Oppenheimer Variable Account Funds
6803 S. Tucson Way, Englewood, Colorado 80112
1-888-470-0861
Statement of Additional Information dated May 1, 1999
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is an investment company
consisting of ten separate Funds (the "Funds"):
Oppenheimer Money Fund/VA Oppenheimer High Income Fund/VA Oppenheimer Bond
Fund/VA Oppenheimer Strategic Bond Fund/VA Oppenheimer Aggressive Growth Fund/VA
Oppenheimer Capital Appreciation Fund/VA Prior to May 1, 1999, this Fund was
named "Oppenheimer Growth Fund."
Oppenheimer Small Cap Growth Fund/VA
Oppenheimer Global Securities Fund/VA
Oppenheimer Multiple Strategies Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA Prior to May 1, 1999, this Fund
was named "Oppenheimer 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, as described in the Prospectuses for the Funds and for the insurance
products you have selected.
This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Funds and the Trust, and supplements
information in the Funds' Prospectuses dated May 1, 1999. It should be read
together with the Prospectuses. You can obtain a Prospectus 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.
Contents
Page
About the Funds
Additional Information About the Funds' Investment Policies and Risks... 3
The Funds' Investment Policies..................................... 3
Other Investment Techniques and Strategies......................... 12
Investment Restrictions............................................ 30
How the Funds are Managed .............................................. 32
Organization and History........................................... 32
Trustees and Officers.............................................. 34
The Manager........................................................ 40
Brokerage Policies of the Funds..........................................42
Distribution and Service Plans...........................................44
Performance of the Funds.................................................45
About Your Account
How To Buy and Sell Shares...............................................51
Dividends, Capital Gains and Taxes.......................................55
Additional Information About the Funds...................................55
Financial Information About the Funds
Independent Auditors' Report.............................................57
Financial Statements.....................................................58
Appendix A: Ratings Definitions..........................................A-1
Appendix B: Industry Classifications.....................................B-1
Appendix C: Major Shareholders...........................................C-1
ABOUT THE FUNDS
Additional Information About the Funds' Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Funds are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Funds' investment Manager, OppenheimerFunds,
Inc., can select for the Funds. Additional information is also provided about
the strategies that each Fund may use to try to achieve its objective. The full
name of each Fund is shown on the cover page, after which the word "Oppenheimer"
is omitted from these names to conserve space.
The Funds' Investment Policies. The composition of the Funds' portfolio and the
techniques and strategies that the Manager uses in selecting portfolio
securities will vary over time. The Funds are not required to use all of the
investment techniques and strategies described below at all times in seeking
their goals. They may use some of the special investment techniques and
strategies at some times or not at all.
In selecting securities for the Funds' portfolios, the Manager evaluates
the merits of particular securities primarily through the exercise of its own
investment analysis. That process may include, among other things, evaluation of
the issuer's historical operations, prospects for the industry of which the
issuer is part, the issuer's financial condition, its pending product
developments and business (and those of competitors), the effect of general
market and economic conditions on the issuer's business, and legislative
proposals that might affect the issuer.
The Funds are categorized by the types of investment they make. Capital
Appreciation Fund/VA, Aggressive Growth Fund/VA, Small Cap Growth Fund/VA and
Global Securities Fund/VA can be categorized as "Equity Funds." High Income
Fund/VA, Bond Fund/VA, and Strategic Bond Fund/VA can be categorized as "Fixed
Income Funds." Multiple Strategies Fund/VA and Main Street Growth & Income
Fund/VA share the investment characteristics (and certain of the Investment
Policies) of both the Equity Funds and the Fixed Income Funds, depending upon
the allocations determined from time to time by their portfolio managers. Money
Fund's/VA investment policies are explained separately; however, discussion
below about investment restrictions, repurchase agreements, illiquid securities
and loans of portfolio securities also apply to Money Fund/VA.
|X| Investments in Equity Securities. The Equity Funds focus their
investments in equity securities, which include common stocks, preferred stocks,
rights and warrants, and securities convertible into common stock. Certain
equity securities may be selected not only for their appreciation possibilities
but because they may provide dividend income.
Small-cap growth companies may offer greater opportunities for capital
appreciation than securities of large, more established companies. However,
these securities also involve greater risks than securities of larger companies.
Securities of small capitalization issuers may be subject to greater price
volatility in general than securities of large-cap and mid-cap companies.
