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Semiannual Report June 30, 1999
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O P P E N H E I M E R
Bond Fund/VA
A Series of Oppenheimer Variable Account Funds
[graphic of pen and checks]
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OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
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Oppenheimer Variable Account Funds--Oppenheimer Bond Fund/VA
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Objective
Oppenheimer Bond Fund/VA, a series of Oppenheimer Variable Account Funds,
primarily seeks a high level of current income by investing in a diversified
portfolio of fixed-income securities. Secondarily, the Fund seeks capital growth
when this is consistent with its primary objective. The Fund may invest in
securities in the lower rating categories, commonly known as "junk bonds," which
are subject to a greater risk of default.
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Narrative by David Negri and John Kowalik, Co-Portfolio Managers
Oppenheimer Bond Fund/VA provided a cumulative total return of -1.69% for the
six-month period that ended June 30, 1999.(1)
The year began with the U.S. economy growing at a surprisingly robust
rate, fueled by high levels of consumer confidence and consumer spending. Most
bond sectors reacted negatively to the economy's unexpectedly high rate of
growth and the resulting increased potential for inflation, since inflation
undermines the value of a bond's yield. However, high-yield instruments remained
relatively strong as investors shifted their focus from fixed-income sectors
offering higher levels of safety, such as Treasuries, to sectors offering
greater yields, such as high-yield corporate bonds and collateralized mortgage
obligations (CMOs).(2)
In early April, reassured by evidence that the U.S. economy was
continuing to grow and that global economies were stabilizing, investors began
looking for undervalued opportunities among companies in basic industries that
stood to benefit from a global recovery. This abrupt shift in market sentiment
affected bonds and equities alike, undermining the market performance of
high-growth sectors while driving prices higher among these basic industrial
sectors.
We positioned the Fund to take advantage of these conditions by
redeploying some of our U.S. Treasury holdings in corporate bonds and CMOs, both
of which benefited from the increased demand for higher yielding bonds. As a
result, the Fund enjoyed relatively strong performance during the high-yield
rally that occurred during the first quarter of 1999. From January through
March, we achieved our best results from new issues and from investments in the
telecommunications sector, many of which we sold when we believed they no longer
offered further potential for price appreciation. At the same time, we
maintained our emphasis on the higher-grade segment of the corporate bond
market, maintaining an average credit rating of "A" to reduce the Fund's
investment risk.(3)
Our diversified investment approach helped cushion the Fund from market
volatility in April 1999, when investors began showing renewed interest in basic
industries that stood to benefit from a global recovery. Although many of our
holdings were in high-growth sectors that had performed well until that time,
many others were in energy and other basic industrial sectors favored during the
shift in market sentiment.
Of course, not all our strategies proved equally effective throughout
the period. We had less success in slightly increasing the Fund's average
duration. Duration is a measure of the length of time before a bond matures. We
shifted the Fund into longer duration instruments to capture the higher yields
generally offered by longer bonds. However, duration is also a measure of a
bond's sensitivity to changes in interest rates, since rising interest rates
diminish the advantage of the long bond's higher yield. With the U.S. economy
growing at a faster-than-expected pace, concern grew that the Federal Reserve
Board might be forced to raise interest rates to restrain inflation. As a
result, short duration instruments generally outperformed long duration
instruments, thereby detracting from the Fund's performance.
The Fund's performance may from time to time be subject to substantial
short-term changes, particularly during periods of market or interest rate
volatility. For updates on the Fund's performance, please contact your financial
advisor, call us at 1-800-525-7048 or visit our website,
www.oppenheimerfunds.com.
1. Includes changes in net asset value per share and does not include the
charges associated with the separate account products, which offer this Fund.
Such performance is not annualized and would have been lower if such charges
were taken into account.
2. Investing in lower rated high-yield domestic corporate bonds (commonly known
as "junk bonds") carries a greater risk of default, while investing in CMOs
carries a greater risk of interest rate sensitivity.
3. The Fund's portfolio is subject to change.
2 Oppenheimer Bond Fund/VA
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Oppenheimer Variable Account Funds--Oppenheimer Bond Fund/VA
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Looking ahead, we believe that the U.S. economy will moderate during the
remainder of 1999, providing a more hospitable environment for bonds in general,
and more favorable conditions for our duration position. We also believe that,
despite recent declines, Treasury bond prices still remain somewhat elevated by
historical standards when compared to the prices of higher yielding fixed-income
instruments. Therefore, we expect that Treasury prices will continue to fall
relative to other bonds. Accordingly, we intend to maintain our emphasis on
corporate bonds while closely monitoring developments in the Treasury sector to
determine how long this trend is likely to continue. We also remain watchful for
Y2K-related business disruptions that might affect corporate performance,
thereby negatively affecting corporate debt obligations.
Whatever changes occur in the market and the economy, we believe our
flexibility to allocate assets among many different fixed income segments is a
key reason why Oppenheimer Bond Fund/VA remains part of The Right Way to Invest.
