B, 1/15/04 15,000 15,075
- --------------------------------------------------------------------------
Del Monte Foods Co., 0%/12.50% Sr.
Disc. Nts., 12/15/07(5)(13) 100,000 57,750
- --------------------------------------------------------------------------
Sparkling Spring Water Group Ltd.,
11.50% Sr. Sub. Nts., 11/15/07(5) 200,000 207,000
- --------------------------------------------------------------------------
Windy Hill Pet Food, Inc., 9.75%
Sr. Sub. Nts., 5/15/07 150,000 153,750
-------------
433,575
- --------------------------------------------------------------------------
HEALTHCARE - 0.4%
Genesis Health Ventures, Inc.,
9.25% Sr. Sub. Nts., 10/1/06 30,000 30,712
- --------------------------------------------------------------------------
Integrated Health Services, Inc.:
10.25% Sr. Sub. Nts., 4/30/06 15,000 15,975
9.50% Sr. Sub. Nts., 9/15/07(5) 150,000 154,500
- --------------------------------------------------------------------------
Kinetics Concepts, Inc., 9.625% Sr.
Sub. Nts., 11/1/07(5) 50,000 51,062
- --------------------------------------------------------------------------
Magellan Health Services, Inc.,
11.25% Sr. Sub. Nts., Series A,
4/15/04 100,000 111,375
- --------------------------------------------------------------------------
Mariner Health Group, Inc., 9.50%
Sr. Sub. Nts., Series B, 4/1/06(4) 100,000 104,000
- --------------------------------------------------------------------------
Sun Healthcare Group, Inc., 9.50%
Sr. Sub. Nts., 7/1/07(5) 265,000 272,950
-------------
740,574
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
HOTEL/GAMING - 1.8%
Boyd Gaming Corp.:
9.25% Sr. Unsec. Gtd. Nts., 10/1/03 $ 100,000 $ 105,250
9.50% Sr. Unsec. Sub. Nts., 7/15/07 50,000 52,625
- --------------------------------------------------------------------------
Capstar Hotel Co., 8.75% Sr. Sub.
Nts., 8/15/07 275,000 284,625
- --------------------------------------------------------------------------
Casino America, Inc., 12.50% Sr.
Nts., 8/1/03 50,000 54,562
- --------------------------------------------------------------------------
Casino Magic of Louisiana Corp.,
13% First Mtg. Nts., Series B,
8/15/03 150,000 144,750
- --------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd.
First Mtg. Nts., 12/1/03 350,000 378,000
- --------------------------------------------------------------------------
Grupo Posadas SA de CV, 10.375%
Bonds, 2/13/02(4) 50,000 51,375
- --------------------------------------------------------------------------
HMC Acquisition Properties, Inc.,
9% Sr. Nts., Series B, 12/15/07 150,000 156,375
- --------------------------------------------------------------------------
HMH Properties, Inc., 8.875% Sr.
Nts., 7/15/07 300,000 317,250
- --------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr.
Sub. Nts., 6/15/07 425,000 447,312
- --------------------------------------------------------------------------
Mohegan Tribal Gaming Authority
(Connecticut), 13.50% Sr. Sec.
Nts., Series B, 11/15/02 200,000 257,000
- --------------------------------------------------------------------------
Rio Hotel & Casino, Inc., 9.50%
Gtd. Sr. Sub. Nts., 4/15/07 350,000 371,875
- --------------------------------------------------------------------------
Showboat Marina Casino
Partnership/Showboat Marina Finance
Corp., 13.50% First Mtg. Nts.,
Series B, 3/15/03 350,000 421,750
- --------------------------------------------------------------------------
Signature Resorts, Inc., 9.75% Sr.
Sub. Nts., 10/1/07(5) 200,000 201,000
- --------------------------------------------------------------------------
Station Casinos, Inc., 10.125% Sr.
Sub. Nts., 3/15/06 110,000 116,600
- --------------------------------------------------------------------------
Venetian Casino Resort LLC/Las
Vegas Sands, Inc.:
10% Sr. Sub. Nts., 11/15/05(5) 200,000 183,500
12.25% Mtg. Nts., 11/15/04(5) 150,000 150,937
-------------
3,694,786
- --------------------------------------------------------------------------
RESTAURANTS - 0.3%
Ameriking, Inc., 10.75% Sr. Nts.,
12/1/06 125,000 131,875
- --------------------------------------------------------------------------
Carrols Corp., 11.50% Sr. Nts.,
8/15/03 100,000 106,500
- --------------------------------------------------------------------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 79,000 80,777
9.75% Sr. Sub. Nts., 6/1/02 300,000 309,750
-------------
628,902
- --------------------------------------------------------------------------
TEXTILE/APPAREL - 0.3%
CMI Industries, Inc., 9.50% Sr.
Sub. Nts., 10/1/03(4) 10,000 9,875
- --------------------------------------------------------------------------
Dan River, Inc., 10.125% Sr. Sub.
Nts., 12/15/03 50,000 53,687
- --------------------------------------------------------------------------
PT Polysindo Eka Perkasa, Zero
Coupon Promissory Nts., 9.39%,
7/14/98(12) 100,000 84,682
- --------------------------------------------------------------------------
Tultex Corp., 9.625% Sr. Unsec.
Nts., 4/15/07 200,000 200,000
- --------------------------------------------------------------------------
William Carter Co., 10.375% Sr.
Sub. Nts., Series A, 12/1/06 200,000 211,000
-------------
559,244
- --------------------------------------------------------------------------
ENERGY - 2.6%
Belden & Blake Corp., 9.875% Sr.
Sub. Nts., 6/15/07 580,000 588,700
- --------------------------------------------------------------------------
Chesapeake Energy Corp.:
12% Gtd. Sr. Exchangeable Nts.,
3/1/01 200,000 210,500
9.125% Sr. Unsec. Nts., 4/15/06 100,000 103,250
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY (CONTINUED)
- --------------------------------------------------------------------------
Clark R&M, Inc.:
8.375% Sr. Nts., 11/15/07(5) $ 125,000 $ 126,094
8.875% Sr. Sub. Nts., 11/15/07(5) 250,000 253,750
- --------------------------------------------------------------------------
Clark USA, Inc., 10.875% Sr. Nts.,
Series B, 12/1/05 125,000 136,875
- --------------------------------------------------------------------------
Cliffs Drilling Co., 10.25% Sr.
Nts., 5/15/03 50,000 54,687
- --------------------------------------------------------------------------
Dailey International, Inc., 9.75%
Gtd. Sr. Unsec. Nts., 8/15/07(5) 125,000 131,875
- --------------------------------------------------------------------------
DI Industries, Inc., 8.875% Sr.
Nts., 7/1/07 75,000 78,000
- --------------------------------------------------------------------------
Energy Corp. of America, 9.50% Sr.
Sub. Nts., Series A, 5/15/07 245,000 245,612
- --------------------------------------------------------------------------
Forcenergy, Inc., 8.50% Sr. Sub.
Nts., Series B, 2/15/07 190,000 193,325
- --------------------------------------------------------------------------
Forcenergy, Inc., 9.50% Sr. Sub.
Nts., 11/1/06 445,000 473,925
- --------------------------------------------------------------------------
Gothic Energy Corp., 12.25% Sr.
Nts., 9/1/04(4) 200,000 210,000
- --------------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr.
Sub. Bonds, 7/15/06 350,000 376,687
- --------------------------------------------------------------------------
National Energy Group, Inc., 10.75%
Sr. Nts., 11/1/06 425,000 445,187
- --------------------------------------------------------------------------
Parker Drilling Corp., 9.75% Gtd.
Sr. Nts., 11/15/06 300,000 324,750
- --------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.,
9.375% Sub. Debs., 2/1/06 425,000 384,625
- --------------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub.
Nts., 5/15/07 395,000 402,900
- --------------------------------------------------------------------------
Statia Terminals
International/Statia Terminals
(Canada), Inc., 11.75% First Mtg.
Nts., Series B, 11/15/03 175,000 185,500
- --------------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub.
Nts., 9/15/07 355,000 362,987
- --------------------------------------------------------------------------
Wiser Oil Co., 9.50% Sr. Sub. Nts.,
5/15/07 135,000 132,975
-------------
5,422,204
- --------------------------------------------------------------------------
FINANCIAL SERVICES - 2.1%
- --------------------------------------------------------------------------
BANKS & THRIFTS - 1.1%
Alliance & Leicester Building
Society, 8.75% Unsec. Sub. Nts.,
12/7/06 GBP 80,000 143,973
- --------------------------------------------------------------------------
Banco de Colombia, 5.20% Cv. Jr.
Unsec. Sub. Nts., 2/1/99 200,000 212,000
- --------------------------------------------------------------------------
Banco Nacional de Mexico SA, 11%
Sub. Exchangeable Capital Debs.,
7/15/03(4) 130,000 133,575
- --------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts.,
7/18/07 7,000 7,875
- --------------------------------------------------------------------------
First Nationwide Holdings, Inc.,
10.625% Sr. Sub. Nts., 10/1/03 120,000 135,000
- --------------------------------------------------------------------------
Korea Development Bank:
6.50% Bonds, 11/15/02 120,000 96,276
6.625% Bonds, 11/21/03 250,000 201,303
7.125% Bonds, 9/17/01 135,000 115,019
7.375% Bonds, 9/17/04 120,000 98,497
7.90% Nts., 2/1/02 220,000 191,710
- --------------------------------------------------------------------------
Local Financial Corp., 11% Sr.
Nts., 9/8/04(4) 150,000 159,000
- --------------------------------------------------------------------------
Ongko International Finance Co. BV,
10.50% Gtd. Nts., 3/29/04(5) 90,000 81,900
- --------------------------------------------------------------------------
Westpac Banking Corp., Zero Coupon
Bills, 19.23%, 3/31/98(12)(17) NZD 1,150,000 654,350
-------------
2,230,478
- --------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 0.8%
Amresco, Inc., 10% Sr. Sub. Nts.,
Series 97-A, 3/15/04 100,000 104,250
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
DIVERSIFIED FINANCIAL (CONTINUED)
Bakrie Investindo, Zero Coupon
Promissory Nts., 26.54%,
7/10/98(12) IDR 1,000,000,000 $ 148,457
- --------------------------------------------------------------------------
Banco del Atlantico SA, 7.875%
Eurobonds, 11/5/98 370,000 369,691
- --------------------------------------------------------------------------
Emergent Group, Inc., 10.75% Sr.
Nts., 9/15/04 25,000 24,906
- --------------------------------------------------------------------------
Ocwen Capital Trust I, 10.875% Gtd.
Bonds, 8/1/27 150,000 163,500
- --------------------------------------------------------------------------
Ocwen Financial Corp., 11.875%
Nts., 10/1/03 150,000 169,875
- --------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment
Trust, 11.625% Sr. Sec. Nts.,
Series B, 4/1/02 200,000 215,000
- --------------------------------------------------------------------------
Southern Pacific Funding Corp.,
11.50% Sr. Nts., 11/1/04 250,000 251,250
- --------------------------------------------------------------------------
Veritas Capital Trust, 10% Gtd.
Debs., 1/1/28(5) 100,000 102,250
- --------------------------------------------------------------------------
Wilshire Financial Services Group,
Inc., 13% Nts., 1/1/04 60,000 61,350
-------------
1,610,529
- --------------------------------------------------------------------------
INSURANCE - 0.2%
Terra Nova Insurance (UK) Holdings
plc, 10.75% Sr. Nts., 7/1/05 100,000 112,406
- --------------------------------------------------------------------------
Veritas Holdings, Inc., 9.625% Sr.
Nts., 12/15/03 200,000 214,000
-------------
326,406
- --------------------------------------------------------------------------
HOUSING RELATED - 0.6%
- --------------------------------------------------------------------------
BUILDING MATERIALS - 0.2%
Building Materials Corp. of
America, 8.625% Sr. Nts., Series B,
12/15/06 50,000 51,750
- --------------------------------------------------------------------------
Falcon Building Products, Inc.,
9.50% Sr. Sub. Nts., 6/15/07 175,000 182,437
- --------------------------------------------------------------------------
Nortek, Inc., 9.25% Sr. Nts.,
Series B, 3/15/07 150,000 153,750
-------------
387,937
- --------------------------------------------------------------------------
HOMEBUILDERS/REAL ESTATE - 0.4%
Continental Homes Holding Corp.,
10% Gtd. Unsec. Bonds, 4/15/06 50,000 54,750
- --------------------------------------------------------------------------
Greystone Homes, Inc., 10.75% Sr.
Gtd. Nts., 3/1/04(4) 50,000 54,750
- --------------------------------------------------------------------------
Hovnanian K. Enterprises, Inc.,
11.25% Gtd. Sub. Nts., 4/15/02 75,000 78,938
- --------------------------------------------------------------------------
International de Ceramica SA, 9.75%
Gtd. Unsec. Unsub. Nts., 8/1/02(4) 70,000 66,850
- --------------------------------------------------------------------------
Kaufman & Broad Home Corp., 7.75%
Sr. Nts., 10/15/04 400,000 398,000
- --------------------------------------------------------------------------
Nortek, Inc., 9.125% Sr. Nts.,
Series B, 9/1/07 150,000 153,000
-------------
806,288
- --------------------------------------------------------------------------
MANUFACTURING - 2.5%
- --------------------------------------------------------------------------
AEROSPACE - 1.0%
America West Airlines, Inc., 10.75%
Sr. Nts., 9/1/05 450,000 483,750
- --------------------------------------------------------------------------
Amtran, Inc., 10.50% Sr. Nts.,
8/1/04(5) 150,000 156,750
- --------------------------------------------------------------------------
Atlas Air, Inc.:
10.75% Sr. Nts., 8/1/05 125,000 132,500
12.25% Pass-Through Certificates,
12/1/02 350,000 390,250
- --------------------------------------------------------------------------
Constellation Finance LLC, 9.80%
Airline Receivable Asset-Backed
Nts., Series 1997-1, 1/1/01(4) 125,000 126,250
- --------------------------------------------------------------------------
Kitty Hawk, Inc., 9.95% Sr. Nts.,
11/15/04(5) 100,000 101,000
- --------------------------------------------------------------------------
Pegasus Aircraft Lease
Securitization Trust, 11.76% Sr.
Nts., Cl. B, 6/15/04(4) 97,191 100,273
- --------------------------------------------------------------------------
SC International Services, Inc.,
9.25% Sr. Sub. Nts., 9/1/07(5) 325,000 338,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
AEROSPACE (CONTINUED)
Trans World Airlines, Inc., 11.50%
Sr. Sec. Nts., 12/15/04(5) $ 300,000 $ 303,000
-------------
2,131,773
- --------------------------------------------------------------------------
AUTOMOTIVE - 0.7%
Cambridge Industries, Inc., 10.25%
Sr. Sub. Nts., 7/15/07(5) 75,000 78,750
- --------------------------------------------------------------------------
Collins & Aikman Products Co.,
11.50% Gtd. Sr. Sub. Nts., 4/15/06 300,000 339,000
- --------------------------------------------------------------------------
Delco Remy International, Inc.,
8.625% Sr. Nts., 12/15/07 50,000 50,938
- --------------------------------------------------------------------------
Hayes Wheels International, Inc.:
11% Sr. Sub. Nts., 7/15/06 225,000 252,000
9.125% Sr. Sub. Nts., 7/15/07 100,000 103,875
- --------------------------------------------------------------------------
Key Plastics, Inc., 10.25% Sr. Sub.
Nts., Series B, 3/15/07 300,000 320,250
- --------------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts.,
7/15/06 200,000 220,500
-------------
1,365,313
- --------------------------------------------------------------------------
CAPITAL GOODS - 0.8%
Burke Industries, Inc., 10% Sr.
Nts., 8/15/07(5) 150,000 154,875
- --------------------------------------------------------------------------
Clark-Schwebel, Inc.:
10.50% Sr. Nts., 4/15/06 100,000 109,500
12.50% Debs., 7/15/07(5)(14) 45,994 49,444
- --------------------------------------------------------------------------
Communications & Power Industries,
Inc., 12% Sr. Sub. Nts., Series B,
8/1/05 250,000 280,000
- --------------------------------------------------------------------------
Hydrochem Industrial Services,
Inc., 10.375% Sr. Sub. Nts., 8/1/07 150,000 155,625
- --------------------------------------------------------------------------
Insilco Corp., 10.25% Unsec. Sr.
Sub. Nts., 8/15/07(5) 300,000 315,750
- --------------------------------------------------------------------------
International Wire Group, Inc.,
11.75% Sr. Sub. Nts., Series B,
6/1/05 125,000 137,500
- --------------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub.