Therefore, to the degree that a Fund has investments in smaller capitalization
companies at times of market volatility, that Fund's share price may fluctuate
more. Those investments may be limited to the extent the Manager believes that
such investments would be inconsistent with the goal of preservation of
principal.
|_| Growth Companies. The Equity Funds in particular may invest in
securities of "growth" companies. Growth companies are those companies that the
Manager believes are entering into a growth cycle in their business, with the
expectation that their stock will increase in value. They may be established
companies as well as newer companies in the development stage. Growth companies
may have a variety of characteristics that in the Manager's view define them as
"growth" issuers.
They may be generating or applying new technologies, new or improved
distribution techniques or new services. They may own or develop natural
resources. They may be companies that can benefit from changing consumer demands
or lifestyles, or companies that have projected earnings in excess of the
average for their sector or industry. In each case, they have prospects that the
Manager believes are favorable for the long term. The portfolio managers of the
Funds look for growth companies with strong, capable management sound financial
and accounting policies, successful product development and marketing and other
factors.
|_| Value Investing. In selecting equity investments, the portfolio
managers for the Equity Funds in particular may from time to time use a value
investing style. In using a value approach, the portfolio managers seek stock
and other equity securities that appear to be temporarily undervalued, by
various measures, such as price/earnings ratios, rather than seeking stocks of
"growth" issuers. This approach is subject to change and might not necessarily
be used in all cases. Value investing seeks stocks having prices that are low in
relation to their real worth or future prospects, in the hope that a Fund will
realize appreciation in the value of its holdings when other investors realize
the intrinsic value of the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures that can be used to
identify these securities include, among others:
|_| Price/Earnings ratio, which is the stock's price divided by its
earnings per share. A stock having a price/earnings ratio lower than its
historical range, or the market as a whole or that of similar companies may
offer attractive investment opportunities.
|_| Price/book value ratio, which is the stock price divided by the book
value of the company per share, which measures the company's stock price in
relation to its asset value.
|_| Dividend Yield is measured by dividing the annual dividend by the stock
price per share.
|_| Valuation of Assets, which compares the stock price to the value of the
company's underlying assets, including their projected value in the
marketplace and liquidation value.
|_| Convertible Securities. While convertible securities are a form of debt
security, in many cases their conversion feature (allowing conversion into
equity securities) causes them to be regarded by the Manager more as
"equity equivalents." As a result, the rating assigned to the security has
less impact on the Manager's investment decision with respect to
convertible securities than in the case of non-convertible fixed income
securities. Convertible securities are subject to the credit risks and
interest rate risks described below in "Debt Securities."
To determine whether convertible securities should be regarded as 'equity
equivalents,' the Manager examines the following factors:
(1) whether, at the option of the investor, the convertible security can be
exchanged for a fixed number of shares of common stock of the issuer,
(2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis (considering
the effect of conversion of the convertible securities), and
(3) the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any appreciation in
the price of the issuer's common stock.
|_| Rights and Warrants. The Funds may invest in warrants or rights. They
do not expect that their investments in warrants and rights will exceed 5%
of their total assets.
Warrants basically are options to purchase equity securities at specific
prices valid for a specific period of time. Their prices do not necessarily
move parallel to the prices of the underlying securities. Rights are
similar to warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants have no
voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
|X| Investments in Bonds and Other Debt Securities. The Fixed Income Funds
in particular can invest in bonds, debentures and other debt securities to
seek current income as part of its investment objective.
The Funds' debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated in one of the four highest
categories by Moody's Investors Service, Inc., Standard & Poor's
Corporation, Fitch IBCA, Inc., Duff & Phelps, Inc., or that have comparable
ratings by another nationally-recognized rating organization, or if unrated
or split-rated, determined by the Manager to be of comparable quality. In
making investments in debt securities, the Manager may rely to some extent
on the ratings of ratings organizations or it may use its own research to
evaluate a security's credit-worthiness.
|_| U.S. Government Securities. The Funds can buy securities issued or
guaranteed by the U.S. government or its agencies and instrumentalities.
Securities issued by the U.S. Treasury are backed by the full faith and
credit of the U.S. government and are subject to very little credit risk.
Obligations of U.S. government agencies or instrumentalities (including
mortgage-backed securities) may or may not be guaranteed or supported by
the "full faith and credit" of the United States. Some are backed by the
right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. government to purchase the agencies'
obligations; while others are supported only by the credit of the
instrumentality. If a security is not backed by the full faith and credit
of the United States, the owner of the security must look principally to
the agency issuing the obligation for repayment and may not be able to
assert a claim against the United States in the event that the agency or
instrumentality does not meet its commitment. A Fund will invest in
securities of U.S. government agencies and instrumentalities only when the
Manager is satisfied that the credit risk with respect to the agency or
instrumentality is minimal.
|_| Special Risks of Lower-Grade Securities. Because lower-rated securities
tend to offer higher yields than investment grade securities, a Fund may invest
in lower grade securities if the Manager is trying to achieve greater income
(and, in some cases, the appreciation possibilities of lower-grade securities
may be a reason they are selected for a Fund's portfolio).