Oppenheimer Bond Fund/VA 3
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Statement of Investments June 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
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<S> <C> <C>
Mortgage-Backed Obligations--39.3%
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Government Agency--20.4%
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FHLMC/FNMA/Sponsored--12.6%
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates:
Series 151, Cl. F, 9%, 5/15/21 $ 650,703 $ 679,374
Series 1092, Cl. K, 8.50%, 6/15/21 2,446,386 2,541,184
Series 1541, Cl. H, 7%, 10/15/22 4,750,000 4,741,070
Series 1712, Cl. B, 6%, 3/15/09 1,000,000 969,680
Series 1714, Cl. M, 7%, 8/15/23 2,000,000 1,975,620
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Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation
Certificates, 7%, 4/1/26 3,337,343 3,303,670
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Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 194, Cl. IO, 10.468%, 4/1/28(2) 16,046,459 4,969,388
Series 197, Cl. IO, 10.69%, 4/1/28(2) 14,131,788 4,433,849
Series 202, Cl. IO, 10.736%, 4/1/29(2) 30,607,673 9,890,104
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Federal National Mortgage Assn.:
6.50%, 3/1/11-11/1/28 8,735,016 8,441,795
7%, 4/1/04-7/25/27 20,282,154 20,048,844
7.50%, 1/1/08-1/1/26 2,389,905 2,417,289
8%, 5/1/17 125,732 129,783
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Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd. Real Estate
Mtg. Investment Conduit Pass-Through Certificates:
8.75%, 11/25/05 1,537,179 1,589,060
Trust 1993-202, Cl. PH, 6.50%, 2/25/22 6,500,000 6,477,640
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Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 1989-17, Cl. E, 10.40%, 4/25/19 741,054 803,807
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Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security,
Trust 294, Cl. 2, 12.887%-16.363%, 2/1/28(2) 20,839,592 6,144,424
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Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security,
Trust 277-C1, 13.105%, 4/1/27(3) 477,937 354,943
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79,911,524
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GNMA/Guaranteed--7.8%
Government National Mortgage Assn.:
7%, 1/15/09-8/15/28 8,373,304 8,277,777
7.50%, 7/15/26-9/15/28 32,755,506 33,117,484
8%, 1/15/28-9/15/28 7,480,305 7,699,405
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49,094,666
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Private--18.9%
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Commercial--16.6%
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1997-D5, Cl. A6, 7.439%, 2/14/41(4) 3,000,000 2,522,812
Series 1997-D5, Cl. B2, 6.93%, 2/14/41 5,400,000 3,802,781
Series 1998-MD6, Cl. A3, 7.227%, 3/15/28(4) 6,000,000 5,707,500
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Asset Securitization Corp., Interest-Only Stripped Mtg.-Backed Security,
Series 1997-D5, Cl. PS1, 9.096%, 2/14/41(2) 18,360,996 1,669,703
4 Oppenheimer Bond Fund/VA
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Statement of Investments (Unaudited) (Continued)
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Principal Market Value
Amount(1) Note 1
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Commercial (continued)
BKB Commercial Mortgage Trust, Commercial Mtg. Obligations,
Series 1997-C1, Cl. C, 7.45%, 10/25/00(5) $ 91,653 $ 91,310
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Capital Lease Funding Securitization LP, Interest-Only Stripped
Mtg.-Backed Security, Series 1997-CTL1, 10.302%, 6/22/24(2)(5) 31,079,621 1,262,610
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Commercial Mortgage Acceptance Corp., Collateralized Mtg. Obligations,
Series 1996-C1, Cl. D, 7.544%, 12/25/20(4)(5) 2,500,000 2,430,469
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Commercial Mortgage Asset Trust, Series 1999-C1, Cl. C, 7.35%, 8/17/13 9,750,000 9,292,969
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CRIMMI MAE Trust I, Collateralized Mtg. Obligations,
Series 1996-C1, Cl. A2, 7.56%, 8/30/05(6) 2,000,000 1,907,812
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CS First Boston Mortgage Securities Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1998-C1, Cl. AX, 8.185%, 5/17/23(2)(5) 24,951,304 1,656,923
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FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1994-C1:
Cl. 2-D, 8.70%, 9/25/25 1,500,000 1,477,969
Cl. 2-E, 8.70%, 9/25/25 1,500,000 1,470,000
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First Union-Lehman Brothers Commercial Mortgage Trust, Commercial
Mtg. Pass-Through Certificates, Series 1998-C2, Cl. E, 6.778%, 5/18/13 2,000,000 1,686,250
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First Union-Lehman Brothers Commercial Mortgage Trust, Interest-Only
Stripped Mtg.-Backed Security, Series 1998-C2, 9.089%, 5/18/28(2) 29,628,016 1,172,390
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General Motors Acceptance Corp., Collateralized Mtg. Obligations:
Series 1997-C2, Cl. D, 7.192%, 1/15/08 3,500,000 3,303,125
Series 1998-C1, Cl. E, 7.154%, 3/15/11(4) 3,500,000 3,340,312
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General Motors Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 1997-C1, Cl. X, 9.21%, 7/15/27(2) 18,540,938 1,564,392
Series 1997-C1, Cl. X, 8.726%, 7/15/27(2) 9,222,912 778,183
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GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through Certificates:
Series 1997-CL1, Cl. F, 7.352%, 7/13/30(4) 5,000,000 4,667,812
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Lehman Brothers Commercial Conduit Mortgage Trust, Interest-Only Stripped
Mtg.-Backed Security, Series 1998-C1, Cl. IO, 8.93%, 2/18/28(2) 44,196,418 2,499,860
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Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates:
Series 1996-C1, Cl. D, 7.42%, 4/25/28 2,000,000 1,960,000
Series 1997-C2, Cl. D, 7.072%, 12/10/29(4) 4,000,000 3,760,000
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Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates:
Series 1996-C1, Cl. D1, 7.426%, 2/15/28(4)(5) 1,000,000 975,312
Series 1997-RR, Cl. D, 7.671%, 4/30/39(5) 4,300,000 3,298,906
Series 1997-XL1, Cl. F, 7.412%, 10/3/30(4) 2,500,000 2,308,594
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NationsCommercial Corp., NB Commercial Mtg. Pass-Through Certificates:
Series DMC, Cl. B, 8.562%, 8/12/11(5) 1,600,000 1,572,500
Series DMC, Cl. C, 8.921%, 8/12/11(5) 4,400,000 4,390,375
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NC Finance Trust, Collateralized Mtg. Obligations, Series 1999-I,
Cl. ECFD, 8.75%, 7/25/02(5) 8,560,551 8,437,493
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Option One Mortgage Trust, Collateralized Mtg. Obligations,
Series 1999-1A, 10.06%, 3/1/29(5) 6,485,312 6,485,313
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Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through Certificates:
Series 1, Cl. C, 8.93%, 12/21/26(5) 250,000 245,469
Series 1, Cl. D, 7.68%, 12/21/26(5) 500,000 483,516
Oppenheimer Bond Fund/VA 5
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Statement of Investments (Unaudited) (Continued)
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Principal Market Value
Amount(1) Note 1
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Commercial (continued)
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1994-C1, Cl. C, 8%, 6/25/26 $1,500,000 $ 1,496,836
Series 1995-C1, Cl. D, 6.90%, 2/25/27 3,000,000 2,934,844
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Structured Asset Securities Corp., Commercial Mtg. Pass-Through Certificates:
Series 1996-C3, Cl. C, 7.375%, 6/25/30(4)(5) 2,515,826 2,528,406
Series 1997-LLI, Cl. E, 7.30%, 4/12/12 4,000,000 3,587,500
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Structured Asset Securities Corp., Multiclass Pass-Through Certificates:
Series 1996-CFL, Cl. D, 7.034%, 2/25/28 1,800,000 1,784,250
Series 1996-CFL, Cl. D, 7.034%, 2/25/28 6,500,000 6,481,719
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105,036,215
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Multi-Family--0.2%
Countrywide Funding Corp., Mtg. Pass-Through Certificates,