Nts., 7/1/07 100,000 100,250
- --------------------------------------------------------------------------
Roller Bearing Co. of America,
Inc., 9.625% Gtd. Sr. Sub. Nts.,
6/15/07(4) 140,000 141,750
- --------------------------------------------------------------------------
Synthetic Industries, Inc., 9.25%
Sr. Sub. Nts., 2/15/07 45,000 47,700
- --------------------------------------------------------------------------
Titan Wheel International, Inc.,
8.75% Sr. Sub. Nts., 4/1/07 100,000 105,250
- --------------------------------------------------------------------------
Unifrax Investment Corp., 10.50%
Sr. Nts., 11/1/03(4) 50,000 52,250
-------------
1,649,894
- --------------------------------------------------------------------------
MEDIA - 3.6%
- --------------------------------------------------------------------------
BROADCASTING - 1.2%
Azteca Holdings SA, 11% Sr. Nts.,
6/15/02(5) 155,000 160,425
- --------------------------------------------------------------------------
Capstar Broadcasting Partners,
Inc., 9.25% Sr. Sub. Nts., 7/1/07 275,000 282,563
- --------------------------------------------------------------------------
Chancellor Radio Broadcasting Co.:
8.125% Sr. Sub. Nts., 12/15/07(5) 200,000 196,750
8.75% Sr. Sub. Nts., 6/15/07 100,000 102,250
- --------------------------------------------------------------------------
Jacor Communications Co., 8.75%
Gtd. Sr. Sub. Nts., 6/15/07(5) 100,000 102,250
- --------------------------------------------------------------------------
Paxson Communications Corp.,
11.625% Sr. Sub. Nts., 10/1/02 95,000 102,125
- --------------------------------------------------------------------------
Radio One, Inc., 7% Sr. Sub. Nts.,
Series B, 5/15/04(10) 100,000 99,500
- --------------------------------------------------------------------------
SFX Broadcasting, Inc., 10.75% Sr.
Sub. Nts., Series B, 5/15/06 150,000 165,000
- --------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
10% Sr. Sub. Nts., 9/30/05 100,000 105,750
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
BROADCASTING (CONTINUED)
Sinclair Broadcast Group, Inc.:
(Continued)
8.75% Sr. Sub. Nts., 12/15/07 $ 150,000 $ 150,750
9% Gtd. Sr. Sub. Nts., 7/15/07 250,000 256,250
- --------------------------------------------------------------------------
Spanish Broadcasting Systems, Inc.,
11% Sr. Nts., 3/15/04 100,000 110,500
- --------------------------------------------------------------------------
TV Azteca SA de CV:
10.125% Gtd. Sr. Nts., Series A,
2/15/04 100,000 103,250
10.50% Gtd. Sr. Nts., Series B,
2/15/07 150,000 155,250
- --------------------------------------------------------------------------
Young Broadcasting, Inc.:
8.75% Sr. Sub. Debs., 6/15/07 275,000 273,625
9% Sr. Sub. Nts., Series B, 1/15/06 100,000 100,500
-------------
2,466,738
- --------------------------------------------------------------------------
CABLE TELEVISION - 1.4%
Adelphia Communications Corp.:
10.50% Sr. Unsec. Nts., Series B,
7/15/04 70,000 75,775
9.25% Sr. Nts., 10/1/02 100,000 102,500
- --------------------------------------------------------------------------
American Telecasting, Inc.,
0%/14.50% Sr. Disc. Nts.,
6/15/04(13) 72,000 24,120
- --------------------------------------------------------------------------
Cablevision Systems Corp.:
9.875% Sr. Sub. Debs., 4/1/23 150,000 165,750
9.875% Sr. Sub. Nts., 5/15/06 250,000 275,625
- --------------------------------------------------------------------------
EchoStar Communications Corp.,
0%/12.875% Sr. Disc. Nts.,
6/1/04(13) 40,000 36,800
- --------------------------------------------------------------------------
EchoStar DBS Corp., 12.50% Gtd.
Nts., 7/1/02 250,000 271,250
- --------------------------------------------------------------------------
EchoStar I, 8.25% Bonds, 2/26/01(4) 159,783 158,185
- --------------------------------------------------------------------------
EchoStar II, 8.25% Bonds,
11/9/01(4) 147,612 146,136
- --------------------------------------------------------------------------
EchoStar Satellite Broadcasting
Corp., 0%/13.125% Sr. Sec. Disc.
Nts., 3/15/04(13) 400,000 342,000
- --------------------------------------------------------------------------
Fundy Cable Ltd./Ltee, 11% Sr. Sec.
Second Priority Nts., 11/15/05(4) 100,000 108,250
- --------------------------------------------------------------------------
Helicon Group LP/Helicon Capital
Corp., 11% Sr. Sec. Nts., Series B,
11/1/03(6) 175,000 189,000
- --------------------------------------------------------------------------
Knology Holdings, Inc., Units (each
unit consists of $1,000 principal
amount of 0%/11.875% sr. disc.
nts., 10/15/07 and one warrant to
purchase .003734 shares of
preferred stock)(4)(13)(15) 100,000 55,000
- --------------------------------------------------------------------------
Marcus Cable Operating Co.
LP/Marcus Cable Capital Corp.,
0%/13.50% Gtd. Sr. Sub. Disc. Nts.,
Series II, 8/1/04(13) 200,000 186,000
- --------------------------------------------------------------------------
Optel, Inc., 13% Sr. Nts., Series
B, 2/15/05 210,000 223,650
- --------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10%
Second Priority Sr. Sec. Debs.,
12/1/07 200,000 221,000
- --------------------------------------------------------------------------
Rogers Communications, Inc., 8.75%
Sr. Nts., 7/15/07 CAD 400,000 272,964
- --------------------------------------------------------------------------
TCI Satellite Entertainment, Inc.,
10.875% Sr. Sub. Nts., 2/15/07(5) 100,000 105,250
-------------
2,959,255
- --------------------------------------------------------------------------
DIVERSIFIED MEDIA - 0.8%
Ackerley Communications, Inc.,
10.75% Sr. Sec. Nts., Series A,
10/1/03 200,000 214,000
- --------------------------------------------------------------------------
Hollywood Theaters, Inc., 10.625%
Sr. Sub. Nts., 8/1/07(5) 100,000 106,750
- --------------------------------------------------------------------------
ITT Promedia CVA, 9.125% Sr. Sub.
Nts., 9/15/07(5) DEM 850,000 498,146
- --------------------------------------------------------------------------
Katz Media Corp., 10.50% Sr. Sub.
Nts., Series B, 1/15/07 90,000 99,675
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
DIVERSIFIED MEDIA (CONTINUED)
Lamar Advertising Co.:
8.625% Sr. Sub. Nts., 9/15/07 $ 150,000 $ 154,875
9.625% Sr. Sub. Nts., 12/1/06 50,000 54,063
- --------------------------------------------------------------------------
Outdoor Systems, Inc., 8.875% Sr.
Sub. Nts., 6/15/07 150,000 156,750
- --------------------------------------------------------------------------
Time Warner Entertainment Co. LP,
8.375% Sr. Debs., 3/15/23 300,000 343,208
- --------------------------------------------------------------------------
Universal Outdoor, Inc.:
9.75% Sr. Sub. Nts., 10/15/06 20,000 22,500
9.75% Sr. Sub. Nts., Series B,
10/15/06 70,000 78,750
-------------
1,728,717
- --------------------------------------------------------------------------
ENTERTAINMENT/FILM - 0.1%
Ascent Entertainment Group, Inc.,
0%/11.875% Sr. Sec. Disc. Nts.,
12/15/04(5)(13) 150,000 86,625
- --------------------------------------------------------------------------
Imax Corp., 10% Sr. Nts., 3/1/01(6) 200,000 211,000
-------------
297,625
- --------------------------------------------------------------------------
PUBLISHING/PRINTING - 0.1%
American Lawyer Media Holdings,
Inc., 9.75% Sr. Nts., 12/15/07(5) 100,000 102,000
- --------------------------------------------------------------------------
Sun Media Corp., 9.50% Sr. Sub.
Nts., 2/15/07 150,000 162,000
-------------
264,000
- --------------------------------------------------------------------------
OTHER - 0.8%
- --------------------------------------------------------------------------
CONGLOMERATES - 0.1%
Cia Latino Americana de
Infraestructura & Servicios SA -
CLISA, 11.625% Gtd. Sr. Nts.,
6/1/04(4) 30,000 30,300
- --------------------------------------------------------------------------
Maxxam Group, Inc., 0%/12.25% Sr.
Sec. Disc. Nts., 8/1/03(13) 25,000 24,875
- --------------------------------------------------------------------------
Mechala Group Jamaica Ltd., 12.75%
Gtd. Sr. Sec. Sub. Nts., Series B,
12/30/99 85,000 80,750
-------------
135,925
- --------------------------------------------------------------------------
ENVIRONMENTAL - 0.2%
Allied Waste Industries, Inc.,
0%/11.30% Sr. Disc. Nts.,
6/1/07(5)(13) 300,000 211,500
- --------------------------------------------------------------------------
Allied Waste North America, Inc.,
10.25% Sr. Sub. Nts., 12/1/06 250,000 275,625
-------------
487,125
- --------------------------------------------------------------------------
SERVICES - 0.5%
Borg-Warner Security Corp.:
9.125% Sr. Sub. Nts., 5/1/03 100,000 102,625
9.625% Sr. Sub. Nts., 3/15/07 100,000 104,500
- --------------------------------------------------------------------------
Coinstar, Inc., 0%/13% Sr. Disc.
Nts., 10/1/06(4)(13) 100,000 82,500
- --------------------------------------------------------------------------
Greater Toronto Airport, 5.40%
Debs., 12/3/02 CAD 240,000 165,990
- --------------------------------------------------------------------------
Kindercare Learning Centers, Inc.,
9.50% Sr. Sub. Nts., 2/15/09 50,000 50,000
- --------------------------------------------------------------------------
Oxford Automotive, Inc., 10.125%
Sr. Unsec. Sub. Nts., 6/15/07 300,000 316,875
- --------------------------------------------------------------------------
Protection One Alarm Monitoring,
Inc., 6.75% Cv. Gtd. Sr. Sub. Nts.,
9/15/03 125,000 148,281
-------------
970,771
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
RETAIL - 1.1%
- --------------------------------------------------------------------------
SPECIALTY RETAILING - 0.3%
Central Termica Guemes, 12% Bonds,
11/26/01(4) $ 100,000 $ 101,500
- --------------------------------------------------------------------------
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(4) 100,000 105,500
- --------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub.
Nts., 10/15/07(4) 200,000 205,000
- --------------------------------------------------------------------------
Specialty Retailers, Inc., 8.50%
Gtd. Sr. Nts., 7/15/05 75,000 76,875
-------------
564,825
- --------------------------------------------------------------------------
SUPERMARKETS - 0.8%
Fleming Cos., Inc.:
10.50% Sr. Sub. Nts., 12/1/04(5) 50,000 52,625
10.625% Sr. Sub. Nts., 7/31/07(5) 300,000 318,000
- --------------------------------------------------------------------------
Ralph's Grocery Co.:
11% Sr. Sub. Nts., 6/15/05 50,000 57,125
10.45% Sr. Nts., 6/15/04 325,000 365,625
- --------------------------------------------------------------------------
Randall's Food Markets, Inc.,
9.375% Sr. Sub. Nts., 7/1/07(5) 375,000 390,000
- --------------------------------------------------------------------------
Shoppers Food Warehouse Corp.,
9.75% Sr. Nts., 6/15/04(5) 400,000 410,000
- --------------------------------------------------------------------------
Stater Brothers Holdings, Inc., 9%
Sr. Unsec. Sub. Nts., 7/1/04 125,000 131,250
-------------
1,724,625
- --------------------------------------------------------------------------
TECHNOLOGY - 6.6%
- --------------------------------------------------------------------------
INFORMATION TECHNOLOGY - 3.5%
Amphenol Corp., 9.875% Sr. Sub.
Nts., 5/15/07 75,000 79,875
- --------------------------------------------------------------------------
Celcaribe SA, 0%/13.50% Sr. Sec.
Nts., 3/15/04(4)(13) 150,000 159,000
- --------------------------------------------------------------------------
Cellular Communications
International, Inc., Zero Coupon
Sr. Disc. Nts., 12.03%, 8/15/00(12) 475,000 382,375
- --------------------------------------------------------------------------
Cellular, Inc., 0%/11.75% Sr. Sub.
Disc. Nts., 9/1/03(13) 50,000 50,375
- --------------------------------------------------------------------------
Clearnet Communications, Inc.,
0%/14.75% Sr. Disc. Nts.,
12/15/05(13) 150,000 118,875
- --------------------------------------------------------------------------
Comcast Cellular Communications,
Inc., 9.50% Sr. Nts., 5/1/07 150,000 157,125
- --------------------------------------------------------------------------
Computervision Corp., 11.375% Sr.
Sub. Nts., 8/15/99 40,000 40,450
- --------------------------------------------------------------------------
Comunicacion Celular SA, 0%/13.125%
Sr. Deferred Coupon Bonds,
11/15/03(13) 350,000 266,875
- --------------------------------------------------------------------------
Concentic Network Corp., Units
(each unit consists of $1,000
principal amount of 12.75% sr.
nts., 12/15/07 and one warrant to
purchase 6.34 shares of common
stock)(5)(15) 100,000 102,875
- --------------------------------------------------------------------------
Consorcio Ecuatoriano de Telecom
SA, 14% Nts., 5/1/02(4) 70,000 70,700
- --------------------------------------------------------------------------
Crown Castle International Corp.,
0%/10.625% Sr. Disc. Nts.,
11/15/07(5)(13) 350,000 219,625
- --------------------------------------------------------------------------
Details, Inc., 10% Sr. Sub. Nts.,
11/15/05(5) 150,000 154,125
- --------------------------------------------------------------------------
Dial Call Communications, Inc.,
0%/12.25% Sr. Disc. Nts.,
4/15/04(13) 400,000 383,000
- --------------------------------------------------------------------------
DII Group, Inc., 8.50% Sr. Sub.
Nts., 9/15/07(5) 30,000 29,550
- --------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts.,
3/1/07 350,000 357,000
- --------------------------------------------------------------------------
Geotek Communications, Inc.:
0%/15% Sr. Sec. Disc. Nts.,
7/15/05(13) 100,000 58,500
12% Cv. Sr. Sub. Nts., 2/15/01(4) 210,000 168,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
INFORMATION TECHNOLOGY (CONTINUED)
Iridium LLC/Iridium Capital Corp.,
11.25% Sr. Nts., 7/15/05(5) $ 125,000 $ 123,125
- --------------------------------------------------------------------------
Iron Mountain, Inc., 8.75% Sr. Sub.
Nts., 9/30/09(5) 150,000 154,500
- --------------------------------------------------------------------------
Metrocall, Inc., 9.75% Sr. Sub.
Nts., 11/1/07(5) 75,000 74,438
- --------------------------------------------------------------------------
Microcell Telecommunications, Inc.:
0%/11.125% Sr. Disc. Nts.,
10/15/07(5)(13) CAD 300,000 118,447
0%/14% Sr. Disc. Nts., Series B,
6/1/06(13) 200,000 135,000
- --------------------------------------------------------------------------
Millicom International Cellular SA,
0%/13.50% Sr. Disc. Nts.,
6/1/06(13) 210,000 154,875
- --------------------------------------------------------------------------
Nextel Communications, Inc.:
0%/10.65% Sr. Disc. Nts.,
9/15/07(5)(13) 400,000 254,000
0%/11.50% Sr. Disc. Nts.,
9/1/03(13) 150,000 150,000
0%/9.75% Sr. Disc. Nts.,
10/31/07(5)(13) 500,000 307,500
- --------------------------------------------------------------------------
Occidente y Caribe Celular SA,
0%/14% Sr. Disc. Nts., Series B,
3/15/04(13) 200,000 151,000
- --------------------------------------------------------------------------
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 295,000 312,700
11.625% Sr. Nts., Series A, 8/15/06 80,000 84,800
- --------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital
Corp., 14% Sr. Nts., 8/15/04 300,000 327,000
- --------------------------------------------------------------------------
Orion Network Systems, Inc.,
0%/12.50% Sr. Disc. Nts.,
1/15/07(13) 150,000 112,125
- --------------------------------------------------------------------------
Price Communications Cellular
Holdings, Inc., 0%/13.50% Sr. Disc.