Some of the special credit risks of lower-grade securities are discussed in
the Prospectus. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of
investment-grade securities. The issuer's low creditworthiness may increase the
potential for its insolvency. An overall decline in values in the high yield
bond market is also more likely during a period of a general economic downturn.
An economic downturn or an increase in interest rates could severely disrupt the
market for high yield bonds, adversely affecting the values of outstanding bonds
as well as the ability of issuers to pay interest or repay principal. In the
case of foreign high yield bonds, these risks are in addition to the special
risk of foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment-grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics. Definitions of the debt security ratings categories of Moody's,
Standard & Poor's, Fitch IBCA and Duff & Phelps are included in Appendix A to
this Statement of Additional Information.
|X| Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of assets, typically accounts receivable or consumer loans.
They are issued by trusts or special-purpose corporations. They are similar to
mortgage-backed securities, described below, and are backed by a pool of assets
that consist of obligations of individual borrowers. The income from the pool is
passed through to the holders of participation interest in the pools. The pools
may offer a credit enhancement, such as a bank letter of credit, to try to
reduce the risks that the underlying debtors will not pay their obligations when
due. However, the enhancement, if any, might not be for the full par value of
the security. If the enhancement is exhausted and any required payments of
interest or repayments of principal are not made, that Fund could suffer losses
on its investment or delays in receiving payment.
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 related to 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 may shorten the weighted average life of asset-backed securities and may
lower their return, in the same manner as in the case of mortgage-backed
securities and CMOs, described below. Unlike mortgage-backed securities,
asset-backed securities typically do not have the benefit of a security interest
in the underlying collateral.
|X| Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or entities or by private issuers. These
securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real-estate
related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fixed Income Funds can
buy mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages. Therefore, it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. Therefore, these securities may
be less effective as a means of "locking in" attractive long-term interest
rates, and they may have less potential for appreciation during periods of
declining interest rates, than conventional bonds with comparable stated
maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of that Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium that Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in responses to changes in interest rates. If the prepayments on a
Fund's mortgage-related securities were to decrease broadly, that Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
|_| Collateralized Mortgage Obligations. CMOs are multi-class bonds that
are backed by pools of mortgage loans or mortgage pass-through certificates.
They may be collateralized by: (1) pass-through certificates issued or
guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac, (2) unsecuritized mortgage
loans insured by the Federal Housing Administration or guaranteed by the
Department of Veterans' Affairs, (3) unsecuritized conventional mortgages, (4)
other mortgage-related securities, or (5) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the reverse direction to an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
|X| Foreign Securities. The Equity Funds and the Fixed Income Funds may
invest in foreign securities, and Global Securities Fund expects to have
substantial investments in foreign securities. These include equity securities
issued by foreign companies and debt securities issued or guaranteed by foreign
companies or governments, including supra-national entities. "Foreign
securities" include equity and debt securities of companies organized under the
laws of countries other than the United States and debt securities issued or
guaranteed by governments other than the U.S. government or by foreign
supra-national entities. They also include securities of companies (including
those that are located in the U.S. or organized under U.S. law) that derive a
significant portion of their revenue or profits from foreign businesses,
investments or sales, or that have a significant portion of their assets abroad.
They may be traded on foreign securities exchanges or in the foreign
over-the-counter markets.
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities" for the purpose
of a Fund's investment allocations, because they are not subject to many of the
special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.
Because the Funds may purchase securities denominated in foreign
currencies, a change in the value of such foreign currency against the U.S.
dollar will result in a change in the amount of income the Funds have available
for distribution. Because a portion of the Funds' investment income may be
received in foreign currencies, the Funds will be required to compute their
income in U.S. dollars for distribution to shareholders, and therefore the Funds
will absorb the cost of currency fluctuations. After the Funds have distributed
income, subsequent foreign currency losses may result in the Fund's having
distributed more income in a particular fiscal period than was available from
investment income, which could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include 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. The Funds will hold foreign currency only in connection with the
purchase or sale of foreign securities.
|_| Foreign Debt Obligations. The debt obligations of foreign governments
and entities may or may not be supported by the full faith and credit of the
foreign government. The Fixed Income Funds may buy securities issued by certain
supra-national entities, which include entities designated or supported by
governments to promote economic reconstruction or development, international
banking organizations and related government agencies. Examples are the
International Bank for Reconstruction and Development (commonly called the
"World Bank"), the Asian Development bank and the Inter-American Development
Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
The Fixed Income Funds can invest in U.S. dollar-denominated "Brady Bonds."