Series 1993-12, Cl. B1, 6.625%, 2/25/24 966,506 901,116
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Merrill Lynch Trust, Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates, Series 43, Cl. E, 6.50%, 8/27/15 334,630 333,165
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Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1991-M5, Cl. A, 9%, 3/25/17(5) 134,442 133,182
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1,367,463
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Other--0.0%
Salomon Brothers Mortgage Securities VI, Interest-Only Stripped Mtg.-Backed Security:
Series 1987-3, Cl. B, 23.119%, 10/23/17(2) 48,373 12,721
Series 1987-3, Cl. B, 53.458%, 10/23/17(2) 17,276 4,543
Series 1987-3, Cl. A, 2.384%, 10/23/17(3) 24,156 19,952
Series 1987-3, Cl. A, 15.66%, 10/23/17(3) 72,993 60,288
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97,504
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Residential--2.1%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates,
Series 1997-C1, Cl. E, 7.50%, 3/1/11(5) 5,006,000 4,303,596
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First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates,
Series 1997-CHL1, Cl. C, 8.055%, 7/25/06(4)(5) 4,024,000 3,798,908
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Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates:
Series 1997-HF1, Cl. E, 7.55%, 7/15/29(5) 1,500,000 1,399,219
Series 1997-WF1, Cl. E, 7.49%, 5/15/09(5) 1,000,000 924,063
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NationsBank Trust, Lease Pass-Through Certificates, Series 1997A-1, 7.442%, 1/10/11(4) 2,500,000 2,500,781
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Ryland Mortgage Securities Corp. III, Sub. Bonds, Series 1992-A, Cl. 1A, 8.256%, 3/29/30(4) 255,850 254,851
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13,181,418
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Total Mortgage-Backed Obligations (Cost $255,837,612) 248,688,790
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U.S. Government Obligations--1.2%
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U.S. Treasury Bonds, STRIPS, 5.99%, 11/15/18(7) 2,900,000 855,828
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U.S. Treasury Inflationary Index Nts., 3.875%, 1/15/09(14) 6,579,300 6,507,342
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Total U.S. Government Obligations (Cost $7,460,321) 7,363,170
6 Oppenheimer Bond Fund/VA
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Statement of Investments (Unaudited) (Continued)
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Principal Market Value
Amount(1) Note 1
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Foreign Government Obligations--2.7%
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Banque Centrale de Tunisie Unsec. Bonds, 8.25%, 9/19/27 $ 2,020,000 $ 1,681,650
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Colombia (Republic of) Nts., 7.25%, 2/23/04 975,000 750,750
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Financiera Energetica Nacional SA Nts., 9.375%, 6/15/06 1,300,000 1,092,000
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Israel (State of) Bonds, 7.25%, 12/15/28 9,750,000 8,662,232
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Ontario, Canada (Province of) Bonds, 8%, 10/17/01 750,000 779,280
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PT Hutama Karya Medium-Term Nts., Zero Coupon, 3/17/99(5)(8)(IDR) 1,000,000,000 39,943
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South Africa (Republic of) Unsec. Nts., 8.50%, 6/23/17 2,565,000 2,349,967
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Vodohospodarska Vystavba Gtd. Nts., 7.25%, 12/19/06 2,350,000 1,786,000
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Total Foreign Government Obligations (Cost $18,057,627) 17,141,822
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Loan Participations--0.6%
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Colombia (Republic of) 1989-1990 Integrated Loan Facility Bonds, 6%, 7/1/01(4)(5) 714,800 650,468
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Ferrell Companies, Inc., 9.06% Sr. Sec. Nts., 7/17/06(4)(5) 3,300,000 3,275,250
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Total Loan Participations (Cost $3,962,247) 3,925,718
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Municipal Bonds and Notes--0.8%
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Dade Cnty., FL Educational Facilities Authority Revenue Bonds,
University of Miami, MBIA Insured, 7.65%, 4/1/10 205,000 214,959
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Dade Cnty., FL Educational Facilities Authority Taxable Exchange Revenue Bonds,
University of Miami, MBIA Insured, 7.65%, 4/1/10 120,000 125,867
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Dade Cnty., FL Educational Facilties Authority Exchangeable Revenue Bonds,
University of Miami, Prerefunded, MBIA Insured, 7.65%, 4/1/10 175,000 183,969
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Port of Portland, OR Special Obligations Taxable Revenue Bonds,
PAMCO Project, 9.20%, 5/15/22 500,000 531,460
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Virgin Islands Public Finance Authority Taxable Revenue Refunding Bonds,
Sr. Lien Loan Nts., Series B, 6.99%, 10/1/01 3,265,000 3,275,317
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Pinole, CA Redevelopment Agency Tax Allocation Taxable Bonds,
Pinole Vista Redevelopment, Series B, MBIA Insured, 8.35%, 8/1/17 670,000 712,042
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Total Municipal Bonds and Notes (Cost $4,928,632) 5,043,614
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Corporate Bonds and Notes--54.9%
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Aerospace/Defense--0.6%
Amtran, Inc., 9.625% Nts., 12/15/05 800,000 785,000
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Atlas Air, Inc., 8.01% Nts., 1/2/10 2,833,188 2,780,845
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3,565,845
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Chemicals--1.8%
ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 300,000 288,375
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Equistar Chemicals LP, 8.75% Sr. Unsec. Nts., 2/15/09(6) 3,250,000 3,290,085
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Huntsman Corp./ICI Chemical Co. plc, 10.125% Sr. Unsec. Sub. Nts., 7/1/09(6) 800,000 812,000
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Lyondell Chemical Co., 9.875% Nts., Series B, 5/1/07(6) 1,000,000 1,027,500
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Rohm & Haas Co., 7.85% Debs., 7/15/29(10) 5,200,000 5,315,284
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ZSC Specialty Chemical plc, 11% Sr. Nts., 7/1/09(6) 800,000 811,000
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11,544,244
Oppenheimer Bond Fund/VA 7
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Statement of Investments (Unaudited) (Continued)
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Principal Market Value
Amount(1) Note 1
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Consumer Non-Durables--0.4%
AKI Holdings, Inc., 10.50% Sr. Unsec. Nts., 7/1/08 $ 300,000 $ 292,500
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Bell Sports, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 8/15/08 210,000 210,000
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Fruit of the Loom, Inc.:
7% Debs., 3/15/11 1,097,000 906,701
8.875% Sr. Unsec. Nts., 4/15/06(6) 425,000 367,625
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Revlon Consumer Products Corp., 9% Sr. Nts., 11/1/06 500,000 495,000
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Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08 360,000 351,000
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2,622,826
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Energy--2.2%
Baker Hughes, Inc., 6.875% Sr. Nts., 1/15/29(6) 3,300,000 3,072,406
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Colorado Interstate Gas Corp., 10% Sr. Debs., 6/15/05 500,000 574,164
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Eastern Energy Ltd., 6.75% Sr. Nts., 12/1/06(6) 2,000,000 1,960,376
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Enron Corp., 9.875% Debs., 6/15/03 375,000 414,410