Nts., Series A, 8/1/07(4)(13) 150,000 95,250
- --------------------------------------------------------------------------
Price Communications Wireless,
Inc., 11.75% Sr. Sub. Nts.,
7/15/07(5) 225,000 245,250
- --------------------------------------------------------------------------
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts.,
10/1/03(13) 150,000 154,500
0%/14% Sr. Sub. Disc. Nts.,
11/15/01(13) 500,000 557,500
10.75% Sr. Nts., 11/1/04 75,000 81,563
- --------------------------------------------------------------------------
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)(13)(15) 300,000 114,000
- --------------------------------------------------------------------------
Star Choice Communications, Inc.,
Units (each unit consists of $1,000
principal amount of 13% sr. sec.
nts., 12/15/05 and one warrant to
buy common stock)(15) 100,000 103,000
- --------------------------------------------------------------------------
Teletrac, Inc., 14% Sr. Nts.,
8/1/07 85,000 81,175
- --------------------------------------------------------------------------
Unisys Corp., 11.75% Sr. Nts.,
10/15/04 150,000 172,125
- --------------------------------------------------------------------------
USA Mobile Communications, Inc. II:
14% Sr. Nts., 11/1/04 200,000 222,000
9.50% Sr. Nts., 2/1/04 100,000 98,000
- --------------------------------------------------------------------------
Wavetek Corp., 10.125% Sr. Sub.
Nts., 6/15/07 175,000 179,375
-------------
7,361,573
- --------------------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY -
3.1%
American Communications Services,
Inc.:
0%/12.75% Sr. Disc. Nts.,
4/1/06(13) 65,000 50,050
13.75% Sr. Nts., 7/15/07(5) 110,000 130,900
- --------------------------------------------------------------------------
Bell Cablemedia plc, 0%/11.95% Sr.
Disc. Nts., 7/15/04(13) 300,000 283,500
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS/TECHNOLOGY
(CONTINUED)
Brooks Fiber Properties, Inc.:
0%/10.875% Sr. Disc. Nts.,
3/1/06(13) $ 300,000 $ 250,500
0%/11.875% Sr. Disc. Nts.,
11/1/06(13) 90,000 72,450
10% Sr. Nts., 6/1/07 300,000 346,500
- --------------------------------------------------------------------------
BTI Telecom Corp., 10.50% Sr. Nts.,
9/15/07(5) 75,000 76,875
- --------------------------------------------------------------------------
Call-Net Enterprises, Inc.:
0%/13.25% Sr. Disc. Nts.,
12/1/04(13) 200,000 183,250
0%/9.27% Sr. Disc. Nts.,
8/15/07(13) 75,000 51,188
8.375% Sr. Nts., 8/15/07 CAD 150,000 110,075
- --------------------------------------------------------------------------
COLT Telecom Group plc:
10.125% Sr. Nts., 11/30/07 GBP 170,000 285,313
8.875% Sr. Nts., 11/30/07 DEM 100,000 56,694
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)(13)(15) 200,000 156,000
- --------------------------------------------------------------------------
Comcast UK Cable Partner Ltd.,
0%/11.20% Sr. Disc. Debs.,
11/15/07(13) 250,000 203,750
- --------------------------------------------------------------------------
Diamond Cable Communications plc,
0%/11.75% Sr. Disc. Nts.,
12/15/05(13) 215,000 167,163
- --------------------------------------------------------------------------
GST Telecommunications, Inc.,
0%/13.875% Cv. Sr. Sub. Disc. Nts.,
12/15/05(5)(13) 25,000 19,203
- --------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr.
Disc. Nts., 12/15/05(13) 425,000 327,250
- --------------------------------------------------------------------------
ICG Holdings, Inc.:
0%/12.50% Gtd. Sr. Disc. Nts.,
5/1/06(13) 195,000 147,225
0%/13.50% Sr. Disc. Nts.,
9/15/05(13) 125,000 101,875
- --------------------------------------------------------------------------
Intermedia Communications, Inc.:
0%/11.25% Sr. Disc. Nts., Series B,
7/15/07(13) 400,000 287,000
8.50% Sr. Nts., 1/15/08(5) 200,000 201,000
8.875% Sr. Nts., 11/1/07(5) 200,000 206,000
- --------------------------------------------------------------------------
McLeodUSA, Inc.:
0%/10.50% Sr. Disc. Nts.,
3/1/07(13) 140,000 101,500
9.25% Sr. Nts., 7/15/07(5) 75,000 78,938
- --------------------------------------------------------------------------
Metronet Communications Corp.,
0%/10.75% Sr. Disc. Nts.,
11/1/07(5)(13) 175,000 108,063
- --------------------------------------------------------------------------
MGC Communications, Inc., Units
(each unit consists of $1,000
principal amount of 13% sr. sec.
nts., 10/1/04 and one warrant to
purchase 8.07 shares of common
stock at $0.01 per share)(5)(15) 150,000 151,500
- --------------------------------------------------------------------------
Netia Holdings BV:
0%/11% Sr. Gtd. Disc. Nts.,
11/1/07(4)(13) DEM 350,000 111,684
10.25% Sr. Gtd. Nts., 11/1/07(4) 50,000 47,875
- --------------------------------------------------------------------------
NEXTLINK Communications, Inc.,
9.625% Sr. Nts., 10/1/07 350,000 364,000
- --------------------------------------------------------------------------
NTL, Inc., 10% Sr. Nts., 2/15/07 100,000 105,750
- --------------------------------------------------------------------------
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)(13)(15) 300,000 286,500
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS/TECHNOLOGY
(CONTINUED)
PTC International Finance BV,
0%/10.75% Gtd. Sr. Sub. Unsec.
Bonds, 7/1/07(5)(13) $ 134,000 $ 87,435
- --------------------------------------------------------------------------
Qwest Communications International,
Inc., 0%/9.47% Sr. Disc. Nts.,
10/15/07(5)(13) 700,000 476,000
- --------------------------------------------------------------------------
Shaw Communications, Inc., 8.54%
Debs., 9/30/27 CAD 340,000 220,836
- --------------------------------------------------------------------------
Teleport Communications Group,
Inc., 0%/11.125% Sr. Disc. Nts.,
7/1/07(13) 425,000 347,438
- --------------------------------------------------------------------------
Telewest Communications plc, 0%/11%
Sr. Disc. Debs., 10/1/07(13) 200,000 156,250
- --------------------------------------------------------------------------
UNIFI Communications, Inc., 14% Sr.
Nts., 3/1/04 25,000 19,750
-------------
6,377,280
- --------------------------------------------------------------------------
TRANSPORTATION - 0.7%
- --------------------------------------------------------------------------
RAILROADS - 0.2%
TFM SA de CV, 10.25% Gtd. Sr. Nts.,
6/15/07(5) 200,000 206,000
- --------------------------------------------------------------------------
Transtar Holdings LP/Transtar
Capital Corp., 0%/13.375% Sr. Disc.
Nts., Series B, 12/15/03(13) 300,000 264,000
-------------
470,000
- --------------------------------------------------------------------------
SHIPPING - 0.2%
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg.
Nts., 6/30/07(5) 275,000 292,875
Units (each unit consists of $1,000
principal amount of 12% second
priority ship mtg. nts., 6/30/07
and 7.66 warrants)(5)(15) 150,000 169,500
- --------------------------------------------------------------------------
Trico Marine Services, Inc., 8.50%
Gtd. Sr. Nts., 8/1/05(5) 50,000 50,938
-------------
513,313
- --------------------------------------------------------------------------
TRUCKING - 0.3%
Coach USA, Inc., 9.375% Gtd. Sr.
Sub. Nts., Series B, 7/1/07 200,000 207,000
- --------------------------------------------------------------------------
Pycsa Panama SA, 10.28% Sr. Sec.
Bonds, 12/15/12(4) 200,000 194,000
- --------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50%
Nts., Series 1993-A, 12/1/11(4) 242,602 200,753
-------------
601,753
- --------------------------------------------------------------------------
UTILITIES - 0.5%
- --------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.4%
California Energy, Inc., 10.25% Sr.
Disc. Nts., 1/15/04 150,000 162,000
- --------------------------------------------------------------------------
Calpine Corp.:
10.50% Sr. Nts., 5/15/06(4) 100,000 109,500
8.75% Sr. Nts., 7/15/07(5) 230,000 235,750
- --------------------------------------------------------------------------
El Paso Electric Co., 9.40% First
Mtg. Bonds, Series E, 5/1/11 250,000 282,500
- --------------------------------------------------------------------------
First PV Funding Corp., 10.30%
Lease Obligation Bonds, Series
1986A, 1/15/14(4) 144,000 153,720
-------------
943,470
- --------------------------------------------------------------------------
GAS UTILITIES - 0.1%
Beaver Valley II Funding Corp., 9%
Second Lease Obligation Bonds,
6/1/17(4) 199,000 219,895
-------------
Total Corporate Bonds and Notes
(Cost $57,018,717) 58,542,921
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES(1) NOTE 1
<S> <C> <C> <C>
- --------------------------------------------------------------------------
COMMON STOCKS - 0.3%
- --------------------------------------------------------------------------
Celcaribe SA(4)(16) 24,390 $ 121,950
- --------------------------------------------------------------------------
Coinstar, Inc.(16) 700 6,388
- --------------------------------------------------------------------------
Optel, Inc.(4)(16) 210 2
- --------------------------------------------------------------------------
Vail Resorts, Inc.(16) 15,500 402,031
-------------
Total Common Stocks (Cost $193,719) 530,371
- --------------------------------------------------------------------------
PREFERRED STOCKS - 1.9%
- --------------------------------------------------------------------------
American Radio Systems Corp.,
11.375% Cum. Exchangeable Preferred 772 91,965
- --------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable Preferred Stock,
Non-Vtg.(4)(16) 2,323 62,140
- --------------------------------------------------------------------------
BankUnited Capital Trust, 10.25%
Redeemable Trust Preferred
Securities(4) 100,000 103,250
- --------------------------------------------------------------------------
California Federal Bank, 11.50%
Non-Cum., Non-Vtg. 1,500 169,875
- --------------------------------------------------------------------------
CGA Group Ltd., Preferred Stock,
Series A(4)(16) 16,000 400,000
- --------------------------------------------------------------------------
Clark USA, Inc., 11.50% Cum.
Preferred Stock(5)(14) 50 53,125
- --------------------------------------------------------------------------
CRIIMI MAE, Inc., 10.875% Cum. Cv.
Preferred Stock, Series B, Non-Vtg. 6,000 205,125
- --------------------------------------------------------------------------
Crown American Realty Trust, 11%
Cum. Non-Vtg. Preferred, Series A 2,000 104,500
- --------------------------------------------------------------------------
Doane Products Co., 14.25% Sr.
Exchangeable Preferred Stock,
Non-Vtg.(16) 5,000 195,000
- --------------------------------------------------------------------------
Earthwatch, Inc., 12% Cv. Sr.
Preferred Stock, Series C(4)(14) 10,000 75,000
- --------------------------------------------------------------------------
EchoStar Communications Corp.,
12.125% Sr. Redeemable Exchangeable
Preferred Stock, Series
B(5)(14)(16) 125 130,938
- --------------------------------------------------------------------------
El Paso Electric Co., 11.40%
Preferred Stock, Series A(14) 1,817 201,233
- --------------------------------------------------------------------------
Fidelity Federal Bank FSB Glendale
California, 12% Non-Cum.
Exchangeable Perpetual Preferred
Stock, Series A(4) 20 555
- --------------------------------------------------------------------------
Fresenius Medical Care Trust, 9%
Preferred Securities 275,000 288,750
- --------------------------------------------------------------------------
Golden State Bancorp, 8.75% Cv.
Preferred Stock, Series A 1,000 91,125
- --------------------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable Preferred Stock 101 118,170
- --------------------------------------------------------------------------
Kelley Oil & Gas Corp., $2.625 Cv. 1,800 39,600
- --------------------------------------------------------------------------
NEXTLINK Communications, Inc., 14%
Sr. Exchangeable Preferred(14) 5,708 355,323
- --------------------------------------------------------------------------
Prime Retail, Inc., 8.50% Cv.
Preferred Stock, Series B 6,000 144,000
- --------------------------------------------------------------------------
PRIMEDIA, Inc., 9.20% Preferred
Stock, Series E(4)(16) 1,000 100,250
- --------------------------------------------------------------------------
SD Warren Co., 14% Cum.
Exchangeable, Series B(16) 9,000 443,250
- --------------------------------------------------------------------------
Spanish Broadcasting Systems, Inc.,
14.25% Cum. Sr. Exchangeable
Preferred Stock, Non-Vtg.(5)(14) 106 112,625
- --------------------------------------------------------------------------
Time Warner, Inc., 10.25%
Exchangeable Preferred, Series
M(14) 1 1,183
- --------------------------------------------------------------------------
Walden Residential Properties,
Inc.:
9.16% Cv. Preferred Stock, Series B 10,000 290,000
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES(1) NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONTINUED)
- --------------------------------------------------------------------------
Walden Residential Properties,
Inc.: (Continued)
9.20% Sr. Preferred Stock 1,000 $ 25,625
-------------
Total Preferred Stocks (Cost
$3,492,228) 3,802,607
- --------------------------------------------------------------------------
OTHER SECURITIES - 0.1%
- --------------------------------------------------------------------------
Intermedia Communications, Inc.,
Depositary Shares representing one
one-hundredth 7% Cum. Cv. Jr.
Preferred Stock, Series E,
Non-Vtg.(5)(16) 2,100 59,587
- --------------------------------------------------------------------------
WorldCom, Inc., 8% Cv. Depositary
Shares each Representing 1/100
Share of Dividend Enhanced
Convertible Stock 2,000 210,000
-------------
Total Other Securities (Cost
$207,309) 269,587
UNITS
- --------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES -
0.0%
- --------------------------------------------------------------------------
American Telecasting, Inc. Wts.,
Exp. 6/99(4) 1,500 15
- --------------------------------------------------------------------------
Cellular Communications
International, Inc. Wts., Exp.
8/03(4) 300 5,100
- --------------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 12/49(4) 16,000 8,000
- --------------------------------------------------------------------------
Clearnet Communications, Inc. Wts.,
Exp. 9/05 165 949
- --------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp.
11/03(4) 200 14,000
- --------------------------------------------------------------------------
Eye Care Centers of America, Inc.
Wts., Exp. 10/03(4) 70 245
- --------------------------------------------------------------------------
Geotek Communications, Inc. Wts.,
Exp. 7/05(4) 7,500 7,500
- --------------------------------------------------------------------------
Gothic Energy Corp. Wts., Exp. 9/04 2,800 5,600
- --------------------------------------------------------------------------
Hyperion Telecommunications, Inc.
Wts., Exp. 4/01(4) 60 3,600
- --------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp.
9/05(4) 825 10,313
- --------------------------------------------------------------------------
IHF Capital, Inc., Series I Wts.,
Exp. 11/99(4) 200 10,000
- --------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp.
8/02 200 --
- --------------------------------------------------------------------------
Mexican Value Rights 1,100 --
- --------------------------------------------------------------------------
Microcell Telecommunications, Inc.:
Conditional Wts., Exp. 6/06(4) 600 375
Wts., Exp. 6/06(4) 600 7,800
- --------------------------------------------------------------------------
NEXTLINK Communications, Inc. Wts.,
Exp. 2/09(4) 4,100 41
- --------------------------------------------------------------------------
Occidente y Caribe Celular SA Wts.,
Exp. 3/04(4) 800 11,000
- --------------------------------------------------------------------------
Orion Network Systems, Inc. Wts.,
Exp. 1/07(4) 150 1,875
- --------------------------------------------------------------------------
Price Communications Corp. Wts.,
Exp. 8/07(4) 516 5
- --------------------------------------------------------------------------
Teletrac, Inc. Wts., Exp. 8/07(4) 85 467
- --------------------------------------------------------------------------
UNIFI Communications, Inc. Wts.,
Exp. 3/07(4) 25 38
- --------------------------------------------------------------------------
United International Holdings, Inc.