These foreign debt obligations may be fixed-rate par bonds or floating-rate
discount bonds. They are generally collateralized in full as to repayment of
principal at maturity by U.S. Treasury zero-coupon obligations that have the
same maturity as the Brady Bonds. Brady Bonds can be viewed as having three or
four valuation components: (i) the collateralized repayment of principal at
final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized repayment of
principal at maturity. Those uncollateralized amounts constitute what is called
the "residual risk."
If there is a default on collateralized Brady Bonds resulting in
acceleration of the payment obligations of the issuer, the zero-coupon U.S.
Treasury securities held as collateral for the payment of principal will not be
distributed to investors, nor will those obligations be sold to distribute the
proceeds. The collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds. The defaulted bonds will continue to
remain outstanding, and the face amount of the collateral will equal the
principal payments which would have then been due on the Brady Bonds in the
normal course. Because of the residual risk of Brady Bonds and the history of
defaults with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, Brady Bonds are considered speculative
investments.
|_| Risks of Foreign Investing. Investments in foreign securities may offer
special opportunities for investing but also present special additional risks
and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency blockage); o
transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in
foreign countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.; o increased risks of
delays in settlement of portfolio transactions or loss of certificates for
portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic
developments; and
o unfavorable differences between the U.S. economy and foreign economies.
In the past, 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 re-imposed.
|_| Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for growth investing but have
greater risks than more developed foreign markets, such as those in Europe,
Canada, Australia, New Zealand and Japan. There may be even less liquidity in
their securities markets, and settlements of purchases and sales of securities
may be subject to additional delays. They are subject to greater risks of
limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be subject
to the risk of greater political and economic instability, which can greatly
affect the volatility of prices of securities in those countries. The Manager
will consider these factors when evaluating securities in these markets, because
the selection of those securities must be consistent with the Fund's goal of
preservation of principal.
The Funds intend to invest less than 5% of their total assets in securities
of issuers of Eastern European countries. The social, political and economic
reforms in most Eastern European countries are still in their early stages, and
there can be no assurance that these reforms will continue. Eastern European
countries in many cases do not have a sophisticated or well-established capital
market structure for the sale and trading of securities. Participation in the
investment markets in some of those countries may be available initially or
solely through investment in joint ventures, state enterprises, private
placements, unlisted securities or other similar illiquid investment vehicles.
In addition, although investment opportunities may exist in Eastern
European countries, any change in the leadership or policies of the governments
of those countries, or changes in the leadership or policies of any other
government that exercises a significant influence over those countries, may halt
the expansion of or reverse the liberalization of foreign investment policies
now occurring. As a result investment opportunities which may currently exist
may be threatened.
The prior authoritarian governments of a number of the Eastern European
countries previously expropriated large amounts of real and personal
property, which may include property which will be represented by or held
by entities issuing the securities a Fund might wish to purchase. In many
cases, the claims of the prior property owners against those governments
were never finally settled. There can be no assurance that any property
represented by or held by entities issuing securities purchased by a Fund
will not also be expropriated, nationalized, or confiscated. If that
property were confiscated, the Fund could lose a substantial portion of its
investments in such countries. A Fund's investments could also be adversely
affected by exchange control regulations imposed in any of those countries.
|_| Risks of Conversion to Euro. On January 1, 1999, eleven countries in
the European Union adopted the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lira)
will also continue in use until January 1, 2002. After that date, it is
expected that only the euro will be used in those countries. A common
currency is expected to confer some benefits in those markets, by
consolidating the government debt market for those countries and reducing
some currency risks and costs. But the conversion to the new currency will
affect the Fund operationally and also has potential risks, some of which
are listed below. Among other things, the conversion will affect: o issuers
in which the Funds invest, because of changes in the competitive
environment from a consolidated currency market and greater operational
costs from converting to the new currency. This might depress securities
values.
o vendors the Funds depend on to carry out their business, such as their
custodian bank (which holds the foreign securities each Fund buys), the
Manager (which must price the Funds' investments to deal with the
conversion to the euro) and brokers, foreign markets and securities
depositories. If they are not prepared, there could be delays in
settlements and additional costs to the Funds. o exchange contracts and
derivatives that are outstanding during the transition to the euro. The
lack of currency rate calculations between the affected currencies and the
need to update the Fund's contracts could pose extra costs to the Funds.