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ENSCO International, Inc., 7.20% Debs., 11/15/27 3,000,000 2,771,202
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Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(6) 300,000 265,500
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Gulf Canada Resources Ltd., 8.375% Sr. Nts., 11/15/05 500,000 493,750
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HNG Internorth/Enron Corp., 9.625% Debs., 3/15/06 500,000 567,307
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McDermott, Inc., 9.375% Nts., 3/15/02 400,000 417,938
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Mitchell Energy & Development Corp., 9.25% Sr. Nts., 1/15/02 55,000 56,832
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Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 400,000 290,000
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P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 900,000 897,750
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RBF Finance Co., 11% Sec. Nts., 3/15/06(6) 455,000 470,925
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Texaco Capital, Inc., 8.875% Gtd. Debs., 9/1/21 500,000 588,988
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TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 750,000 916,897
------------
13,758,445
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Financial--24.6%
1st Bank Oak Park, 9% Nts., 8/6/29(6) 7,800,000 7,691,447
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Aeltus CBO II Ltd./Aeltus CBO II Corp., 7.982% Sr. Sec. Sub. Bonds, 8/6/09(5) 5,000,000 4,735,750
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AES Ironwood LLC, 8.857% Nts., 11/30/25(5) 6,500,000 6,517,745
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Aetna Services, Inc., 7.125% Nts., 8/15/06 1,000,000 1,000,657
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Allmerica Capital I, 8.207% Debs., 2/3/27(11) 2,000,000 2,076,398
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American General Finance Corp., 5.875% Sr. Nts., 7/1/00 196,000 195,950
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BHP Finance USA Ltd., 7.25% Nts., 3/1/16 6,500,000 6,215,683
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Chase Manhattan Corp., 10.125% Sub. Nts., 11/1/00 750,000 786,703
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Citicorp Capital I, 7.933% Gtd. Bonds, 2/15/27 2,000,000 2,019,490
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CNA Financial Corp., 6.25% Nts., 11/15/03 2,195,000 2,150,591
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Countrywide Home Loan, Inc., 6.85% Nts., 6/15/04 6,500,000 6,507,995
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Dresdner Funding Trust II, 8.151% Nts., 6/30/31(6) 16,250,000 15,603,217
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Farmers Exchange Capital, 7.05% Trust Surplus Nts., 7/15/28(6) 3,000,000 2,719,191
8 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
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Financial (continued)
First Union National Bank, 6.50% Sub. Bank Nts., 12/1/28 $ 9,750,000 $ 8,694,640
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Fleet Mtg. Group, Inc., 6.50% Nts., 9/15/99 500,000 500,528
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Ford Motor Credit Co., 6.75% Nts., 8/15/08 1,000,000 985,013
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Household Finance Corp., 8.95% Debs., 9/15/99 500,000 502,759
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Keycorp Capital II, 6.875% Bonds, 3/17/29 6,500,000 6,029,023
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Lehman Brothers Holdings, Inc., 6.625% Unsec. Nts., 2/5/06 5,850,000 5,605,388
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Lehman Brothers, Inc., 6.625% Sr. Sub. Nts., 2/15/08 3,000,000 2,803,449
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Liberty Financial Co., 7.625% Unsec. Debs., 11/15/28 6,500,000 6,401,161
- ---------------------------------------------------------------------------------------------------------------------------------
Liberty Mutual Insurance Co., 7.697% Unsec. Nts., 10/15/2097(6) 19,000,000 17,303,604
- ---------------------------------------------------------------------------------------------------------------------------------
Lumbermens Mutual Casualty Co., 8.30% Surplus Nts., 12/1/37(6) 2,000,000 1,918,726
- ---------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 7% Debs., 10/1/13 1,000,000 991,364
- ---------------------------------------------------------------------------------------------------------------------------------
National City Corp., 6.875% Unsec. Sub. Nts., 5/15/19 8,450,000 7,958,083
- ---------------------------------------------------------------------------------------------------------------------------------
Rothmans Nederland Holdings BV, 6.875% Sr. Unsec. Unsub. Nts., 5/6/08 13,750,000 13,004,062
- ---------------------------------------------------------------------------------------------------------------------------------
Safeco Capital Trust I, 8.072% Nts., 7/15/37 10,679,000 10,297,439
- ---------------------------------------------------------------------------------------------------------------------------------
Sears Roebuck Acceptance Corp., 6.25% Unsec. Nts., 5/1/09 10,400,000 9,738,144
- ---------------------------------------------------------------------------------------------------------------------------------
Travelers Group, Inc., 6.875% Unsec. Nts., 2/15/2098 1,000,000 899,821
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Leasing International, Inc., 6.625% Sr. Nts., 5/15/03 750,000 749,635
- ---------------------------------------------------------------------------------------------------------------------------------
Washington Mutual Capital I, 8.375% Sub. Capital Income Nts., 6/1/27 3,000,000 3,051,864
------------
155,655,520
- ---------------------------------------------------------------------------------------------------------------------------------
Food & Drug--0.2%
Pathmark Stores, Inc.:
0%/10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03(12) 1,095,000 1,089,525
12.625% Sub. Nts., 6/15/02 400,000 408,000
------------
1,497,525
- ---------------------------------------------------------------------------------------------------------------------------------
Food/Tobacco--1.2%
Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 300,000 295,500
- ---------------------------------------------------------------------------------------------------------------------------------
Bass North America, Inc., 6.75% Gtd. Nts., 8/1/99 750,000 750,282
- ---------------------------------------------------------------------------------------------------------------------------------
Chiquita Brands International, Inc., 10% Sr. Nts., 6/15/09 450,000 451,125
- ---------------------------------------------------------------------------------------------------------------------------------
Pepsi Bottling Group, Inc., 7% Sr. Nts., 3/1/29(6) 6,500,000 6,094,263
------------
7,591,170
- ---------------------------------------------------------------------------------------------------------------------------------
Forest Products/Containers--0.6%
Boise Cascade Corp., 9.90% Nts., 3/15/00 750,000 764,407
- ---------------------------------------------------------------------------------------------------------------------------------
Fletcher Challenge Capital Canada, Inc., 7.75% Nts., 6/20/06 1,800,000 1,800,185
- ---------------------------------------------------------------------------------------------------------------------------------
Mail-Well Corp., 8.75% Sr. Unsec. Sub. Nts., Series B, 12/15/08 535,000 521,625
- ---------------------------------------------------------------------------------------------------------------------------------
Potlatch Corp., 9.46% Medium-Term Nts., 4/2/02 500,000 530,339
------------
3,616,556
- ---------------------------------------------------------------------------------------------------------------------------------
Gaming/Leisure--0.7%
HMH Properties, Inc., 8.45% Sr. Nts., Series C, 12/1/08 300,000 286,500
- ---------------------------------------------------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08 950,000 961,875