Wts., Exp. 11/99(4) 200 2,400
-------------
Total Rights, Warrants and
Certificates (Cost $22,677) 89,323
PRINCIPAL
AMOUNT(1)
- --------------------------------------------------------------------------
STRUCTURED INSTRUMENTS - 3.9%
- --------------------------------------------------------------------------
Bayerische Landesbank Girozentrale
(New York Branch) Canada Banker's
Acceptance Index Yield Nts.,
8.405%, 5/22/98 $ 400,000 397,000
- --------------------------------------------------------------------------
Bayerische Landesbank Girozentrale
(New York Branch) Lehman Brothers
High Yield Bond Index Nts., 12.50%,
2/4/98 250,000 249,600
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
<S> <C> <C> <C>
- --------------------------------------------------------------------------
STRUCTURED INSTRUMENTS (CONTINUED)
- --------------------------------------------------------------------------
Cargill Financial Services Corp.,
Contingent Promissory Nts., 5.80%,
6/10/99 $ 250,000 $ 209,067
- --------------------------------------------------------------------------
Daiwa Finance Corp. (New York),
Daiwa Physical Commodity Index
Linked Nts., 4.906%, 3/24/98(6) 250,000 231,225
- --------------------------------------------------------------------------
First Boston Corp. (The), Russian
GKO Linked Nts., Zero Coupon,
13.95%, 1/20/98(12) 100,000 98,500
- --------------------------------------------------------------------------
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,
11.30%, 4/1/00 and an interest rate
swap between Goldman Sachs and the
Trust)(4) 130,434 131,087
- --------------------------------------------------------------------------
Goldman Sachs Group, LP:
South Korean Won Linked Nts.,
5.60%, 1/20/98 245,000 253,648
Taiwanese Dollar Linked Nts.,
5.75%, 6/12/98 880,000 888,624
- --------------------------------------------------------------------------
ING (U.S.) Financial Holdings
Corp.:
Czech Koruna/U.S. Dollar Linked
Nts., Zero Coupon, 11.10%,
3/4/98(12) 180,000 145,496
PT Polysindo Linked Nts., Zero
Coupon, 10.43%, 7/15/98(4)(12) 50,000 45,018
- --------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.
Greek Drachma/Swiss Franc Linked
Nts., Zero Coupon, 14.71%,
1/15/98(12) 100,000 104,000
- --------------------------------------------------------------------------
Lehman High Yield Index Nts.:
12.50%, 7/6/98 200,000 200,680
12.50%, 7/8/98 250,000 248,750
- --------------------------------------------------------------------------
Morgan Guaranty Trust Co. of New
York:
2 Times Leveraged Nts. on The
Emerging Markets Bond Index, Zero
Coupon, 2/4/98 100,000 107,620
Japanese Government Bond 193
Currency Protected Bank Nts.,
8.14%, 4/29/98 160,000 93,936
- --------------------------------------------------------------------------
Salomon Brothers, Inc. Chilean Peso
Linked Nts.:
Zero Coupon, 9.33%, 6/24/98(12) 110,000 98,659
Zero Coupon, 9.18%, 9/9/98(12) 110,000 96,195
- --------------------------------------------------------------------------
Salomon, Inc.:
Chilean Peso Indexed Credit Linked
Nts., Zero Coupon, 9.32%,
7/22/98(12) 1,000,000 893,400
Chilean Peso Indexed Enhanced
Access Nts., Zero Coupon, 9.18%,
6/18/98(12) 200,000 180,820
- --------------------------------------------------------------------------
Salomon, Inc. Russian S-Account
Credit Linked Nts.:
Zero Coupon, 13.71%, 4/3/98(12) 400,000 385,140
Zero Coupon, 14.17%, 5/22/98(12) 225,000 211,511
Zero Coupon, 14.10%, 5/7/98(12) 700,000 662,375
Zero Coupon, 9.79%, 7/31/98(12) 400,000 359,260
Zero Coupon, 15.21%, 8/7/98(12) 700,000 624,960
- --------------------------------------------------------------------------
Shoshone Partners Loan Trust, 7.50%
Sr. Nts., 5/31/02(4)(6) 742,000 786,944
- --------------------------------------------------------------------------
Standard Chartered Bank, U.S.
Dollar/Chinese Yuan Linked Nts.,
9.50%, 2/3/98 440,000 435,688
-------------
Total Structured Instruments (Cost
$8,396,216) 8,139,203
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
DATE STRIKE CONTRACTS NOTE 1
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
CALL OPTIONS PURCHASED - 0.1%
- -----------------------------------------------------------------------------------------
German Mark/Japanese Yen Call Opt. 1/98 67.68% DEM/JPY 1,654,846 $ 59,995
- -----------------------------------------------------------------------------------------
German Mark/Japanese Yen Call Opt. 3/98 68.59% DEM/JPY 1,990,000 59,963
- -----------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.125%,
11/15/27 Call Opt. 1/98 103.406% 1,000 7,031
- -----------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.125%,
11/15/27 Call Opt. 3/98 100.266% 4,600 148,062
-------------
Total Call Options Purchased (Cost
$192,207) 275,051
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(1)
- ----------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS - 0.8%
- ----------------------------------------------------------------------
Repurchase agreement with Smith,
Barney, Harris, Upham & Co., Inc.,
6.625%, dated 12/31/97, to be
repurchased at $1,750,644 on
1/2/98, collateralized by U.S.
Treasury Bonds, 8.875%-11.25%,
2/15/15-2/15/19, with a value of
$1,792,733 (Cost $1,750,000) $ 1,750,000 1,750,000
- ----------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$222,378,087) 107.9% 224,183,620
- ----------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (7.9) (16,344,216)
----------------- -------------
NET ASSETS 100.0% $207,839,404
----------------- -------------
----------------- -------------
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
<TABLE>
<S> <C> <C> <C> <C> <C>
ARP - Argentine Peso ITL - Italian Lira
AUD - Australian Dollar JPY - Japanese Yen
CAD - Canadian Dollar MXP - Mexican Peso
DEM - German Mark NOK - Norwegian Krone
DKK - Danish Krone NZD - New Zealand Dollar
ESP - Spanish Peseta PLZ - Polish Zloty
GBP - British Pound Sterling RUR - Russian Ruble
HUF - Hungarian Forint SEK - Swedish Krona
IDR - Indonesian Rupiah TRL - Turkish Lira
IEP - Irish Punt ZAR - South African Rand
</TABLE>
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, 1997.
4. Identifies issues considered to be illiquid or restricted - See Note 8 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 $14,529,773 or 6.99% of the Fund's net
assets as of December 31, 1997.
6. Represents the current interest rate for a variable rate security.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
7. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See Note 5 of Notes to Financial
Statements.
8. Securities with an aggregate market value of $1,327,157 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
9. A sufficient amount of securities has been designated to cover outstanding
written options if applicable, as follows:
<TABLE>
<CAPTION>
PRINCIPAL/UNITS EXPIRATION EXERCISE PREMIUM MARKET VALUE
SUBJECT TO CALL DATE PRICE RECEIVED NOTE 1
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Banco Hopotecario Nacional (Argentina)
Medium-Term Nts., 10.625%, 8/7/06 Call
Option 400,000 8/00 100.00 $ 3,680 $ 10,000
German Mark Put Option 1,820,000 3/98 1.82 DEM 11,600 11,266
Japanese Yen Put Option 223,000,000 1/98 125.00 JPY 19,445 69,576
-------- -------------
$34,725 $ 90,842
-------- -------------
-------- -------------
</TABLE>
10. Represents the current interest rate for an increasing rate security.
11. Non-income producing - issuer is in default of interest payment.
12. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
13. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
14. Interest or dividend is paid in kind.
15. 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.
16. Non-income producing security.
17. A sufficient amount of securities has been designated to cover outstanding
interest rate swap transactions. See Note 9 of Notes to Financial Statements.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 79.0%
- ----------------------------------------------------------------
BASIC MATERIALS - 2.5%
- ----------------------------------------------------------------
CHEMICALS - 2.5%
Du Pont (E.I.) De Nemours & Co. 5,000 $ 300,312
- ----------------------------------------------------------------
Ferro Corp. 26,250 638,203
- ----------------------------------------------------------------
IMC Global, Inc. 50,000 1,637,500
- ----------------------------------------------------------------
Olin Corp. 27,500 1,289,062
-------------
3,865,077
- ----------------------------------------------------------------
CONSUMER CYCLICALS - 18.0%
- ----------------------------------------------------------------
AUTOS & HOUSING - 3.4%
Champion Enterprises, Inc.(1) 25,000 514,062
- ----------------------------------------------------------------
General Motors Corp. 15,000 909,375
- ----------------------------------------------------------------
Lear Corp.(1) 17,500 831,250
- ----------------------------------------------------------------
Republic Industries, Inc.(1) 110,000 2,564,375
- ----------------------------------------------------------------
Tower Realty Trust, Inc. 20,000 492,500
-------------
5,311,562
- ----------------------------------------------------------------
LEISURE & ENTERTAINMENT - 6.3%
AMR Corp.(1)(2) 2,500 321,250
- ----------------------------------------------------------------
Brinker International, Inc.(1) 26,500 424,000
- ----------------------------------------------------------------
Callaway Golf Co. 13,500 385,594
- ----------------------------------------------------------------
Circus Circus Enterprises, Inc.(1) 7,500 153,750
- ----------------------------------------------------------------
Delta Air Lines, Inc. 10,000 1,190,000
- ----------------------------------------------------------------
Harrah's Entertainment, Inc. 100,000 1,887,500
- ----------------------------------------------------------------
Host Marriott Corp. 32,500 637,812
- ----------------------------------------------------------------
Mirage Resorts, Inc.(1) 20,000 455,000
- ----------------------------------------------------------------
Nintendo Co. Ltd. 4,000 393,782
- ----------------------------------------------------------------
Time Warner, Inc. 32,500 2,015,000
- ----------------------------------------------------------------
Viacom, Inc., Cl. B(1) 47,500 1,968,281
-------------
9,831,969
- ----------------------------------------------------------------
MEDIA - 3.2%
CBS Corp.(2) 50,000 1,471,875
- ----------------------------------------------------------------
Chancellor Media Corp.(1) 10,000 746,250
- ----------------------------------------------------------------
Comcast Corp., Cl. A Special 20,000 631,250
- ----------------------------------------------------------------
Jacor Communications, Inc.(1) 20,000 1,062,500
- ----------------------------------------------------------------
U S West Media Group(1) 37,500 1,082,812
-------------
4,994,687
- ----------------------------------------------------------------
RETAIL: GENERAL - 2.8%
Dayton Hudson Corp. 2,500 168,750
- ----------------------------------------------------------------
Dillard's, Inc. 25,000 881,250
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
RETAIL: GENERAL (CONTINUED)
Federated Department Stores,
Inc.(1) 75,000 $ 3,229,687
-------------
4,279,687
- ----------------------------------------------------------------
RETAIL: SPECIALTY - 2.3%
Abercrombie & Fitch Co., Cl.
A(1)(2) 35,000 1,093,750
- ----------------------------------------------------------------
AutoZone, Inc.(1) 47,500 1,377,500
- ----------------------------------------------------------------
Nine West Group, Inc.(1) 45,000 1,167,187
-------------
3,638,437
- ----------------------------------------------------------------
CONSUMER NON-CYCLICALS - 7.1%
- ----------------------------------------------------------------
BEVERAGES - 1.2%
Anheuser-Busch Cos., Inc. 41,000 1,804,000
- ----------------------------------------------------------------
FOOD - 0.6%
Unilever NV, NY Shares 16,000 999,000
- ----------------------------------------------------------------
HEALTHCARE/DRUGS - 1.8%
American Home Products Corp. 8,000 612,000
- ----------------------------------------------------------------
Amgen, Inc.(1) 20,000 1,082,500
- ----------------------------------------------------------------
Merck & Co., Inc. 5,000 531,250
- ----------------------------------------------------------------
Schering-Plough Corp. 10,000 621,250
-------------
2,847,000
- ----------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES -
0.1%
Boston Scientific Corp.(1)(2) 2,500 114,688
- ----------------------------------------------------------------
HOUSEHOLD GOODS - 0.5%
Kimberly-Clark Corp. 15,000 739,687
- ----------------------------------------------------------------
TOBACCO - 2.9%
Philip Morris Cos., Inc. 50,000 2,265,625
- ----------------------------------------------------------------
RJR Nabisco Holdings Corp. 58,500 2,193,750
-------------
4,459,375
- ----------------------------------------------------------------
ENERGY - 4.2%
- ----------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 2.8%
Apache Corp. 8,750 306,797
- ----------------------------------------------------------------
BJ Services Co.(1) 6,250 449,609
- ----------------------------------------------------------------
Coflexip SA, Sponsored ADR 10,000 555,000
- ----------------------------------------------------------------
Cooper Cameron Corp.(1) 12,500 762,500
- ----------------------------------------------------------------
Schlumberger Ltd. 4,500 362,250
- ----------------------------------------------------------------
Stolt Comex Seaway SA(1) 27,500 1,375,000
- ----------------------------------------------------------------
Weatherford Enterra, Inc.(1) 11,000 481,250
-------------
4,292,406
- ----------------------------------------------------------------
OIL-INTEGRATED - 1.4%
Atlantic Richfield Co. 5,500 440,687
- ----------------------------------------------------------------
Enron Corp. 10,000 415,625
- ----------------------------------------------------------------
Mobil Corp. 3,000 216,562
- ----------------------------------------------------------------
Royal Dutch Petroleum Co., NY
Shares 5,000 270,937
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
OIL-INTEGRATED (CONTINUED)
Texaco, Inc. 3,000 $ 163,125
- ----------------------------------------------------------------
Unocal Corp. 6,000 232,875
- ----------------------------------------------------------------
YPF SA, Cl. D, ADR 10,500 358,969
-------------
2,098,780
- ----------------------------------------------------------------
FINANCIAL - 18.3%
- ----------------------------------------------------------------
BANKS - 10.4%
Banco Rio de la Plata SA, ADR(1) 50,000 700,000
- ----------------------------------------------------------------
Barnett Banks, Inc. 2,500 179,688
- ----------------------------------------------------------------
Chase Manhattan Corp. (New) 34,000 3,723,000
- ----------------------------------------------------------------
Citicorp 4,000 505,750
- ----------------------------------------------------------------
Commercial Federal Corp. 22,500 800,156
- ----------------------------------------------------------------
Compass Bancshares, Inc. 10,000 437,500
- ----------------------------------------------------------------
CoreStates Financial Corp. 21,000 1,681,313
- ----------------------------------------------------------------
Credito Italiano 100,000 308,541
- ----------------------------------------------------------------
First Commerce Corp. 7,500 504,375
- ----------------------------------------------------------------
First International Bancorp, Inc. 15,000 181,875
- ----------------------------------------------------------------
Fleet Financial Group, Inc. 25,000 1,873,438
- ----------------------------------------------------------------
Hubco, Inc. 15,000 586,875
- ----------------------------------------------------------------
J.P. Morgan & Co., Inc. 4,500 507,938
- ----------------------------------------------------------------
KeyCorp 6,500 460,281
- ----------------------------------------------------------------
Mellon Bank Corp. 2,500 151,563
- ----------------------------------------------------------------
NationsBank Corp. 2,500 152,031
- ----------------------------------------------------------------
Societe Generale 7,250 988,221
- ----------------------------------------------------------------
Sovereign Bancorp, Inc. 40,000 830,000
- ----------------------------------------------------------------
Unibanco-Uniao de Bancos
Brasileiros SA, Sponsored GDR
Representing 500 Units of one
Preferred Share of Unibanco and one
Preferred Share of Unibanco
Holdings SA(1)(3) 13,500 434,531
- ----------------------------------------------------------------
Union Planters Corp. 17,500 1,188,906
-------------
16,195,982
- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL - 3.8%
Advanta Corp., Cl. B 13,500 342,563
- ----------------------------------------------------------------
American Express Co. 15,000 1,338,750
- ----------------------------------------------------------------
C.I.T. Group, Inc., Cl. A(1) 16,300 525,675
- ----------------------------------------------------------------
Fannie Mae 7,500 427,969
- ----------------------------------------------------------------
Freddie Mac 9,000 377,438
- ----------------------------------------------------------------
MoneyGram Payment Systems, Inc.(1) 17,000 182,750
- ----------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 18,500 1,093,813
- ----------------------------------------------------------------
Travelers Group, Inc. 30,510 1,643,726
-------------
5,932,684
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
INSURANCE - 4.1%
Allstate Corp. 26,000 $ 2,362,750
- ----------------------------------------------------------------
Cigna Corp. 1,500 259,594
- ----------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 91,700 3,782,625
-------------
6,404,969
- ----------------------------------------------------------------
INDUSTRIAL - 8.3%
- ----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.5%
Raychem Corp. 55,000 2,368,438
- ----------------------------------------------------------------
INDUSTRIAL MATERIALS - 0.5%
Crown Cork & Seal Co., Inc. 15,000 751,875
- ----------------------------------------------------------------
INDUSTRIAL SERVICES - 4.1%
Cognizant Corp. 32,000 1,426,000
- ----------------------------------------------------------------
Mettler-Toledo International,
Inc.(1) 100,000 1,725,000
- ----------------------------------------------------------------
USA Waste Services, Inc.(1) 80,000 3,140,000
-------------
6,291,000
- ----------------------------------------------------------------
MANUFACTURING - 2.2%
American Standard Cos., Inc.(1) 55,000 2,107,188
- ----------------------------------------------------------------
Halter Marine Group, Inc.(1) 22,500 649,688
- ----------------------------------------------------------------
MascoTech, Inc. 40,000 735,000
-------------
3,491,876
- ----------------------------------------------------------------
TECHNOLOGY - 18.4%
- ----------------------------------------------------------------
AEROSPACE/DEFENSE - 0.2%
Boeing Co. 6,500 318,094
- ----------------------------------------------------------------
Raytheon Co., Cl. A 956 47,143
-------------
365,237
- ----------------------------------------------------------------
COMPUTER HARDWARE - 6.8%
Adaptec, Inc.(1) 12,500 464,063
- ----------------------------------------------------------------
Cabletron Systems, Inc.(1) 27,500 412,500
- ----------------------------------------------------------------
Ikon Office Solutions, Inc. 120,000 3,375,000
- ----------------------------------------------------------------
Ingram Micro, Inc., Cl. A(1) 20,000 582,500
- ----------------------------------------------------------------
International Business Machines
Corp. 15,000 1,568,438
- ----------------------------------------------------------------
Iomega Corp.(1) 135,000 1,679,063
- ----------------------------------------------------------------
Seagate Technology, Inc.(1) 17,500 336,875
- ----------------------------------------------------------------
Sun Microsystems, Inc.(1)(2) 25,000 996,875
- ----------------------------------------------------------------
Xerox Corp. 16,000 1,181,000
-------------
10,596,314
- ----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 5.7%
First Data Corp. 115,000 3,363,750
- ----------------------------------------------------------------
PLATINUM Technology, Inc.(1) 35,000 988,750
- ----------------------------------------------------------------
Structural Dynamics Research
Corp.(1) 200,000 4,500,000
-------------
8,852,500
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
ELECTRONICS - 2.8%
Intel Corp. 4,000 $ 281,000
- ----------------------------------------------------------------
LSI Logic Corp.(1) 7,500 148,125
- ----------------------------------------------------------------
Waters Corp.(1) 100,000 3,762,500
- ----------------------------------------------------------------
Xilinx, Inc.(1) 6,000 210,375
-------------
4,402,000
- ----------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY -
2.9%
ADC Telecommunications, Inc.(1) 32,500 1,356,875
- ----------------------------------------------------------------
Bay Networks, Inc.(1) 10,000 255,625
- ----------------------------------------------------------------
Cisco Systems, Inc.(1) 22,500 1,254,375
- ----------------------------------------------------------------
Intermedia Communications, Inc.(1) 503 30,557
- ----------------------------------------------------------------
MCI Communications Corp. 32,500 1,391,406
- ----------------------------------------------------------------
Tellabs, Inc.(1) 2,500 132,188
- ----------------------------------------------------------------
WorldCom, Inc. 2,500 75,625
-------------
4,496,651
- ----------------------------------------------------------------
UTILITIES - 2.2%
- ----------------------------------------------------------------
TELEPHONE UTILITIES - 2.2%
LCI International, Inc.(1) 80,000 2,460,000
- ----------------------------------------------------------------
Telecomunicacoes Brasileiras SA,
Sponsored ADR 7,750 902,391
-------------
3,362,391
-------------
Total Common Stocks (Cost
$107,792,827) 122,788,272
- ----------------------------------------------------------------
PREFERRED STOCKS - 6.1%
- ----------------------------------------------------------------
Automatic Commission Exchange
Security Trust II, 6.50% Cv.