The Manager is upgrading (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Funds' custodian bank has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Funds' portfolio managers will also monitor the effects of the
conversion on the issuers in which each Fund invests. The possible effect of
these factors on the Funds' investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Funds' holdings and
increase its operational costs.
|X| Portfolio Turnover. "Portfolio turnover" describes the rates at which
the Funds traded their portfolio securities during its last fiscal year. For
example, if a Fund sold all of its securities during the year, its portfolio
turnover rate would have been 100%. The Funds' portfolio turnover rates will
fluctuate from year to year, and any of the Funds may have portfolio turnover
rates of more than 100% annually.
Other Investment Techniques and Strategies. In seeking their respective
objectives, the Funds may from time to time use the types of investment
strategies and investments described below. They are not required to use
all of these strategies at all times, and at times may not use them.
|X| Investing in Small, Unseasoned Companies. The Funds may invest in
securities of small, unseasoned companies, subject to limits (if any) stated in
that Fund's Prospectus. These are companies that have been in operation for less
than three years, including the operations of any predecessors. Securities of
these companies may be subject to volatility in their prices. They may have a
limited trading market, which may adversely affect their ability to dispose of
them and can reduce the price the Funds might be able to obtain for them. Other
investors that own a security issued by a small, unseasoned issuer for which
there is limited liquidity might trade the security when the Funds are
attempting to dispose of their holdings of that security. In that case, a Fund
might receive a lower price for its holdings than might otherwise be obtained.
|X| When-Issued and Delayed-Delivery Transactions (All Portfolios). The
Funds may invest in securities on a "when-issued" basis and may purchase or sell
securities on a "delayed-delivery" or "forward commitment" basis. When-issued
and delayed-delivery are terms that refer 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. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, 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 a loss to the Funds.
During the period between purchase and settlement, no payment is made by the
Funds to the issuer and no interest accrues to that portfolio from the
investment. No income begins to accrue to the Funds on a when-issued security
until the Funds receive the security at settlement of the trade.
The Funds will engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time of entering
into the obligation. When a Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause that Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When a Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purpose of investment
leverage. Although a Fund will enter into delayed-delivery or when-issued
purchase transactions to acquire securities, it may dispose of a commitment
prior to settlement. If a Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
delivery or receive against a forward commitment, it may incur a gain or loss.
At the time a Fund makes the commitment to purchase or sell a security on a
when-issued or delayed delivery basis, it records the transaction on their books
and reflects the value of the security purchased in determining that Fund's net
asset value. In a sale transaction, it records the proceeds to be received. That
fund will identify on its books liquid assets at least equal in value to the
value of that Fund's purchase commitments until that Fund pays for the
investment.
When-issued and delayed-delivery transactions can be used by the Funds as a
defensive technique to hedge against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and falling prices, a
Fund might sell securities in their 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 delayed-delivery
basis to obtain the benefit of currently higher cash yields.
|X| Zero-Coupon Securities. The Fixed Income Funds may buy zero-coupon and
delayed interest securities, and "stripped" securities of foreign government
issuers, which may or may not be backed by the "full faith and credit" of the
issuing foreign government, and of corporations. The Fixed Income Funds may also
buy zero-coupon and "stripped" U.S. government securities. Zero-coupon
securities issued by foreign governments and by corporations will be subject to
greater credit risks than U.S. government zero-coupon securities.
|X| "Stripped" Mortgage-Related Securities. The Fixed Income Funds can
invest in stripped mortgage-related securities that are created by segregating
the cash flows from underlying mortgage loans or mortgage securities to create
two or more new securities. Each has a specified percentage of the underlying
security's principal or interest payments. These are a form of derivative
investment.
Mortgage securities may be partially stripped so that each class
receives some interest and some principal. However, they may be completely
stripped. In that case all of the interest is distributed to holders of one
type of security, known as an "interest-only" security, or "I/O," and all
of the principal is distributed to holders of another type of security,
known as a "principal-only" security or "P/O." Strips can be created for
pass-through certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to
principal repayments (including prepayments) on the underlying mortgages.
If the underlying mortgages experience greater than anticipated prepayments
of principal, that Fund might not fully recoup its investment in an I/O
based on those assets. If underlying mortgages experience less than
anticipated prepayments of principal, the yield on the P/Os based on them
could decline substantially.
|X| Repurchase Agreements. The Funds may acquire securities subject to
repurchase agreements. They may do so for liquidity purposes to meet
anticipated redemptions of Fund shares, or pending the investment of the
proceeds from sales of Fund shares, or pending the settlement of portfolio
securities transactions, or for temporary defensive purposes, as described
below.