- ---------------------------------------------------------------------------------------------------------------------------------
Meristar Hospitality Corp., 8.75% Sr. Sub. Nts., 8/15/07(6) 700,000 668,500
Oppenheimer Bond Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- ---------------------------------------------------------------------------------------------------------------------------------
Gaming/Leisure (continued)
Mohegan Tribal Gaming Authority:
8.125% Sr. Nts., 1/1/06 $ 400,000 $ 394,000
8.75% Sr. Unsec. Sub. Nts., 1/1/09 300,000 298,500
- ---------------------------------------------------------------------------------------------------------------------------------
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts., 4/1/08(12) 300,000 200,625
9.75% Sr. Nts., 6/15/07 600,000 609,000
- ---------------------------------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 9.75% Sr. Sub. Nts., 4/15/07 550,000 561,000
------------
3,980,000
- ---------------------------------------------------------------------------------------------------------------------------------
Healthcare--0.1%
Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 600,000 559,500
- ---------------------------------------------------------------------------------------------------------------------------------
ICN Pharmaceuticals, Inc., 8.75% Sr. Nts., 11/15/08(6) 125,000 123,438
------------
682,938
- ---------------------------------------------------------------------------------------------------------------------------------
Housing--1.6%
Building Materials Corp. of America, 8% Sr. Unsec. Nts., 12/1/08 800,000 750,000
- ---------------------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 400,000 378,000
- ---------------------------------------------------------------------------------------------------------------------------------
Kimco Realty Corp., 6.875% Sr. Unsec. Nts., 2/10/09 9,100,000 8,692,038
------------
9,820,038
- ---------------------------------------------------------------------------------------------------------------------------------
Manufacturing--0.3%
Moll Industries, Inc., 10.50% Sr. Unsec. Sub. Nts., 7/1/08 250,000 221,250
- ---------------------------------------------------------------------------------------------------------------------------------
Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 500,000 475,000
- ---------------------------------------------------------------------------------------------------------------------------------
Tenneco, Inc.:
8.075% Nts., 10/1/02 650,000 669,835
10.20% Debs., 3/15/08 400,000 467,657
- ---------------------------------------------------------------------------------------------------------------------------------
Terex Corp., 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08(6) 100,000 96,000
------------
1,929,742
- ---------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Broadcasting--0.8%
Chancellor Media Corp.:
8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 2,500,000 2,503,125
9% Sr. Unsec. Sub. Nts., 10/1/08 2,200,000 2,249,500
- ---------------------------------------------------------------------------------------------------------------------------------
Emmis Communications Corp., 8.125% Sr. Sub. Nts., 3/15/09(6) 600,000 573,750
------------
5,326,375
- ---------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Cable/Wireless Video--1.4%
Adelphia Communications Corp., 8.375% Sr. Nts., Series B, 2/1/08 1,300,000 1,257,750
- ---------------------------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18(9) 1,500,000 1,396,875
- ---------------------------------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication Holdings
Capital Corp., 8.25% Sr. Nts., 4/1/07(6) 3,000,000 2,887,500
- ---------------------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09(6) 900,000 920,250
- ---------------------------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 2,200,000 2,340,210
------------
8,802,585
10 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- ---------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Diversified Media--2.0%
GSP I Corp., 10.15% First Mtg. Bonds, 6/24/10(5) $1,071,442 $ 1,023,924
- ---------------------------------------------------------------------------------------------------------------------------------
Imax Corp., 7.875% Sr. Nts., 12/1/05 900,000 851,625
- ---------------------------------------------------------------------------------------------------------------------------------
Knight-Ridder, Inc., 6.875% Debs., 3/15/29 9,750,000 9,049,755
- ---------------------------------------------------------------------------------------------------------------------------------
Reed Elsevier, Inc., 6.625% Nts., 10/15/23(6) 600,000 527,616
- ---------------------------------------------------------------------------------------------------------------------------------
Regal Cinemas, Inc., 9.50% Sr. Unsec. Sub. Nts., 6/1/08 500,000 470,000
- ---------------------------------------------------------------------------------------------------------------------------------
SFX Entertainment, Inc., 9.125% Sr. Unsec. Sub. Nts., 12/1/08 600,000 585,000
------------
12,507,920
- ---------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications--3.0%
Cable & Wireless Communications plc, 6.75% Nts., 12/1/08 9,750,000 9,340,549
- ---------------------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 8.60% Sr. Unsec. Nts., Series B, 6/1/08 800,000 740,000
- ---------------------------------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Inc., 10% Sr. Unsec. Nts., Series B, 11/15/08 650,000 671,125
- ---------------------------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc.:
9.625% Sr. Nts., 10/1/07 2,200,000 2,150,500
10.75% Sr. Unsec. Nts., 11/15/08 200,000 205,500
- ---------------------------------------------------------------------------------------------------------------------------------
NTL, Inc., 11.50% Sr. Unsec. Nts., Series B, 10/1/08 1,000,000 1,106,250
- ---------------------------------------------------------------------------------------------------------------------------------
PSINet, Inc.:
10% Sr. Unsec. Nts., Series B, 2/15/05 800,000 808,000
11.50% Sr. Unsec. Nts., 11/1/08 1,000,000 1,060,000
- ---------------------------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc., 0%/8.29% Sr. Unsec. Disc. Nts.,
Series B, 2/1/08(12) 1,350,000 1,005,750
- ---------------------------------------------------------------------------------------------------------------------------------
Shaw Communications, Inc., 8.54% Debs., 9/30/27(CAD) 3,000,000 1,935,566
------------
19,023,240
- ---------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications--0.4%
Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07 200,000 173,000
- ---------------------------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 200,000 174,500
- ---------------------------------------------------------------------------------------------------------------------------------
Omnipoint Corp., 11.625% Sr. Nts., Series A, 8/15/06 100,000 102,500
- ---------------------------------------------------------------------------------------------------------------------------------
Price Communications Wireless, Inc., 9.125% Sr. Sec. Nts., Series B, 12/15/06 1,000,000 1,015,000
- ---------------------------------------------------------------------------------------------------------------------------------
SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(12) 700,000 406,000
- ---------------------------------------------------------------------------------------------------------------------------------
Spectrasite Holdings, Inc., 0%/12% Sr. Disc. Nts., 7/15/08(6)(12) 600,000 381,000
------------
2,252,000
- ---------------------------------------------------------------------------------------------------------------------------------
Metals/Minerals--0.3%
AK Steel Corp., 7.875% Sr. Nts., 2/15/09(6) 1,000,000 965,000
- ---------------------------------------------------------------------------------------------------------------------------------
Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 750,000 735,000
- ---------------------------------------------------------------------------------------------------------------------------------
National Steel Corp.:
9.875% First Mtg. Bonds, Series D, 3/1/09 350,000 357,875