Preferred (exchangeable to common
stock of Republic Industries, Inc.
"TRACES" effective 5/15/00) 75,000 1,762,500
- ----------------------------------------------------------------
Evergreen Media Corp., 6% Cv.
Preferred(4) 20,000 1,547,500
- ----------------------------------------------------------------
Host Marriott Financial Trust,
6.75% Cv. Preferred Stock(4) 12,500 762,500
- ----------------------------------------------------------------
ICG Communications, Inc., 6.75% Cv.
Preferred Stock(4) 35,000 2,213,750
- ----------------------------------------------------------------
Intermedia Communications, Inc., 7%
Cv. Preferred Stock(1)(4) 50,000 2,056,250
- ----------------------------------------------------------------
QUALCOMM Financial Trust I, 5.75%
Cum. Cv. Preferred Securities,
Non-Vtg. 25,000 1,200,000
-------------
Total Preferred Stocks (Cost
$7,862,050) 9,542,500
- ----------------------------------------------------------------
OTHER SECURITIES - 1.8%
- ----------------------------------------------------------------
Continental Airlines Finance Trust,
8.50% Cv. Trust Originated
Preferred Securities 10,000 1,028,750
- ----------------------------------------------------------------
Houston Industries, Inc., 7%
Automatic Common Exchange
Securities, Exchangeable for Time
Warner, Inc. Common Stock 25,000 1,426,562
- ----------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.25%
Structured Yield Product
Exchangeable for Stock 10,000 345,000
-------------
Total Other Securities (Cost
$2,239,123) 2,800,312
PRINCIPAL
AMOUNT
- ----------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 3.2%
- ----------------------------------------------------------------
U.S. Treasury Bonds:
6.375%, 8/15/27 $ 1,150,000 1,212,891
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT NOTE 1
<S> <C> <C>
- ----------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS
(CONTINUED)
- ----------------------------------------------------------------
U.S. Treasury Bonds: (Continued)
6.50%, 11/15/26 $ 3,500,000 $ 3,737,346
-------------
Total U.S. Government Obligations
(Cost $4,488,195) 4,950,237
- ----------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND
NOTES - 8.0%
- ----------------------------------------------------------------
Adaptec, Inc., 4.75% Cv. Sub. Nts.,
2/1/04(5) 1,000,000 1,030,000
- ----------------------------------------------------------------
Continental Airlines, Inc., 6.75%
Cv. Sub. Nts., 4/15/06 500,000 820,000
- ----------------------------------------------------------------
Corporate Express, Inc., 4.50% Cv.
Sub. Nts., 7/1/00 1,250,000 1,110,937
- ----------------------------------------------------------------
Fine Host Corp., 5% Cv. Sub. Nts.,
11/1/04(4) 1,000,000 625,000
- ----------------------------------------------------------------
Interpublic Group Cos., 1.80% Cv.
Sub. Debs., 9/16/04(4) 1,000,000 823,750
- ----------------------------------------------------------------
Loews Corp., 3.125% Cv. Sub. Nts.,
9/15/07 1,000,000 995,000
- ----------------------------------------------------------------
PLATINUM Technology, Inc.:
6.25% Cv. Sub. Nts., 12/15/02(5) 2,000,000 2,117,500
6.75% Cv. Sub. Nts., 11/15/01 500,000 1,046,875
- ----------------------------------------------------------------
Quantum Corp., 7% Cv. Sub. Nts.,
8/1/04 1,250,000 1,175,000
- ----------------------------------------------------------------
Saks Holdings, Inc., 5.50% Cv. Sub.
Nts., 9/15/06 1,500,000 1,280,625
- ----------------------------------------------------------------
Tower Automotive, Inc., 5% Cv. Sub.
Nts., 8/1/04(4) 500,000 520,000
- ----------------------------------------------------------------
U.S. Office Products Co., 5.50% Cv.
Sub. Nts., 5/15/03(4) 1,000,000 903,750
-------------
Total Convertible Corporate Bonds
and Notes (Cost $11,947,833) 12,448,437
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS - 0.8%
- ----------------------------------------------------------------
Repurchase agreement with First
Chicago Capital Markets, 6.60%,
dated 12/31/97, to be repurchased
at $1,200,440 on 1/2/98,
collateralized by U.S. Treasury
Bonds, 8%-10.625%,
8/15/15-11/15/21, with a value of
$889,443, and U.S. Treasury Nts.,
5.875%-7.50%, 9/30/01-12/31/01,
with a value of $335,205 (Cost
$1,200,000) $ 1,200,000 1,200,000
- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$135,530,028) 98.9% 153,729,758
- ----------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.1 1,637,992
----------- -------------
NET ASSETS 100.0% $155,367,750
----------- -------------
----------- -------------
</TABLE>
1. Non-income producing security.
2. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:
<TABLE>
<CAPTION>
SHARES
SUBJECT EXPIRATION EXERCISE PREMIUM MARKET VALUE
TO CALL DATE PRICE RECEIVED NOTE 1
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Abercrombie & Fitch Cl. A 8,000 1/98 $ 35 $22,759 $2,000
AMR Corp. 2,500 1/98 135 9,612 2,188
Boston Scientific Corp. 2,500 1/98 55 1,200 313
CBS Corp. 50,000 1/98 35 17,749 3,125
Sun Microsystems, Inc. 25,000 1/98 50 10,438 1,562
-------- ------
$61,758 $9,188
-------- ------
-------- ------
</TABLE>
3. 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.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 $9,452,500 or 6.08% of the Fund's net
assets as of December 31, 1997.
5. Identifies issues considered to be illiquid or restricted - See Note 6 of
Notes to Financial Statements.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER OPPENHEIMER
MONEY HIGH INCOME BOND
FUND FUND FUND
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost * )
(including repurchase agreements
**) - see accompanying statements $125,778,964 $315,552,124 $601,914,075
- ----------------------------------------------------------------------------------
Unrealized appreciation on forward
foreign currency exchange contracts
- -see applicable note -- 211,244 193,971
- ----------------------------------------------------------------------------------
Cash 2,083 10,676 750,383
- ----------------------------------------------------------------------------------
Receivables:
Dividends, interest and principal
paydowns 184,276 3,819,980 7,588,406
Closed forward foreign currency
exchange contracts -- 138,584 1,683
Daily variation on futures
contracts - see applicable note -- -- 171,203
Shares of beneficial interest sold 1,081,045 260,980 352,813
Investments sold -- 2,112,567 32,654,999
- ----------------------------------------------------------------------------------
Other 4,564 5,251 6,192
------------- ------------- -------------
Total assets 127,050,932 322,111,406 643,633,725
- ----------------------------------------------------------------------------------
LIABILITIES:
Bank overdraft -- -- --
- ----------------------------------------------------------------------------------
Options written, at value (premiums
received ***) - see accompanying
statements and notes -- -- --
- ----------------------------------------------------------------------------------
Unrealized depreciation on forward
foreign exchange contracts - see
applicable note -- 62,395 2,803
- ----------------------------------------------------------------------------------
Unrealized depreciation on interest
rate swaps - see applicable note -- -- --
- ----------------------------------------------------------------------------------
Payables and other liabilities:
Closed forward foreign currency
exchange contracts -- 13,758 16,014
Daily variation on futures
contracts - see applicable note -- -- --
Dividends 243,614 -- --
Custodian fees 3,783 38,682 71,463
Registration and filing fees 2,059 27,228 24,389
Shareholder reports 5,704 6,971 7,401
Legal and auditing fees 9,321 14,678 --
Investments purchased (including
those purchased on a when-issued
basis****) - see applicable note -- 30,065,705 122,645,501
Shares of beneficial interest
redeemed -- 387,715 775,130
Other 4,069 171,483 12,996
------------- ------------- -------------
Total liabilities 268,550 30,788,615 123,555,697
- ----------------------------------------------------------------------------------
NET ASSETS $126,782,382 $291,322,791 $520,078,028
------------- ------------- -------------
------------- ------------- -------------
- ----------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Paid-in capital $126,798,517 $272,156,892 $501,115,939
- ----------------------------------------------------------------------------------
Undistributed net investment income -- 1,776,867 1,857,027
- ----------------------------------------------------------------------------------
Accumulated net realized gain
(loss) from investments and foreign
currency transactions (16,135) 6,730,159 5,563,419
- ----------------------------------------------------------------------------------
Net unrealized appreciation on
investments and translation of
assets and liabilities denominated
in foreign currencies -- 10,658,873 11,541,643
------------- ------------- -------------
Net assets $126,782,382 $291,322,791 $520,078,028
------------- ------------- -------------
------------- ------------- -------------
- ----------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
OUTSTANDING 126,798,538 25,297,573 43,651,270
- ----------------------------------------------------------------------------------
NET ASSETS VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $ 1.00 $ 11.52 $ 11.91
* Cost $125,778,964 $305,080,290 $590,845,008
** Repurchase agreements $ -- $ 74,150,000 $ 13,500,000
*** Premiums received $ -- $ -- $ --
****When-issued $ -- $ 1,480,181 $122,707,112
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (CONTINUED)
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER
CAPITAL OPPENHEIMER MULTIPLE
APPRECIATION GROWTH STRATEGIES
FUND FUND FUND
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost * )
(including repurchase agreements
**) - see accompanying statements $881,988,555 $491,180,589 $641,798,961
- ----------------------------------------------------------------------------------
Unrealized appreciation on forward
foreign currency exchange contracts
- -see applicable note -- -- --
- ----------------------------------------------------------------------------------
Cash 14,363 294,871 --
- ----------------------------------------------------------------------------------
Receivables:
Dividends, interest and principal
paydowns 125,802 268,765 4,206,562
Closed forward foreign currency
exchange contracts -- -- --
Daily variation on futures
contracts - see applicable note -- -- --
Shares of beneficial interest sold 619,393 1,707,785 119,130
Investments sold 7,415,298 1,898,266 6,153,594
- ----------------------------------------------------------------------------------
Other 7,782 5,536 8,008
------------- ------------- -------------
Total assets 890,171,193 495,355,812 652,286,255
- ----------------------------------------------------------------------------------
LIABILITIES:
Bank overdraft -- -- 191,501
- ----------------------------------------------------------------------------------
Options written, at value (premiums
received ***) - see accompanying
statements and notes -- -- 1,659,525
- ----------------------------------------------------------------------------------
Unrealized depreciation on forward
foreign exchange contracts - see
applicable note -- -- --
- ----------------------------------------------------------------------------------
Unrealized depreciation on interest
rate swaps - see applicable note -- -- --
- ----------------------------------------------------------------------------------
Payables and other liabilities:
Closed forward foreign currency
exchange contracts -- -- --
Daily variation on futures
contracts - see applicable note -- -- --
Dividends -- -- --
Custodian fees 28,264 14,814 32,669
Registration and filing fees 60,358 41,484 30,771
Shareholder reports 9,099 5,283 5,111
Legal and auditing fees 14,386 10,400 15,420
Investments purchased (including
those purchased on a when-issued
basis****) - see applicable note 11,980,470 -- 12,430,220
Shares of beneficial interest
redeemed 269,803 1,377,532 322,021
Other 1,340 325 54,187
------------- ------------- -------------
Total liabilities 12,363,720 1,449,838 14,741,425
- ----------------------------------------------------------------------------------
NET ASSETS $877,807,473 $493,905,974 $637,544,830
------------- ------------- -------------
------------- ------------- -------------
- ----------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Paid-in capital $688,711,219 $351,479,268 $505,041,083
- ----------------------------------------------------------------------------------
Undistributed net investment income 2,236,363 3,896,959 1,264,870
- ----------------------------------------------------------------------------------
Accumulated net realized gain
(loss) from investments and foreign
currency transactions 20,119,606 47,279,914 33,831,700
- ----------------------------------------------------------------------------------
Net unrealized appreciation on
investments and translation of
assets and liabilities denominated
in foreign currencies 166,740,285 91,249,833 97,407,177
------------- ------------- -------------
Net assets $877,807,473 $493,905,974 $637,544,830
------------- ------------- -------------
------------- ------------- -------------
- ----------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
OUTSTANDING 21,431,667 15,223,362 37,473,072
- ----------------------------------------------------------------------------------
NET ASSETS VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $ 40.96 $ 32.44 $ 17.01
* Cost $715,248,270 $399,931,087 $544,500,683
** Repurchase agreements $107,250,000 $101,500,000 $107,800,000
*** Premiums received $ -- $ -- $ 1,797,849
****When-issued $ -- $ -- $ 12,187,250
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997 (CONTINUED)
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER OPPENHEIMER
GLOBAL STRATEGIC GROWTH &
SECURITIES BOND INCOME
FUND FUND FUND
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost * )
(including repurchase agreements
**) - see accompanying statements $962,129,951 $224,183,620 $153,729,758
- ----------------------------------------------------------------------------------
Unrealized appreciation on forward
foreign currency exchange contracts
- -see applicable note 1,799,690 595,613 --
- ----------------------------------------------------------------------------------
Cash 2,017,169 699,965 231,605
- ----------------------------------------------------------------------------------
Receivables:
Dividends, interest and principal
paydowns 1,240,888 3,691,367 360,188
Closed forward foreign currency
exchange contracts -- 84,889 --
Daily variation on futures
contracts - see applicable note -- 116,794 --
Shares of beneficial interest sold 137,876 212,467 422,551
Investments sold 1,195,436 11,561,416 677,712
- ----------------------------------------------------------------------------------
Other 76,135 3,937 3,526
------------- ------------- -------------
Total assets 968,597,145 241,150,068 155,425,340
- ----------------------------------------------------------------------------------
LIABILITIES:
Bank overdraft -- -- --
- ----------------------------------------------------------------------------------
Options written, at value (premiums
received ***) - see accompanying
statements and notes -- 90,842 9,188
- ----------------------------------------------------------------------------------
Unrealized depreciation on forward
foreign exchange contracts - see
applicable note -- 36,840 --
- ----------------------------------------------------------------------------------
Unrealized depreciation on interest
rate swaps - see applicable note -- 13,161 --
- ----------------------------------------------------------------------------------
Payables and other liabilities:
Closed forward foreign currency
exchange contracts -- 24,680 --
Daily variation on futures
contracts - see applicable note 148,871 -- --
Dividends -- -- --
Custodian fees 149,388 22,286 10,063
Registration and filing fees 69,677 25,784 25,194
Shareholder reports 2,651 6,995 4,972
Legal and auditing fees 14,856 -- 7,454
Investments purchased (including
those purchased on a when-issued
basis****) - see applicable note 7,860,390 33,068,507 --
Shares of beneficial interest
redeemed 1,241,092 12,563 117
Other -- 9,006 602
------------- ------------- -------------
Total liabilities 9,486,925 33,310,664 57,590
- ----------------------------------------------------------------------------------
NET ASSETS $959,110,220 $207,839,404 $155,367,750
------------- ------------- -------------
------------- ------------- -------------
- ----------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Paid-in capital $744,137,672 $203,301,751 $127,164,576
- ----------------------------------------------------------------------------------
Undistributed net investment income 18,148,506 885,276 130,085
- ----------------------------------------------------------------------------------
Accumulated net realized gain
(loss) from investments and foreign
currency transactions 80,213,055 1,088,375 9,820,789
- ----------------------------------------------------------------------------------
Net unrealized appreciation on
investments and translation of
assets and liabilities denominated
in foreign currencies 116,610,987 2,564,002 18,252,300
------------- ------------- -------------
Net assets $959,110,220 $207,839,404 $155,367,750
------------- ------------- -------------
------------- ------------- -------------
- ----------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
OUTSTANDING 44,883,946 40,604,565 7,551,181