In a repurchase transaction, the Funds buy a security from, and
simultaneously resells it to, an approved vendor 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. Approved vendors
include U.S. commercial banks, U.S. branches of foreign banks, or
broker-dealers that have been designated as primary dealers in government
securities. They must meet credit requirements set by the Funds' Board of
Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the
purchase. Repurchase agreements having a maturity beyond seven days are
subject to each Fund's limit on holding illiquid investments. No Fund will
enter into a repurchase agreement that causes more than 15% of its net
assets (for Money Fund/VA, 10%) 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 having
maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Funds' repurchase
agreements require that at all times while the repurchase agreement are in
effect, the value of the collateral must equal or exceed the repurchase
price to fully collateralize the repayment obligation. However, if the
vendor fails to pay the resale price on the delivery date, the Funds may
incur costs in disposing of the collateral and may experience losses if
there is any delay in its ability to do so. The Manager will monitor the
vendor's creditworthiness to confirm that the vendor is financially sound
and will continuously monitor the collateral's value.
|X| Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Funds' investments. To enable a
Fund to sell its holdings of a restricted security not registered under the
Securities Act of 1933, that Fund may have to cause those securities to be
registered. The expenses of registering restricted securities may be
negotiated by the Fund with the issuer at the time the Fund buys the
securities. When a Fund must arrange registration because the Fund wishes
to sell the security, a considerable period may elapse between the time the
decision is made to sell the security and the time the security is
registered so that the Fund could sell it. That Fund would bear the risks
of any downward price fluctuation during that period.
The Funds may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit a Fund's ability to dispose of the
securities and might lower the amount a Fund could realize upon the sale.
The Funds have limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do
not limit purchases of restricted securities that are eligible for sale to
qualified institutional purchasers under Rule 144A of the Securities Act of
1933, if those securities have been determined to be liquid by the Manager
under Board-approved guidelines. Those guidelines take into account the
trading activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of trading
interest in a particular Rule 144A security, the Funds' holdings of that
security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more
than seven days and participation interests that do not have puts
exercisable within seven days.
|X| Forward Rolls. The Funds can enter into "forward roll"
transactions with respect to mortgage related securities. In this type of
transaction, the Funds sell a mortgage related security to a buyer and
simultaneously agrees to repurchase a similar security (the same type of
security, and having the same coupon and maturity) at a later date at a set
price. The securities that are repurchased will have the same interest rate
as the securities that are sold, but typically will be collateralized by
different pools of mortgages (with different prepayment histories) than the
securities that have been sold. Proceeds from the sale are invested in
short-term instruments, such as repurchase agreements. The income from
those investments, plus the fees from the forward roll transaction, are
expected to generate income to the Funds in excess of the yield on the
securities that have been sold. The Funds will only enter into "covered"
rolls. To assure their future payment of the purchase price, the Funds will
identify cash, U.S. government securities or other high-grade debt
securities on their books in an amount equal to their respective payment
obligations under the roll.
These transactions have risks. During the period between the sale
and the repurchase, the Funds will not be entitled to receive interest
and principal payments on the securities that have been sold. It is
possible that the market value of the securities the Funds sell may
decline below the price at which the Funds are obligated to repurchase
securities.
|X| Loans of Portfolio Securities. To raise cash for liquidity
purposes or income, the Funds can lend their portfolio securities to
brokers, dealers and other types of financial institutions approved by
the Fund's Board of Trustees. These loans are limited to not more than
25% of the value of that Fund's net assets. The Funds currently do not
intend to engage in loans of securities in the coming year, but if
they do so, such loans will not likely exceed 5% of that Fund's total
assets.
There are some risks in connection with securities lending. The
Funds might experience a delay in receiving additional collateral to
secure a loan, or a delay in recovery of the loaned securities if the
borrower defaults. The Funds must receive collateral for a loan. Under
current applicable regulatory requirements (which are subject to
change), on each business day the loan collateral must be at least
equal to the value of the loaned securities. It must consist of cash,
bank letters of credit, or securities of the U.S. Government or its
agencies or instrumentalities, or other cash equivalents in which that
Fund is permitted to invest. To be acceptable as collateral, letters
of credit must obligate a bank to pay amounts demanded by the Funds if
the demand meets the terms of the letter. The terms of the letter of
credit and the issuing bank both must be satisfactory to the Funds.