9.875% Nts., Series B, 3/1/09(6) 150,000 153,375
------------
2,211,250
- ---------------------------------------------------------------------------------------------------------------------------------
Retail--2.2%
Dana Corp., 7% Unsec. Nts., 3/1/29 4,550,000 4,162,290
- ---------------------------------------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 250,000 218,750
- ---------------------------------------------------------------------------------------------------------------------------------
Sherwin-Williams Co., 7.45% Debs., 2/1/2097 9,750,000 9,467,435
------------
13,848,475
Oppenheimer Bond Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- ---------------------------------------------------------------------------------------------------------------------------------
Service--3.5%
Allied Waste North America, Inc., 7.875% Sr. Unsec. Nts., Series B, 1/1/09 $ 965,000 $ 899,863
- ---------------------------------------------------------------------------------------------------------------------------------
Archer Daniels Midland Co., 7.125% Debs., 3/1/13 750,000 754,409
- ---------------------------------------------------------------------------------------------------------------------------------
Arvin Industries, Inc., 6.75% Nts., 3/15/08 2,500,000 2,349,800
- ---------------------------------------------------------------------------------------------------------------------------------
Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 135,000 139,725
- ---------------------------------------------------------------------------------------------------------------------------------
Harcourt General, Inc., 7.30% Sr. Debs., 8/1/2097 10,025,000 8,331,647
- ---------------------------------------------------------------------------------------------------------------------------------
Norsk Hydro ASA, 7.15% Bonds, 1/15/29 9,850,000 9,098,622
- ---------------------------------------------------------------------------------------------------------------------------------
Safety-Kleen Corp., 9.25% Sr. Nts., 5/15/09(6) 800,000 808,000
------------
22,382,066
- ---------------------------------------------------------------------------------------------------------------------------------
Transportation--2.6%
Chrysler Corp., 7.40% Debs., 8/1/2097 2,000,000 1,965,330
- ---------------------------------------------------------------------------------------------------------------------------------
Johnson Controls, Inc., 7.70% Debs., 3/1/15 500,000 518,543
- ---------------------------------------------------------------------------------------------------------------------------------
Kansas City Southern Industries, Inc., 6.625% Nts., 3/1/05 750,000 732,668
- ---------------------------------------------------------------------------------------------------------------------------------
Quantas Airways, 7.75% Nts., 6/15/09(6) 9,750,000 9,799,511
- ---------------------------------------------------------------------------------------------------------------------------------
Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 400,000 410,026
- ---------------------------------------------------------------------------------------------------------------------------------
United Air Lines, Inc., 9.75% Non-Redeemable Debs., 8/15/21 2,500,000 2,905,803
------------
16,331,881
- ---------------------------------------------------------------------------------------------------------------------------------
Utility--4.4%
Calpine Corp., 7.75% Sr. Nts., 4/15/09 650,000 612,625
- ---------------------------------------------------------------------------------------------------------------------------------
Cleveland Electric Illuminating Co./Toledo Edison Co., 7.13% Sec. Nts., Series B, 7/1/07 3,000,000 3,001,722
- ---------------------------------------------------------------------------------------------------------------------------------
Consolidated Natural Gas Co., 6.625% Debs., 12/1/13 1,000,000 950,227
- ---------------------------------------------------------------------------------------------------------------------------------
GTE Corp., 9.375% Debs., 12/1/00 500,000 520,840
- ---------------------------------------------------------------------------------------------------------------------------------
Israel Electric Corp. Ltd., 7.70% Bonds, 7/15/18(6) 12,050,000 11,292,995
- ---------------------------------------------------------------------------------------------------------------------------------
KN Energy, Inc., 7.45% Sr. Debs., 3/1/2098 6,500,000 5,513,989
- ---------------------------------------------------------------------------------------------------------------------------------
Long Island Lighting Co., 8.20% Debs., 3/15/23 3,300,000 3,513,906
- ---------------------------------------------------------------------------------------------------------------------------------
Northern Telecom Ltd., 6.875% Nts., 10/1/02 500,000 510,330
- ---------------------------------------------------------------------------------------------------------------------------------
Public Service Co. of Colorado, 8.75% First Mtg. Bonds, 3/1/22 750,000 776,929
- ---------------------------------------------------------------------------------------------------------------------------------
South Carolina Electric & Gas Co., 9% Mtg. Bonds, 7/15/06 500,000 554,704
- ---------------------------------------------------------------------------------------------------------------------------------
Washington Gas Light Co., 8.75% First Mtg. Bonds, 7/1/19 500,000 500,000
------------
27,748,267
-----------
Total Corporate Bonds and Notes (Cost $362,652,226) 346,698,908
<CAPTION>
Shares
=================================================================================================================================
Preferred Stocks--0.5%
- ---------------------------------------------------------------------------------------------------------------------------------
ING Capital Fund Trust, 7.70% Non-Cum.(13) (Cost $3,250,000) 130,000 3,250,000
=================================================================================================================================
Other Securities--1.4%
- ---------------------------------------------------------------------------------------------------------------------------------
Allstate Financing I, 7.95% Cum. Quarterly Income Preferred Securities,
Series A, Non-Vtg. 120,000 3,030,000
- ---------------------------------------------------------------------------------------------------------------------------------
News Corp. Ltd., 5% Preferred Stock(13) 97,500 5,996,250
------------
Total Other Securities (Cost $9,341,400) 9,026,250
12 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<CAPTION>
Market Value
Date Strike Contracts Note 1
=================================================================================================================================
Call Options Purchased--0.0%
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond Futures, 10 yr., 9/99 Call Opt. 7/99 111% 195 $ 158,437
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond Futures, 10 yr., 9/99 Call Opt. 7/99 112 390 140,156
-------------
Total Call Options Purchased (Cost $161,363) 298,593
<CAPTION>
Principal
Amount(1)
=================================================================================================================================
Repurchase Agreements--0.9%
- ---------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 4.80%, dated 6/30/99,
to be repurchased at $5,700,760 on 7/1/99, collateralized by U.S. Treasury Nts.,
5.50%-8%, 11/30/99-7/15/06, with a value of $4,811,947, U.S. Treasury Bonds,
6%-9.25%, 2/15/16-2/15/26, with a value of $1,007,661 (Cost $5,700,000) $5,700,000 5,700,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $671,351,428) 102.3% 647,136,865
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (2.3) (14,735,036)
---------- -------------
Net Assets 100.0% $632,401,829
========== =============
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
CAD--Canadian Dollar
IDR --Indonesian Rupiah
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. 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.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
6. 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 $94,512,612 or 14.95% of the Fund's net
assets as of June 30, 1999.
7. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
8. Non-income producing--issuer is in default.
9. A sufficient amount of securities has been designated to cover outstanding
foreign currency exchange contracts. See Note 5 of Notes to Financial
Statements.
10. When-issued security to be delivered and settled after June 30, 1999.
11. Securities with an aggregate market value of $2,076,398 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
12. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
13. Non-income producing security.
14. Denotes an inflation-indexed security: coupon and principal are indexed to
the consumer price index.
See accompanying Notes to Financial Statements.
Oppenheimer Bond Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
=====================================================================================================
<S> <C>
Assets
Investments, at value (cost $671,351,428)--see accompanying statement $647,136,865
- -----------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 8,506,259
Investments sold 7,868,771
Shares of beneficial interest sold 344,493
Closed foreign currency exchange contracts 2,172
Other 4,203
------------
Total assets 663,862,763
=====================================================================================================
Liabilities
Bank overdraft 41,703
- -----------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency exchange contracts--Note 5 56,762
- -----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $5,196,204 purchased on a when-issued basis)--Note 1 30,148,705
Shares of beneficial interest redeemed 891,878
Daily variation on futures contracts--Note 6 284,594
Shareholder reports 22,446
Legal, auditing and other professional fees 8,102
Transfer and shareholder servicing agent fees 179
Other 6,565
------------
Total liabilities 31,460,934
=====================================================================================================
Net Assets $632,401,829
============
=====================================================================================================
Composition of Net Assets
Paid-in capital $637,184,545
- -----------------------------------------------------------------------------------------------------
Undistributed net investment income 22,060,745
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (2,166,111)
- -----------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (24,677,350)
------------
Net assets--applicable to 54,993,973 shares of beneficial interest outstanding $632,401,829
============
=====================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $11.50
</TABLE>
See accompanying Notes to Financial Statements.
14 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
======================================================================================
<S> <C>
Investment Income
Interest (net of foreign withholding taxes of $39) $ 23,904,181
- --------------------------------------------------------------------------------------
Dividends 488,535
------------
Total income 24,392,716
======================================================================================
Expenses
Management fees--Note 4 2,298,294
- --------------------------------------------------------------------------------------
Custodian fees and expenses 23,155
- --------------------------------------------------------------------------------------
Legal, auditing and other professional fees 10,411
- --------------------------------------------------------------------------------------
Registration and filing fees 6,240
- --------------------------------------------------------------------------------------
Insurance expenses 3,159
- --------------------------------------------------------------------------------------
Trustees' compensation 2,406
- --------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 1,047
- --------------------------------------------------------------------------------------
Shareholder reports 244
- --------------------------------------------------------------------------------------
Other 209
------------
Total expenses 2,345,165
Less expenses paid indirectly--Note 1 (15,424)
------------
Net expenses 2,329,741
======================================================================================
Net Investment Income 22,062,975
======================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (3,485,606)
Closing of futures contracts 1,647,714
Closing and expiration of option contracts written--Note 7 29,523
Foreign currency transactions (187,063)
------------
Net realized loss (1,995,432)
- --------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (31,216,340)
Translation of assets and liabilities denominated in foreign currencies 200,495
------------
Net change (31,015,845)
------------
Net realized and unrealized loss (33,011,277)
======================================================================================
Net Decrease in Net Assets Resulting from Operations $(10,948,302)
============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Bond Fund/VA 15
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
Six Months Ended Year Ended
June 30, 1999 December 31,
(Unaudited) 1998
================================================================================================
<S> <C> <C>
Operations
Net investment income $ 22,062,975 $ 37,001,034
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) (1,995,432) 5,539,991
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (31,015,845) (5,203,148)
-------------- -------------
Net increase (decrease) in net assets resulting from operations (10,948,302) 37,337,877
================================================================================================
Dividends and Distributions to Shareholders
Dividends from net investment income (30,081,522) (9,009,958)
- ------------------------------------------------------------------------------------------------
Distributions from net realized gain (2,888,886) (8,154,014)
================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from
beneficial interest transactions--Note 2 20,777,840 115,290,766
================================================================================================
Net Assets
Total increase (decrease) (23,140,870) 135,464,671
- ------------------------------------------------------------------------------------------------
Beginning of period 655,542,699 520,078,028
-------------- -------------
End of period (including undistributed net investment
income of $22,060,745 and $30,079,292, respectively) $ 632,401,829 $ 655,542,699
============== =============
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30,1999 Year Ended December 31,
(Unaudited) 1998 1997 1996 1995 1994
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $12.32 $11.91 $11.63 $11.84 $10.78 $11.65
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .41 .72 .76 .69 .72 .76
Net realized and unrealized gain (loss) (.61) .07 .28 (.15) 1.07 (.98)
- ---------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.20) .79 1.04 .54 1.79 (.22)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.57) (.20) (.72) (.74) (.73) (.62)
Distributions from net realized gain (.05) (.18) (.04) (.01) -- (.03)
- ---------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.62) (.38) (.76) (.75) (.73) (.65)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.50 $12.32 $11.91 $11.63 $11.84 $10.78
====== ====== ====== ====== ====== ======
===========================================================================================================================
Total Return, at Net Asset Value(1) (1.69)% 6.80% 9.25% 4.80% 17.00% (1.94)%
===========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $632,402 $655,543 $520,078 $426,439 $211,232 $135,067
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $647,562 $586,242 $449,760 $296,253 $170,929 $121,884
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (2)
Net investment income 6.87% 6.31% 6.72% 6.72% 6.91% 7.30%
Expenses (3) 0.73% 0.74% 0.78% 0.78% 0.80% 0.57%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 119% 76% 117% 82% 79% 35%
</TABLE>
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce the
total return figures for all periods shown.