- ----------------------------------------------------------------------------------
NET ASSETS VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $ 21.37 $ 5.12 $ 20.58
* Cost $847,161,916 $222,378,087 $135,530,028
** Repurchase agreements $165,700,000 $ 1,750,000 $ 1,200,000
*** Premiums received $ -- $ 34,725 $ 61,758
****When-issued $ -- $ 30,736,603 $ --
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER OPPENHEIMER
MONEY HIGH INCOME BOND
FUND FUND FUND
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest (net of withholding taxes
of *) $7,577,599 $20,442,056 $33,458,444
- ------------------------------------------------------------------------------
Dividends (net of withholding taxes
of **) -- 1,258,134 258,565
----------- ------------ ------------
Total income 7,577,599 21,700,190 33,717,009
- ------------------------------------------------------------------------------
EXPENSES:
Management fees - see applicable
note 601,698 1,667,490 3,281,556
- ------------------------------------------------------------------------------
Custodian fees and expenses 13,515 103,951 154,627
- ------------------------------------------------------------------------------
Legal and auditing fees 11,852 19,951 16,713
- ------------------------------------------------------------------------------
Insurance expenses 3,192 4,124 11,009
- ------------------------------------------------------------------------------
Trustees' fees and expenses 2,531 3,923 2,633
- ------------------------------------------------------------------------------
Registration and filing fees 6,580 27,204 25,949
- ------------------------------------------------------------------------------
Shareholder reports 1,022 7,350 4,789
- ------------------------------------------------------------------------------
Other 3,155 5,155 --
----------- ------------ ------------
Total expenses 643,545 1,839,148 3,497,276
- ------------------------------------------------------------------------------
NET INVESTMENT INCOME 6,934,054 19,861,042 30,219,733
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain (loss) on:
Investments (including premiums on
written options exercised) 2,232 7,036,521 5,711,116
Closing of futures contracts -- 826,665 1,316,170
Closing and expiration of options
written -- (51,550) (146,182)
Foreign currency transactions -- (1,546,166) (2,842,519)
- ------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation on:
Investments -- 563,196 6,848,511
Translation of assets and
liabilities denominated in foreign
currencies -- (469,986) (408,371)
----------- ------------ ------------
Net realized and unrealized gain 2,232 6,358,680 10,478,725
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $6,936,286 $26,219,722 $40,698,458
----------- ------------ ------------
----------- ------------ ------------
* Interest $ -- $ 10,065 $ 4,337
** Dividends $ -- $ -- $ --
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 (CONTINUED)
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER
CAPITAL OPPENHEIMER MULTIPLE
APPRECIATION GROWTH STRATEGIES
FUND FUND FUND
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest (net of withholding taxes
of *) $ 7,105,846 $ 4,639,011 $22,495,840
- -------------------------------------------------------------------------------
Dividends (net of withholding taxes
of **) 720,291 2,269,196 3,524,342
------------ ------------ ------------
Total income 7,826,137 6,908,207 26,020,182
- -------------------------------------------------------------------------------
EXPENSES:
Management fees - see applicable
note 5,324,309 2,859,202 4,068,887
- -------------------------------------------------------------------------------
Custodian fees and expenses 52,443 17,577 91,673
- -------------------------------------------------------------------------------
Legal and auditing fees 19,986 7,969 23,261
- -------------------------------------------------------------------------------
Insurance expenses 5,743 3,820 6,306
- -------------------------------------------------------------------------------
Trustees' fees and expenses 4,447 2,538 8,486
- -------------------------------------------------------------------------------
Registration and filing fees 61,056 41,602 32,647
- -------------------------------------------------------------------------------
Shareholder reports 4,975 5,552 6,420
- -------------------------------------------------------------------------------
Other 3,812 3,172 3,651
------------ ------------ ------------
Total expenses 5,476,771 2,941,432 4,241,331
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,349,366 3,966,775 21,778,851
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain (loss) on:
Investments (including premiums on
written options exercised) 19,490,648 47,415,133 33,641,766
Closing of futures contracts 1,783,530 -- 491,399
Closing and expiration of options
written -- -- 786,716
Foreign currency transactions 19,135 20,660 (722,776)
- -------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation on:
Investments 61,402,694 34,345,899 38,520,567
Translation of assets and
liabilities denominated in foreign
currencies 115,131 (151,565) (6,064,955)
------------ ------------ ------------
Net realized and unrealized gain 82,811,138 81,630,127 66,652,717
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $85,160,504 $85,596,902 $88,431,568
------------ ------------ ------------
------------ ------------ ------------
* Interest $ -- $ -- $ 209
** Dividends $ 6,162 $ 1,341 $ 61,592
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 (CONTINUED)
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER OPPENHEIMER
GLOBAL STRATEGIC GROWTH &
SECURITIES BOND INCOME
FUND FUND FUND
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest (net of withholding taxes
of *) $ 9,183,668 $14,212,979 $ 979,655
- --------------------------------------------------------------------------------
Dividends (net of withholding taxes
of **) 9,092,481 264,213 906,266
------------- ------------ ------------
Total income 18,276,149 14,477,192 1,885,921
- --------------------------------------------------------------------------------
EXPENSES:
Management fees - see applicable
note 5,615,606 1,197,613 709,577
- --------------------------------------------------------------------------------
Custodian fees and expenses 400,943 71,266 20,090
- --------------------------------------------------------------------------------
Legal and auditing fees 24,221 9,307 17,255
- --------------------------------------------------------------------------------
Insurance expenses 5,865 3,511 3,408
- --------------------------------------------------------------------------------
Trustees' fees and expenses 5,100 1,201 2,424
- --------------------------------------------------------------------------------
Registration and filing fees 71,845 26,345 25,431
- --------------------------------------------------------------------------------
Shareholder reports 6,035 8,252 8,542
- --------------------------------------------------------------------------------
Other 2,859 3,649 4,281
------------- ------------ ------------
Total expenses 6,132,474 1,321,144 791,008
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 12,143,675 13,156,048 1,094,913
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain (loss) on:
Investments (including premiums on
written options exercised) 113,207,351 2,473,943 9,650,814
Closing of futures contracts (5,626,341) (369,000) --
Closing and expiration of options
written -- 118,947 262,534
Foreign currency transactions (3,862,454) (1,329,032) (75,881)
- --------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation on:
Investments 58,404,815 1,600,922 15,100,642
Translation of assets and
liabilities denominated in foreign
currencies (24,747,813) (2,042,323) (51,446)
------------- ------------ ------------
Net realized and unrealized gain 137,375,558 453,457 24,886,663
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $149,519,233 $13,609,505 $25,981,576
------------- ------------ ------------
------------- ------------ ------------
* Interest $ -- $ 5,972 $ --
** Dividends $ -- $ -- $ --
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER
MONEY HIGH INCOME
FUND FUND
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 6,934,054 $ 4,976,254 $ 19,861,042 $ 14,430,943
- -------------------------------------------------------------------------------------------
Net realized gain 2,232 2,966 6,265,470 3,333,591
- -------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation -- -- 93,210 4,840,420
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 6,936,286 4,979,220 26,219,722 22,604,954
- -------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income (6,937,040) (4,976,254) (18,546,183) (15,283,448)
- -------------------------------------------------------------------------------------------
Distributions from net realized
gain -- -- (138,778) --
- -------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net
assets resulting from beneficial
interest transactions - see
applicable note (2,935,384) 64,329,094 92,494,657 50,521,087
- -------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) (2,936,138) 64,332,060 100,029,418 57,842,593
- -------------------------------------------------------------------------------------------
Beginning of period 129,718,520 65,386,460 191,293,373 133,450,780
------------ ------------ ------------ ------------
End of period $126,782,382 $129,718,520 $291,322,791 $191,293,373
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Undistributed net investment income $ -- $ -- $ 1,776,867 $ 913,946
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER CAPITAL
BOND APPRECIATION
FUND FUND
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 30,219,733 $ 19,901,086 $ 2,349,366 $ 1,496,337
- -------------------------------------------------------------------------------------------
Net realized gain 4,038,585 2,269,644 21,293,313 29,569,670
- -------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation 6,440,140 (4,742,040) 61,517,825 42,247,113
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 40,698,458 17,428,690 85,160,504 73,313,120
- -------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income (27,908,616) (20,181,337) (1,547,409) (1,132,964)
- -------------------------------------------------------------------------------------------
Distributions from net realized
gain (1,447,022) (133,010) (30,466,762) (21,289,429)
- -------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net
assets resulting from beneficial
interest transactions - see
applicable note 82,296,263 218,092,832 207,268,868 241,097,454
- -------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) 93,639,083 215,207,175 260,415,201 291,988,181
- -------------------------------------------------------------------------------------------
Beginning of period 426,438,945 211,231,770 617,392,272 325,404,091
------------ ------------ ------------ ------------
End of period $520,078,028 $426,438,945 $877,807,473 $617,392,272
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Undistributed net investment income $ 1,857,027 $ 1,873,402 $ 2,236,363 $ 1,479,312
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER MULTIPLE
GROWTH STRATEGIES
FUND FUND
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 3,966,775 $ 1,650,969 $ 21,778,851 $ 20,927,009
- -------------------------------------------------------------------------------------------
Net realized gain 47,435,793 17,101,200 34,197,105 18,594,692
- -------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation 34,194,334 14,349,688 32,455,612 22,792,094
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 85,596,902 33,101,857 88,431,568 62,313,795
- -------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income (1,639,463) (1,310,185) (21,242,764) (21,290,805)
- -------------------------------------------------------------------------------------------
Distributions from net realized
gain (17,220,011) (8,706,724) (18,354,349) (9,273,309)
- -------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net
assets resulting from beneficial
interest transactions - see
applicable note 141,248,396 145,125,312 104,424,895 71,272,635
- -------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) 207,985,824 168,210,260 153,259,350 103,022,316
- -------------------------------------------------------------------------------------------
Beginning of period 285,920,150 117,709,890 484,285,480 381,263,164
------------ ------------ ------------ ------------
End of period $493,905,974 $285,920,150 $637,544,830 $484,285,480
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Undistributed net investment income $ 3,896,959 $ 1,631,413 $ 1,264,870 $ 961,193
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER
GLOBAL STRATEGIC
SECURITIES BOND
FUND FUND
1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 12,143,675 $ 5,075,730 $ 13,156,048 $ 7,004,776
- -------------------------------------------------------------------------------------------
Net realized gain 103,718,556 11,775,734 894,858 1,835,670
- -------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation 33,657,002 59,143,734 (441,401) 1,164,352
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations 149,519,233 75,995,198 13,609,505 10,004,798
- -------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income (8,181,958) -- (12,654,390) (6,891,899)
- -------------------------------------------------------------------------------------------
Distributions from net realized
gain -- -- (207,080) --
- -------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net
assets resulting from beneficial
interest transactions - see
applicable note 235,692,756 145,106,158 88,374,959 55,505,898
- -------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) 377,030,031 221,101,356 89,122,994 58,618,797
- -------------------------------------------------------------------------------------------
Beginning of period 582,080,189 360,978,833 118,716,410 60,097,613
------------ ------------ ------------ ------------
End of period $959,110,220 $582,080,189 $207,839,404 $118,716,410
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Undistributed net investment income $ 18,148,506 $ 7,724,243 $ 885,276 $ 751,089
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 (CONTINUED)
<TABLE>
<CAPTION>
OPPENHEIMER
GROWTH &
INCOME
1997 FUND1996
<S> <C> <C>
- --------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,094,913 $ 303,556
- --------------------------------------------------------------
Net realized gain 9,837,467 2,657,756
- --------------------------------------------------------------
Net change in unrealized
appreciation or depreciation 15,049,196 2,697,929
------------ -----------
Net increase in net assets
resulting from operations 25,981,576 5,659,241
- --------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income (976,438) (291,690)
- --------------------------------------------------------------
Distributions from net realized
gain (2,670,354) (31,219)
- --------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net
assets resulting from beneficial
interest transactions - see
applicable note 86,023,722 37,384,461
- --------------------------------------------------------------
NET ASSETS:
Total increase (decrease) 108,358,506 42,720,793
- --------------------------------------------------------------
Beginning of period 47,009,244 4,288,451
------------ -----------
End of period $155,367,750 $47,009,244
------------ -----------
------------ -----------
Undistributed net investment income $ 130,085 $ 12,643
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
<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 .05 .06 .04 .03
Dividends and distributions to
shareholders (.05) (.05) (.06) (.04) (.03)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 5.31% 5.13% 5.62% 4.25% 3.09%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $126,782 $129,719 $ 65,386 $ 89,671 $ 61,221
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $133,707 $ 99,263 $ 75,136 $ 90,264 $ 57,654
- -----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.19% 5.01% 5.52% 4.18% 3.12%
Expenses 0.48% 0.49% 0.51% 0.43% 0.43%
</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.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $ 11.13 $ 10.63 $ 9.79 $ 11.02 $ 9.74
- -----------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .94 .97 .98 .94 .82
Net realized and unrealized gain
(loss) .37 .58 .94 (1.27) 1.65
- -----------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.31 1.55 1.92 (.33) 2.47
- -----------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.91) (1.05) (1.08) (.66) (1.19)
Distributions from net realized
gain (.01) -- -- (.24) --
- -----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.92) (1.05) (1.08) (.90) (1.19)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $ 11.52 $ 11.13 $ 10.63 $ 9.79 $ 11.02
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 12.21% 15.26% 20.37% (3.18)% 26.34%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $291,323 $191,293 $133,451 $ 95,698 $ 93,011
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $223,617 $157,203 $115,600 $101,096 $ 67,000
- -----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.88% 9.18% 9.81% 9.15% 10.50%
Expenses 0.82% 0.81% 0.81% 0.67% 0.68%
- -----------------------------------------------------------------------------------------
Portfolio turnover rate(2) 167.6% 125.0% 107.1% 110.1% 135.7%
</TABLE>
1. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Total returns
are not annualized for periods of less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce the
total return figures for all periods shown.
2. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1997 were $378,724,828 and $329,656,036, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $ 11.63 $ 11.84 $ 10.78 $ 11.65 $ 10.99
- -----------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .76 .69 .72 .76 .65
Net realized and unrealized gain
(loss) .28 (.15) 1.07 (.98) .76
- -----------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.04 .54 1.79 (.22) 1.41
- -----------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.72) (.74) (.73) (.62) (.75)
Distributions from net realized
gain (.04) (.01) -- (.03) --
- -----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.76) (.75) (.73) (.65) (.75)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $ 11.91 $ 11.63 $ 11.84 $ 10.78 $ 11.65
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 9.25% 4.80% 17.00% (1.94)% 13.04%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $520,078 $426,439 $211,232 $135,067 $111,846
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $449,760 $296,253 $170,929 $121,884 $ 87,215
- -----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.72% 6.72% 6.91% 7.30% 7.20%
Expenses 0.78% 0.78% 0.80% 0.57% 0.46%
- -----------------------------------------------------------------------------------------
Portfolio turnover rate(2) 116.9% 82.3% 79.4% 35.1% 36.3%
</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 and mortgage
"dollar rolls") for the period ended December 31, 1997 were $497,189,725 and
$456,241,630, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $ 38.71 $ 34.21 $ 25.95 $ 31.64 $ 26.04
- -----------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .10 .09 .11 .10 .05
Net realized and unrealized gain
(loss) 4.01 6.59 8.29 (2.22) 6.71
- -----------------------------------------------------------------------------------------
Total income (loss) from investment
operations 4.11 6.68 8.40 (2.12) 6.76
- -----------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.09) (.11) (.09) (.04) (.06)
Distributions from net realized
gain (1.77) (2.07) (.05) (3.53) (1.10)
- -----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.86) (2.18) (.14) (3.57) (1.16)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $ 40.96 $ 38.71 $ 34.21 $ 25.95 $ 31.64
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 11.67% 20.22% 32.52% (7.59)% 27.32%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $877,807 $617,392 $325,404 $185,774 $136,885
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $753,852 $467,080 $240,730 $153,832 $ 98,228
- -----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.31% 0.32% 0.47% 0.50% 0.23%
Expenses 0.73% 0.75% 0.78% 0.57% 0.47%
- -----------------------------------------------------------------------------------------
Portfolio turnover rate(2) 87.6% 100.1% 125.5% 96.5% 122.8%
Average brokerage commission
rate(3) $ 0.0626 $ 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, 1997 were $762,900,287 and $551,581,444, 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.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $ 27.24 $ 23.55 $ 17.68 $ 17.70 $ 16.96
- -------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .25 .15 .25 .22 .46
Net realized and unrealized gain
(loss) 6.62 5.46 6.10 (.05) .74
- -------------------------------------------------------------------------------------------
Total income from investment
operations 6.87 5.61 6.35 .17 1.20
- -------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.15) (.25) (.22) (.15) (.14)
Distributions from net realized
gain (1.52) (1.67) (.26) (.04) (.32)
- -------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.67) (1.92) (.48) (.19) (.46)
- -------------------------------------------------------------------------------------------
Net asset value, end of period $ 32.44 $ 27.24 $ 23.55 $ 17.68 $ 17.70
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 26.68% 25.20% 36.65% 0.97% 7.25%
- -------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $493,906 $285,920 $117,710 $ 63,283 $ 56,701
- -------------------------------------------------------------------------------------------
Average net assets (in thousands) $390,447 $152,466 $ 88,803 $ 59,953 $ 46,389
- -------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.02% 1.08% 1.46% 1.38% 1.13%
Expenses, before voluntary
reimbursement by the Manager 0.75% 0.81%(2) 0.79% 0.58% 0.50%
- -------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 66.0% 65.4% 58.2% 53.8% 12.6%
Average brokerage commission
rate(4) $ 0.0549 $ 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 expense ratio was 0.79% net of the voluntary reimbursement by the
Manager.
3. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1997 were $308,605,124 and $200,244,411, respectively.
4. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period, divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $ 15.63 $ 14.55 $ 12.91 $ 13.88 $ 12.47
- -----------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .62 .72 .66 .63 .55
Net realized and unrealized gain
(loss) 1.95 1.45 2.00 (.90) 1.41
- -----------------------------------------------------------------------------------------
Total income (loss) from investment
operations 2.57 2.17 2.66 (.27) 1.96
- -----------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.61) (.74) (.65) (.60) (.55)
Distributions from net realized
gain (.58) (.35) (.37) (.10) --
- -----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.19) (1.09) (1.02) (.70) (.55)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $ 17.01 $ 15.63 $ 14.55 $ 12.91 $ 13.88
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 17.22% 15.50% 21.36% (1.95)% 15.95%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $637,545 $484,285 $381,263 $292,067 $250,290
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $564,369 $428,277 $344,745 $279,949 $199,954
- -----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 3.86% 4.89% 4.81% 4.90% 4.44%
Expenses 0.75% 0.77% 0.77% 0.56% 0.48%
- -----------------------------------------------------------------------------------------
Portfolio turnover rate(2) 41.9% 40.3% 39.0% 31.4% 32.4%
Average brokerage commission
rate(3) $ 0.0217 $ 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, 1997 were $258,504,039 and $195,905,788, 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. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $ 17.67 $ 15.00 $ 15.09 $ 16.30 $ 9.57
- ----------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss) .25 .15 .12 .04 (.02)
Net realized and unrealized gain
(loss) 3.68 2.52 .19 (.96) 6.75
- ----------------------------------------------------------------------------------------
Total income (loss) from investment
operations 3.93 2.67 .31 (.92) 6.73
- ----------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.23) -- -- (.04) --
Distributions from net realized
gain -- -- (.40) (.25) --
- ----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.23) -- (.40) (.29) --
- ----------------------------------------------------------------------------------------
Net asset value, end of period $ 21.37 $ 17.67 $ 15.00 $ 15.09 $ 16.30
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
- ----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 22.42% 17.80% 2.24% (5.72)% 70.32%
- ----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $959,110 $582,080 $360,979 $297,842 $96,425
- ----------------------------------------------------------------------------------------
Average net assets (in thousands) $802,389 $466,750 $332,336 $214,545 $31,696
- ----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.51% 1.09% 0.86% 0.54% 0.72%
Expenses 0.76% 0.81% 0.89% 0.91% 0.92%
- ----------------------------------------------------------------------------------------
Portfolio turnover rate(2) 67.1% 89.9% 131.3% 70.4% 65.1%
Average brokerage commission
rate(3) $ 0.0041 $ 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, 1997 were $595,489,366 and $459,609,905, 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. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993(1)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $ 5.09 $ 4.91 $ 4.60 $ 5.12 $ 5.00
- -----------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .39 .38 .38 .35 .10
Net realized and unrealized gain
(loss) .04 .19 .30 (.54) .11
- -----------------------------------------------------------------------------------------
Total income (loss) from investment
operations .43 .57 .68 (.19) .21
- -----------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.39) (.39) (.37) (.32) (.09 )
Distributions from net realized
gain (.01) -- -- (.01) --
- -----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.40) (.39) (.37) (.33) (.09 )
- -----------------------------------------------------------------------------------------
Net asset value, end of period $ 5.12 $ 5.09 $ 4.91 $ 4.60 $ 5.12
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 8.71% 12.07% 15.33% (3.78)% 4.25%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $207,839 $118,716 $ 60,098 $ 20,320 $ 9,887
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $159,934 $ 82,604 $ 37,698 $ 15,389 $ 4,259
- -----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.23% 8.48% 9.32% 8.36% 5.67%(3)
Expenses 0.83% 0.85% 0.85% 0.87% 0.96%(3)
- -----------------------------------------------------------------------------------------
Portfolio turnover rate(4) 149.7% 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, 1997 were $280,894,743 and $221,120,528, respectively.
See accompanying Notes to Financial Statements.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995(1)
<S> <C> <C> <C>
- -------------------------------------------------------------------
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $ 16.37 $ 12.51 $ 10.00
- -------------------------------------------------------------------
Income from investment operations:
Net investment income .19 .14 .01
Net realized and unrealized gain 4.91 3.91 2.52
- -------------------------------------------------------------------
Total income from investment
operations 5.10 4.05 2.53
- -------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.17) (.14) (.02)
Distributions from net realized
gain (.72) (.05) --
- -------------------------------------------------------------------
Total dividends and distributions
to shareholders (.89) (.19) (.02)
- -------------------------------------------------------------------
Net asset value, end of period $ 20.58 $ 16.37 $ 12.51
-------- -------- --------
-------- -------- --------
- -------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 32.48% 32.51% 25.25%
- -------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $155,368 $ 47,009 $ 4,288
- -------------------------------------------------------------------
Average net assets (in thousands) $ 94,906 $ 21,562 $ 1,809
- -------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.15% 1.41% 0.50%(3)
Expenses 0.83% 1.00% 2.07%(3)
- -------------------------------------------------------------------
Portfolio turnover rate(4) 78.5% 112.6% 23.7%
Average brokerage commission
rate(5) $ 0.0602 $ 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, 1997 were $155,403,150 and $71,649,903, 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.
<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 advisor is OppenheimerFunds,
Inc. (the Manager). 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
investment in high yield fixed-income securities.
OPPENHEIMER BOND FUND seeks a high level of current income from investments in
high yield fixed-income securities rated "Baa" or better by Moody's or "BBB" or
better by Standard & Poor's.
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 as well as 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 and to enhance such income by writing
covered call options 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.
- --------------------------------------------------------------------------------
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 an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of 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
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
STRUCTURED NOTES. OHIF and OSBF invest in commodity, foreign currency and
index-linked structured notes whereby the market value and redemption price are
linked to commodity indices, foreign currency exchange rates and bond indices.
The structured notes may be leveraged, which increases the notes' volatility
relative to the face of the security. Fluctuations in values of the securities
are recorded as unrealized gains and losses in the accompanying financial
statements. During the year ended December 31, 1997, the market value of these
securities comprised an average of 5% for OHIF and OSBF, and resulted in
realized and unrealized losses of $646,867 for OHIF and $872,513 for OSBF.
- --------------------------------------------------------------------------------
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. As of December
31, 1997, OHIF, OBF, OMSF and OSBF had entered into outstanding when-issued or
forward commitments as shown below:
<TABLE>
<CAPTION>
OUTSTANDING WHEN-ISSUED
OR
FORWARD COMMITMENTS
<S> <C>
- ------------------------------------------------------------------------------------------------------
Oppenheimer High Income Fund $ 1,480,181
Oppenheimer Bond Fund 122,707,112
Oppenheimer Multiple Strategies Fund 12,187,250
Oppenheimer Strategic Bond Fund 30,736,603
</TABLE>
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.
- --------------------------------------------------------------------------------
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. At December 31, 1997, securities
with an aggregate market value of $227,391, representing 0.11% of OSBF's net
assets, were in default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Funds are maintained
in U.S. dollars. Prices of securities purchased by OHIF, OBF, OCAP, OGF, 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 foreign securities and investment income are translated at
the rates of exchange prevailing on the respective dates of such transactions.
For OHIF, OBF, OCAP, OGF, 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.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Funds.
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
during the year ended December 31, 1997 are shown below:
<TABLE>
<CAPTION>
ADJUSTMENTS FOR THE YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------
INCREASE
INCREASE (DECREASE)
(DECREASE) IN ACCUMULATED INCREASE
IN UNDISTRIBUTED NET REALIZED (DECREASE)
NET GAIN IN PAID-IN
INVESTMENT INCOME ON INVESTMENTS CAPITAL
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Oppenheimer High Income Fund $ (451,938) $ 970,781 $(518,843)
Oppenheimer Bond Fund (2,327,492) 1,641,033 686,459
Oppenheimer Capital Appreciation Fund (44,906) 44,906 --
Oppenheimer Growth Fund (61,766) 120,736 (58,970)
Oppenheimer Multiple Strategies Fund (232,410) 232,410 --
Oppenheimer Global Securities Fund 6,462,546 (6,457,702) (4,844)
Oppenheimer Strategic Bond Fund (367,471) 367,376 95
Oppenheimer Growth & Income Fund (1,033) 1,033 --
</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 periodically.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
<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:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ------------------------------
OPPENHEIMER MONEY FUND SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 390,437,217 $ 390,437,217 304,073,729 $ 304,073,729
Dividends and distributions reinvested 6,901,000 6,901,000 4,923,661 4,923,661
Issued in connection with the acquisition
of
Panorama Series Fund, Inc. - -- -- -- --
Money Market Portfolio - Note 9 -- -- 63,968,818 63,968,791
Redeemed (400,273,601) (400,273,601) (308,637,087) (308,637,087)
------------- -------------- ------------- --------------
Net increase (decrease) (2,935,384) $ (2,935,384) 64,329,121 $ 64,329,094
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER HIGH INCOME FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 14,372,458 $ 163,481,515 9,857,582 $ 107,788,590
Dividends and distributions reinvested 1,658,451 18,684,961 1,412,713 15,283,448
Redeemed (7,919,351) (89,671,819) (6,635,862) (72,550,951)
------------- -------------- ------------- --------------
Net increase 8,111,558 $ 92,494,657 4,634,433 $ 50,521,087
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER BOND FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 12,079,029 $ 142,326,116 10,037,878 $ 116,328,846
Dividends and distributions reinvested 2,509,897 29,264,275 1,774,316 20,314,347
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 (7,613,095) (89,294,128) (4,827,959) (55,937,445)
------------- -------------- ------------- --------------
Net increase 6,975,831 $ 82,296,263 18,833,021 $ 218,092,832
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER CAPITAL APPRECIATION FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 9,511,150 $ 368,762,665 12,247,492 $ 455,862,164
Dividends and distributions reinvested 952,236 32,014,171 643,582 22,422,394
Redeemed (4,981,695) (193,507,968) (6,453,749) (237,187,104)
------------- -------------- ------------- --------------
Net increase 5,481,691 $ 207,268,868 6,437,325 $ 241,097,454
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ------------------------------
OPPENHEIMER GROWTH FUND SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 10,437,357 $ 313,824,006 5,738,355 $ 144,756,556
Dividends and distributions reinvested 720,274 18,842,365 430,280 10,016,909
Issued in connection with the acquisition
of JP Capital Appreciation Fund, Inc. -
Note 9 -- -- 3,293,050 90,009,399
Redeemed (6,429,313) (191,417,975) (3,964,366) (99,657,552)
------------- -------------- ------------- --------------
Net increase 4,728,318 $ 141,248,396 5,497,319 $ 145,125,312
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER MULTIPLE STRATEGIES FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 6,728,904 $ 110,124,465 5,556,735 $ 83,206,142
Dividends and distributions reinvested 2,517,354 39,597,113 2,062,453 30,564,114
Redeemed (2,765,980) (45,296,683) (2,838,629) (42,497,621)
------------- -------------- ------------- --------------
Net increase 6,480,278 $ 104,424,895 4,780,559 $ 71,272,635
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER GLOBAL SECURITIES FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 17,881,768 $ 354,780,849 14,595,634 $ 237,535,239
Dividends and distributions reinvested 446,370 8,181,958 -- --
Redeemed (6,390,329) (127,270,051) (5,717,318) (92,429,081)
------------- -------------- ------------- --------------
Net increase 11,937,809 $ 235,692,756 8,878,316 $ 145,106,158
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER STRATEGIC BOND FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 18,907,314 $ 96,727,423 12,624,581 $ 63,274,177
Dividends and distributions reinvested 2,528,920 12,861,470 1,387,256 6,891,899
Redeemed (4,147,991) (21,213,934) (2,946,444) (14,660,178)
------------- -------------- ------------- --------------
Net increase 17,288,243 $ 88,374,959 11,065,393 $ 55,505,898
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER GROWTH & INCOME FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 5,209,743 $ 95,997,603 2,942,183 $ 43,552,642
Dividends and distributions reinvested 216,162 3,646,792 21,023 322,909
Redeemed (745,544) (13,620,674) (435,180) (6,491,090)
------------- -------------- ------------- --------------
Net increase 4,680,361 $ 86,023,722 2,528,026 $ 37,384,461
------------- -------------- ------------- --------------
------------- -------------- ------------- --------------
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At December 31, 1997, net unrealized appreciation or depreciation on investments
and options written consisted of the following:
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER CAPITAL
HIGH INCOME OPPENHEIMER APPRECIATION OPPENHEIMER
FUND BOND FUND FUND GROWTH FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Gross appreciation $ 12,810,405 $ 15,832,646 $ 183,508,779 $ 106,896,721
Gross depreciation 2,338,571 4,763,579 16,768,494 15,647,219
-------------- -------------- -------------- --------------
Net unrealized appreciation $ 10,471,834 $ 11,069,067 $ 166,740,285 $ 91,249,502
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER
MULTIPLE GLOBAL OPPENHEIMER OPPENHEIMER
STRATEGIES SECURITIES STRATEGIC BOND GROWTH &
FUND FUND FUND INCOME FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Gross appreciation $ 112,337,379 $ 144,961,412 $ 5,930,571 $ 22,519,758
Gross depreciation 14,900,777 29,993,377 4,181,155 4,267,458
-------------- -------------- -------------- --------------
Net unrealized appreciation $ 97,436,602 $ 114,968,035 $ 1,749,416 $ 18,252,300
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
4. 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 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. In addition, management fees for OHIF, OBF and OSBF are 0.50% of
average annual net assets in excess of $1 billion. Management fees for OMF are
0.45% of the first $500 million of average annual net assets, 0.425% of the next
$500 million, 0.40% of the next $500 million and 0.375% of average annual 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.