When they lend securities, that Fund receives amounts equal to
the dividends or interest on loaned securities. It also receives one
or more of (a) negotiated loan fees, (b) interest on securities used
as collateral, and (c) interest on any short-term debt securities
purchased with such loan collateral. Either type of interest may be
shared with the borrower. That Fund may also pay reasonable finder's,
custodian and administrative fees in connection with these loans. The
terms of a Fund's loans must meet applicable tests under the Internal
Revenue Code and must permit the Fund to reacquire loaned securities
on five days' notice or in time to vote on any important matter.
|X| Borrowing for Leverage. Each Fund has the ability to borrow
from banks on an unsecured basis. Each Fund has undertaken to limit
borrowing to 25% of the value of that Fund's net assets, which is
further limited to 10% if borrowing is for a purpose other than to
facilitate redemptions. Investing borrowed funds in portfolio
securities is a speculative technique known as "leverage." The Funds
may borrow only from banks. Under current regulatory requirements,
borrowings can 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 that Fund's assets fails to meet this 300% asset coverage
requirement, that Fund will reduce its bank debt within three days to
meet the requirement. To do so, that Fund might have to sell a portion
of its investments at a disadvantageous time.
A Fund will pay interest on these loans, and that interest
expense will raise the overall expenses of that Fund and reduce its
returns. If it does borrow, its expenses will be greater than
comparable funds that do not borrow for leverage. Additionally, that
Fund's net asset value per share might fluctuate more than that of
funds that do not borrow. Currently, the Funds do not contemplate
using this technique in the next year but if they do so, it will not
likely be to a substantial degree.
|X| Derivatives. The Funds can invest in a variety of derivative
investments for hedging purposes. Some derivative investments the
Funds can use are the hedging instruments described below in this
Statement of Additional Information. The Equity Funds do not use, and
do not currently contemplate using, derivatives or hedging instruments
to a significant degree in the coming year and they are not obligated
to use them in seeking their objectives.
Other derivative investments the Fixed Income Funds can invest in
include "index-linked" notes. Principal and/or interest payments on
these notes depend on the performance of an underlying index.
Currency-indexed securities are another derivative these Funds may
use. Typically, these are short-term or intermediate-term debt
securities. Their value at maturity or the 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 type of index
security offers the potential for increased income or principal
payments but at a greater risk of loss than a typical debt security of
the same maturity and credit quality.
Other derivative investments the Fixed Income Funds can use
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 it is payable
in an amount based on the price of the issuer's common stock at the
time of maturity. Both alternatives present 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 might not be as high as
the Manager expected.
|X| Hedging. Although the Funds can use hedging instruments, they
are not obligated to use them in seeking their objective. To attempt
to protect against declines in the market value of the Funds'
portfolio, to permit the Funds to retain unrealized gains in the value
of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Funds could:
|_| sell futures contracts,
|_| buy puts on such futures or on securities, or
|_| write covered calls on securities or futures. Covered calls may also be
used to increase the Funds' income, but the Manager does not expect to
engage extensively in that practice.
The Funds can use hedging to establish a position in the
securities market as a temporary substitute for purchasing particular
securities. In that case the Funds would normally seek to purchase the
securities and then terminate that hedging position. The Funds might
also use this type of hedge to attempt to protect against the
possibility that its portfolio securities would not be fully included
in a rise in value of the market. To do so the Funds could:
|_| buy futures, or
|_| buy calls on such futures or on securities.
The Funds' strategy of hedging with futures and options on
futures will be incidental to the Fund's activities in the underlying
cash market. The particular hedging instruments the Funds can use are
described below. The Funds may employ new hedging instruments and
strategies when they are developed, if those investment methods are
consistent with the Funds' investment objective and are permissible
under applicable regulations governing the Fund.
|_| Futures. The Equity Funds, Multiple Strategies Fund/VA and
Main Street Growth & Income Fund/VA can buy and sell future contracts
that relate to (1) broadly-based stock indices (these are referred to
as "stock index futures") and (2) foreign currencies (these are
referred to as "forward contracts"). The Fixed Income Funds can buy
and sell futures contracts that relate to (1) bond indices (these are
referred to as "bond index futures"), (2) debt securities (these are
referred to as "interest rate futures"), and (3) forward contracts.
A broadly-based stock index is used as the basis for trading
stock index futures. They may in some cases be based on stocks of
issuers in a particular industry or group of industries. A stock index
assigns relative values to the common stocks included in the index and
its value fluctuates in response to the changes in value of the
underlying stocks. A stock index cannot be purchased or sold directly.