2. Annualized for periods less than one full year.
3. Beginning in fiscal 1995, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended June 30, 1999, were $801,744,761 and $726,293,331, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer Bond Fund/VA 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies.
Oppenheimer Bond Fund/VA (the Fund) is a separate series of Oppenheimer Variable
Account Funds (the Trust), a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek a high level of current income. The Fund
operated under the name Oppenheimer Bond Fund through April 30, 1999. The
Trust's investment advisor is OppenheimerFunds, Inc. (the Manager). The
following is a summary of significant accounting policies consistently followed
by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of 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. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
- --------------------------------------------------------------------------------
Securities Purchased on a When-Issued Basis. Delivery and payment for securities
that have been purchased by the Fund on a forward commitment or when-issued
basis can take place a month or more after the transaction date. Normally the
settlement date occurs within six months after the transaction date; however,
the Fund may, from time to time, purchase securities whose settlement date
extends beyond six months and possibly as long as two years or more beyond trade
date. During this period, such securities do not earn interest, are subject to
market fluctuation and may increase or decrease in value prior to their
delivery. The Fund maintains segregated assets with a market value equal to or
greater than the amount of its purchase commitments. The purchase of securities
on a when-issued or forward commitment basis may increase the volatility of the
Fund's net asset value to the extent the Fund makes such purchases while
remaining substantially fully invested. As of June 30, 1999, the Fund had
entered into outstanding when-issued or forward commitments of $5,196,204.
In connection with its ability to purchase securities on a when-issued
or forward commitment basis, the Fund may enter into mortgage dollar-rolls in
which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Fund records each dollar-roll as a sale and a new purchase
transaction.
- --------------------------------------------------------------------------------
Security Credit Risk. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issues subsequently default. As of June 30, 1999, securities with an
aggregate market value of $39,943, representing 0.01% of the Fund's net assets,
were in default.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
18 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Distributions to shareholders, which are
determined in accordance with income tax regulations, are recorded on the
ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and options
written and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest.
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999 Year Ended December 31, 1998
-------------------------------- --------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 5,757,087 $ 68,988,645 24,245,723 $ 293,126,941
Dividends and distributions reinvested 2,820,394 32,970,408 1,463,254 17,163,972
Redeemed (6,793,511) (81,181,213) (16,150,244) (195,000,147)
---------- ------------ ----------- -------------
Net increase 1,783,970 $ 20,777,840 9,558,733 $ 115,290,766
========== ============ =========== =============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities.
As of June 30, 1999, net unrealized depreciation on investments of $24,214,563
was composed of gross appreciation of $2,936,987, and gross depreciation of
$27,151,550.
Oppenheimer Bond Fund/VA 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates.
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 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. The Fund's
management fee for the six months ended June 30, 1999, was 0.72% of average
annual net assets.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer agent for the Fund and is responsible for maintaining the shareholder
registry and shareholder accounting records for the Fund. OFS provides these
services at cost.
================================================================================
5. Foreign Currency Contracts
A foreign currency exchange contract is a commitment to purchase or sell a
foreign currency at a future date, at a negotiated rate. The Fund may enter into
foreign currency exchange contracts for operational purposes and to seek to
protect against adverse exchange rate fluctuations. Risks to the Fund include
the potential inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
As of June 30, 1999, the Fund had outstanding foreign currency contracts as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized
Contract Description Date Amounts (000s) June 30, 1999 Depreciation
- -----------------------------------------------------------------------------------------------------------
Contracts to Sell
- -----------------
<S> <C> <C> <C> <C>
Canadian Dollar (CAD) 7/15/99 3,000 CAD $2,027,400 $56,762
=======
</TABLE>
================================================================================
6. Futures Contracts
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to protect against changes in interest rates. The Fund may also buy or
write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases
in interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund may recognize a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include
the possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value of
the underlying securities.
20 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
As of June 30, 1999, outstanding futures contracts were as follows:
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Contract Description Date Contracts June 30, 1999 Depreciation
- ---------------------------------------------------------------------------------------------------------
Contracts to Sell
- -----------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds, 5 yr. 9/21/99 19 $ 2,071,000 $ 17,219
U.S. Treasury Bonds, 10 yr. 9/21/99 195 21,681,563 278,281
U.S. Treasury Bonds, 30 yr. 9/21/99 107 12,401,969 110,344
--------
$405,844
========
</TABLE>
================================================================================
7. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options
to hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the six months ended June 30, 1999, was as follows:
<TABLE>
<CAPTION>
Put Options
-----------------------
Number of Amount of
Options Premiums
- -----------------------------------------------------------------------
<S> <C> <C>
Options outstanding as of December 31, 1998 -- $ --
Options written 130 33,748
Options closed or expired (130) (33,748)
---- --------
Options outstanding as of June 30, 1999 -- $ --
==== ========
</TABLE>
================================================================================
8. Illiquid or Restricted Securities
As of June 30, 1999, investments in securities included issues that are illiquid
or restricted. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of June 30, 1999, was $60,660,648,
which represents 9.59% of the Fund's net assets.
Oppenheimer Bond Fund/VA 21
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Bond Fund/VA
- --------------------------------------------------------------------------------
A Series of Oppenheimer Variable Account Funds
<TABLE>
===============================================================================================
<S> <C>
Officers and Trustees James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, President
Robert G. Avis, Trustee
William A. Baker, Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
John S. Kowalik, Vice President
David P. Negri, Vice President
Andrew J. Donohue, Vice President and Secretary
Brian W. Wixted, Vice President and Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
===============================================================================================
Investment Advisor OppenheimerFunds, Inc.
===============================================================================================
Transfer Agent OppenheimerFunds Services
===============================================================================================
Custodian of Portfolio Securities The Bank of New York
===============================================================================================
Independent Auditors Deloitte & Touche LLP
===============================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
The financial statements included herein have been
taken from the records of the Fund without
examination of the independent auditors.
This is a copy of a report to shareholders of
Oppenheimer Bond Fund/VA. This report must be
preceded or accompanied by a Prospectus of
Oppenheimer Bond Fund/VA. For material information
concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, are not insured by the FDIC or any other
agency, and involve investment risks, including the
possible loss of the principal amount invested.
</TABLE>
22 Oppenheimer Bond Fund/VA