- --------------------------------------------------------------------------------
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The 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.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. FORWARD CONTRACTS (CONTINUED)
At December 31, 1997, outstanding forward contracts were as follows:
<TABLE>
<CAPTION>
VALUATION AS
EXPIRATION CONTRACT OF DECEMBER UNREALIZED UNREALIZED
OPPENHEIMER HIGH INCOME FUND DATES AMOUNT (000'S) 31, 1997 APPRECIATION DEPRECIATION
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
- -----------------------------
German Mark (DEM) 1/2/98 16,138 DEM $ 8,975,065 $ -- $ 53,947
----------- -------------
CONTRACTS TO SELL
- -----------------------------
Canadian Dollar (CAD) 1/21/98 2,375 CAD 1,661,542 -- 8,448
German Mark (DEM) 2/19/98 23,080 DEM 12,883,786 44,714 --
Indonesian Rupiah (IDR) 2/10/98 2,055,000 IDR 384,240 166,530 --
----------- -------------
211,244 8,448
----------- -------------
Total Unrealized Appreciation and Depreciation $ 211,244 $ 62,395
----------- -------------
----------- -------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER BOND FUND
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
- -----------------------------
Canadian Dollar (CAD) 1/21/98 4,000 CAD $ 2,798,387 $ 82,235 $ 1,078
German Mark (DEM) 1/20/98 1,600 DEM 891,392 39,582 --
Greek Drachma (GRD) 1/15/98 168,876 GRD 593,250 6,750 --
Indonesian Rupiah (IDR) 2/10/98-4/6/98 911,340 IDR 169,866 60,641 1,725
Japanese Yen (JPY) 1/12/98 12,400 JPY 95,387 4,722 --
South African Rand (ZAR) 1/29/98 8,446 ZAR 1,712,542 41 --
----------- -------------
Total Unrealized Appreciation and Depreciation $ 193,971 $ 2,803
----------- -------------
----------- -------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER GLOBAL SECURITIES FUND
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
- -----------------------------
French Franc (FRF) 3/24/98 228,832 FRF $38,246,095 $ 311,565 $ --
Japanese Yen (JPY) 5/26/98 4,919,200 JPY 38,514,965 1,485,035 --
Swiss Franc (CHF) 7/6/98 57,156 CHF 39,996,909 3,090 --
----------- -------------
Total Unrealized Appreciation $1,799,690 $ --
----------- -------------
----------- -------------
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. FORWARD CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
VALUATION AS
OPPENHEIMER STRATEGIC BOND EXPIRATION CONTRACT OF DECEMBER UNREALIZED UNREALIZED
FUND DATES AMOUNT (000'S) 31, 1997 APPRECIATION DEPRECIATION
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
- -----------------------------
Canadian Dollar (CAD) 1/20/98 3,594 CAD $ 2,514,335 $ -- $ 32,003
German Mark (DEM) 1/2/98 215 DEM 119,668 -- 719
----------- -------------
-- 32,722
----------- -------------
CONTRACTS TO SELL
- -----------------------------
Australian Dollar (AUD) 1/14/98-1/30/98 6,724 AUD 4,383,521 290,647 --
Canadian Dollar (CAD) 1/21/98 515 CAD 360,292 15,192 --
German Mark (DEM) 2/19/98 605 DEM 337,725 4,562 --
Greek Drachma (GRD) 1/15/98 27,584 GRD 96,901 1,102 --
Indonesian Rupiah (IDR) 2/10/98-3/24/98 1,333,500 IDR 248,972 96,149 302
Irish Punt (IEP) 1/20/98-1/30/98 558 IEP 793,708 36,517 --
Japanese Yen (JPY) 3/23/98 163,000 JPY 1,263,813 27,327 --
Malaysian Ringgit (MYR) 2/3/98 1,558 MYR 401,436 38,564 --
Mexican Peso (MXP) 3/31/98 838 MXP 103,489 -- 3,489
New Zealand Dollar (NZD) 1/28/98-2/11/98 2,885 NZD 1,669,373 85,553 --
South African Rand (ZAR) 1/26/98 2,600 ZAR 530,336 -- 327
----------- -------------
595,613 4,118
----------- -------------
Total Unrealized Appreciation and Depreciation $ 595,613 $ 36,840
----------- -------------
----------- -------------
</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 (initial margin) in an amount 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.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS (CONTINUED)
At December 31, 1997, outstanding futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
OPPENHEIMER BOND FUND DATE CONTRACTS DECEMBER 31, 1997 (DEPRECIATION)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
- -------------------------------------------
U.S. Treasury Nts., 5 yr. 3/98 13 $ 1,412,125 $ 6,828
U.S. Treasury Nts., 10 yr. 3/98 12 1,345,875 9,375
U.S. Treasury Bonds, 30 yr. 3/98 285 34,333,594 278,125
-------------
294,328
-------------
CONTRACTS TO SELL
- -------------------------------------------
U.S. Treasury Nts., 2 yr. 3/98 22 4,570,500 (9,969)
-------------
$ 284,359
-------------
-------------
<CAPTION>
OPPENHEIMER STRATEGIC BOND FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
- -------------------------------------------
U.S. Treasury Nts., 5 yr. 3/98 50 $ 5,431,250 $ 25,781
U.S. Treasury Nts., 10 yr. 3/98 157 17,608,531 122,656
U.S. Treasury Bonds, 30 yr. 3/98 100 12,046,875 141,063
-------------
289,500
-------------
CONTRACTS TO SELL
- -------------------------------------------
German Government Bonds 3/98 4 579,463 (2,725)
Gold 100 oz. 6/98 1 29,360 1,820
Standard & Poors 500 Index 3/98 14 3,426,850 14,900
-------------
13,995
-------------
$ 303,495
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER GLOBAL SECURITIES FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
- -------------------------------------------
Standard & Poors 500 Index Futures 3/98 82 $20,071,550 $(148,871)
</TABLE>
- --------------------------------------------------------------------------------
7. 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.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY (CONTINUED)
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.
Written option activity for the year ended December 31, 1997 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
------------------------------ ----------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
OPPENHEIMER HIGH INCOME FUND OPTIONS PREMIUMS OPTIONS PREMIUMS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1996 2,460,530 $ 42,285 -- $ --
Options written 173,558,037 477,850 64,036,345 58,865
Options closed or expired (175,634,322) (464,709) (16,136,255) (33,534)
Options exercised (384,245) (55,426) (47,900,090) (25,331)
------------- -------------- --------------- ----------
Options outstanding at December 31, 1997 -- $ -- -- $ --
------------- -------------- --------------- ----------
------------- -------------- --------------- ----------
<CAPTION>
OPPENHEIMER BOND FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1996 6,199,750 $ 80,185 -- $ --
Options written 112,600,092 848,642 61,722,790 117,129
Options closed or expired (118,009,842) (921,295) (54,072,790) (75,278)
Options exercised (790,000) (7,532) (7,650,000) (41,851)
------------- -------------- --------------- ----------
Options outstanding at December 31, 1997 -- $ -- -- $ --
------------- -------------- --------------- ----------
------------- -------------- --------------- ----------
<CAPTION>
OPPENHEIMER MULTIPLE STRATEGIES FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1996 4,569 $ 1,235,136 -- $ --
Options written 13,114 3,551,560 -- --
Options closed or expired (7,680) (1,917,115) -- --
Options exercised (3,947) (1,071,732) -- --
------------- -------------- --------------- ----------
Options outstanding at December 31, 1997 6,056 $ 1,797,849 -- $ --
------------- -------------- --------------- ----------
------------- -------------- --------------- ----------
<CAPTION>
OPPENHEIMER STRATEGIC BOND FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Options outstanding at December 31, 1996 9,375,291 $ 111,246 375 $ 8,992
Options written 126,239,395 643,389 1,808,805,495 174,556
Options closed or expired (133,489,381) (239,934) (1,257,985,870) (135,791)
Options exercised (2,124,905) (511,022) (326,000,000) (16,711)
------------- -------------- --------------- ----------
Options outstanding at December 31, 1997 400 $ 3,679 224,820,000 $ 31,046
------------- -------------- --------------- ----------
------------- -------------- --------------- ----------
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
------------------------------ ----------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
OPPENHEIMER GROWTH & INCOME FUND OPTIONS PREMIUMS OPTIONS PREMIUMS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at December 31, 1996 -- $ -- -- $ --
Options written 2,525 421,955 1,170 168,966
Options closed or expired (1,080) (207,516) (1,107) (151,583)
Options exercised (565) (152,681) (63) (9,383)
------------- -------------- --------------- ----------
Options outstanding at December 31, 1997 880 $ 61,758 -- $ --
------------- -------------- --------------- ----------
------------- -------------- --------------- ----------
</TABLE>
- --------------------------------------------------------------------------------
8. ILLIQUID AND RESTRICTED SECURITIES
At December 31, 1997, 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 their net assets (determined at the time of purchase and reviewed
periodically) 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, 1997 are shown below:
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Oppenheimer High Income Fund $21,897,438 7.52%
Oppenheimer Bond Fund 49,719,055 9.56
Oppenheimer Multiple Strategies Fund 6,979,490 1.09
Oppenheimer Global Securities Fund 1,749,542 0.18
Oppenheimer Strategic Bond Fund 10,129,223 4.87
Oppenheimer Growth & Income Fund 3,147,500 2.03
</TABLE>
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. ILLIQUID AND RESTRICTED SECURITIES (CONTINUED)
Information concerning restricted securities is as follows:
OPPENHEIMER HIGH INCOME FUND
The aggregate value of restricted securities is $3,045,689.
<TABLE>
<CAPTION>
VALUATION
ACQUISITION COST PER PER UNIT AS OF
SECURITY DATE UNIT DECEMBER 31, 1997
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
BONDS
- ------------------------------------------------------
ECM Fund, L.P. I., 14% Sub. Nts., 6/10/02 4/14/92 100.00% 100.25%
STOCKS AND WARRANTS
- ------------------------------------------------------
ECM Fund, L.P. I. 4/14/92 $1,000.00 $1,102.50
CGA Group Ltd., Preferred 6/17/97 25.00 25.00
CGA Group Ltd. Wts., Exp. 12/49 6/17/97 .00 .50
Omnipoint Corp. 1/26/96 16.00 22.21
Omnipoint Corp. Wts., Exp. 11/00 11/29/95 .00 22.21
</TABLE>
OPPENHEIMER BOND FUND
The aggregate value of restricted securities is $1,172,800.
<TABLE>
<CAPTION>
VALUATION
ACQUISITION COST PER PER UNIT AS OF
SECURITY DATE UNIT DECEMBER 31, 1997
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
BONDS
- ------------------------------------------------------
Merrill Lynch & Co., Inc., Units, 9.75%, 6/15/99 5/15/95 110.05% 117.28%
</TABLE>
OPPENHEIMER STRATEGIC BOND FUND
The aggregate value of restricted securities is $408,000.
<TABLE>
<CAPTION>
VALUATION
ACQUISITION COST PER PER UNIT AS OF
SECURITY DATE UNIT DECEMBER 31, 1997
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
STOCKS AND WARRANTS
- ------------------------------------------------------
CGA Group Ltd. Preferred 6/17/97 $ 25.00 $ 25.00
CGA Group Ltd. Wts., Exp. 12/49 6/17/97 .00 .50
</TABLE>
- --------------------------------------------------------------------------------
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.
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
9. ACQUISITIONS (CONTINUED)
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 qualified 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 qualified as a tax-free reorganization for federal
income tax purposes.
- --------------------------------------------------------------------------------
10. INTEREST RATE SWAP TRANSACTIONS
OSBF entered into an interest rate swap transaction to seek to maintain a total
return or yield spread on a particular investment or portion of its portfolio,
or for other non-speculative purposes. Interest rate swaps involve the exchange
of commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The coupon payments are based on an agreed
upon principal amount and a specified index. Because the principal amount is not
exchanged, it represents neither an asset nor a liability to either
counterparty, and is referred to as a notional principal amount. The Fund
records an increase or decrease to interest income, the amount due or owed by
the Fund at termination or settlement. The Fund enters into swaps only on
securities it owns. Interest rate swaps are subject to credit risks (if the
other party fails to meet its obligations) and also to interest rate risks. The
Fund could be obligated to pay more under its swap agreements than it receives
under them, as a result of interest rate changes. The Fund segregates liquid
assets to cover any amounts it could owe under swaps that exceed the amounts it
is entitled to receive.
As of December 31, 1997, OSBF had entered into the following interest rate swap
agreement:
<TABLE>
<CAPTION>
FLOATING
RATE PAID RATE
BY THE RECEIVED
FUND BY THE NET
NOTIONAL AT FUND AT TERMINATION UNREALIZED
SWAP COUNTERPARTY PRINCIPAL 12/31/97 12/31/97 FLOATING RATE INDEX DATE LOSS
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust
Co. 1,110,000 7.50% 7.31% New Zealand Bank Bill 12/8/00 $13,161
</TABLE>
-1-
<PAGE>
Appendix A
Corporate 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
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Information Technology
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 Wireless
Services
A-1
<PAGE>
APPENDIX B - MAJOR SHAREHOLDERS
As of April 9, 1998, 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:
Life of
Monarch ReliaStar Virginia Nationwide Aetna
Money Fund 21,499,321,08,093,264.192 * *
12,369,251.370
17.64% 17.64% 10.15%
High Income Fund * 2,165,823.647 14,990,095.4**
2,978,922.048
7.60% 52.69% 10.46%
Bond Fund * * 3,866,286.4527,008,568.18*
8.27% 57.80%
Aggressive Growth * 1,301,216.741 5,437,690.77*
1,532,591.771
Fund 5.77% 24.12% 6.80%
Growth Fund 1,040,760.30*
5,179,659.791,171,925.8861,782,271.929
5.82% 28.93% 6.55% 9.95%
Multiple Strategie3,280,203.388,093,264.192 1
4,983,247.8522,386,053.013,244,265.630
Fund 8.27% 6.64% 12.56% 56.41% 8.18%
Global Securities * * * 26
27,725,753.82,630,290.307
Fund 53.57% 5.08%
Strategic Bond Fun* * * *
4,966,074.026
10.72%
Growth & Income * * * *
1,479,984.610
Fund 15.00%
- ---------------
*Less than 5% of the outstanding shares of that Fund.
(continued)
A-2
<PAGE>
MassMutual Jefferson-Pilot
CUNA
Money Fund 79,892,214.064* *
65.56%
High Income Fund 4,986,977.788 * 2,006,997.136
17.52% 7.06%
Bond Fund 10,375,581.1253,638,780.489 *
22.21% 7.79%
Aggressive Growth 13,04,219.906 * *
Fund 59.91%
Growth Fund 4,513,660.568 3,705,101.994 *
25.21% 20.70%
Multiple Strategies 2,911,017.696 * *
Fund 7.34%
Global Securities 19,905,519.2*2 *
Fund 38.46%
Strategic Bond Fund 39,617,075.312* *
85.52%
Growth & Income 7,570,113.808 * *
Fund 76.72%
- ---------------
*Less than 5% of the outstanding shares of that Fund.
A-3
<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