Bond index futures are similar contracts based on the future value of
the basket of securities that comprise the index. These contracts
obligate the seller to deliver, and the purchaser to take, cash to
settle the futures transaction. There is no delivery made of the
underlying securities to settle the futures obligation. Either party
may also settle the transaction by entering into an offsetting
contract.
An interest rate future obligates the seller to deliver (and the
purchaser to take) cash or a specified type of debt security to settle
the futures transaction. Either party could also enter into an
offsetting contract to close out the position.
No money is paid or received by the Funds on the purchase or sale
of a future. Upon entering into a futures transaction, the Funds will
be required to deposit an initial margin payment with the futures
commission merchant (the "futures broker"). Initial margin payments
will be deposited with the Funds' custodian bank 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 (that is, its value on that Fund's
books is changed) to reflect changes in its market value, subsequent
margin payments, called variation margin, will be paid to or by the
futures broker daily.
At any time prior to expiration of the future, the Funds may
elect to close out their position by taking an opposite position, at
which time a final determination of variation margin is made and any
additional cash must be paid by or released to that Fund. Any loss or
gain on the future is then realized by that Fund for tax purposes. All
futures transactions are effected through a clearinghouse associated
with the exchange on which the contracts are traded.
|_| Put and Call Options. The Funds can buy and sell certain
kinds of put options ("puts") and call options ("calls"). The Funds
can 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 above.
|_| Writing Covered Call Options. The Funds can write (that is,
sell) covered calls. If a Fund sells a call option, it must be
covered. That means the Fund must own the security subject to the call
while the call is outstanding, or, for certain types of calls, the
call may be covered by segregating liquid assets to enable that Fund
to satisfy its obligations if the call is exercised. Up to 100% of a
Fund's total assets may be subject to calls that Fund writes.
When a Fund writes a call on a security, it receives cash (a
premium). That Fund agrees to sell the underlying security to a
purchaser of a corresponding call on the same security during the call
period at a fixed exercise price regardless of market price changes
during the call period. The call period is usually not more than nine
months. The exercise price may differ from the market price of the
underlying security. That Fund shares the risk of loss that the price
of the underlying security may decline during the call period. That
risk may be offset to some extent by the premium the Fund receives. If
the value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised. In that case
the Fund would keep the cash premium and the investment.
When a Fund writes a call on an index, it receives cash (a
premium). If the buyer of the call exercises it, the Fund will pay an
amount of cash equal to the difference between the closing price of
the call and the exercise price, multiplied by a specified multiple
that determines the total value of the call for each point of
difference. If the value of the underlying investment does not rise
above the call price, it is likely that the call will lapse without
being exercised. In that case the Fund would keep the cash premium.
The Funds' custodian bank, or a securities depository acting for
the custodian bank, will act as the Funds' escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Funds have written calls traded on exchanges
or as to other acceptable escrow securities. In that way, no margin
will be required for such transactions. OCC will release the
securities on the expiration of the option or when the Funds enter
into a closing transaction.
When a Fund writes an over-the-counter ("OTC") option, that Fund
will enter into an arrangement with a primary U.S. government
securities dealer which will establish a formula price at which the
Fund will have the absolute right to repurchase that OTC option. The
formula price will generally be based on a multiple of the premium
received for the option, plus the amount by which the option is
exercisable below the market price of the underlying security (that
is, the option is "in the money"). When a Fund writes an OTC option,
it will treat as illiquid (for purposes of its restriction on holding
illiquid securities) the mark-to-market value of any OTC option it
holds, unless the option is subject to a buy-back agreement by the
executing broker.
To terminate its obligation on a call it has written, a Fund may
purchase a corresponding call in a "closing purchase transaction." A
Fund will then realize a profit or loss, depending upon whether the
net of the amount of the option transaction costs and the premium
received on the call the Fund wrote is more or less than the price of
the call the Fund purchases to close out the transaction. That Fund
may realize a profit if the call expires unexercised, because that
Fund will retain the underlying security and the premium it received
when it wrote the call. Any such profits are considered short-term
capital gains for Federal income tax purposes, as are the premiums on
lapsed calls. When distributed by a Fund they are taxable as ordinary
income. If a Fund cannot effect a closing purchase transaction due to
the lack of a market, it will have to hold the callable securities
until the call expires or is exercised.
A Fund may also write calls on a futures contract without owning
the futures contract or securities deliverable under the contract. To
do so, at the time the call is written, that Fund must cover the call
by segregating an equivalent dollar amount of liquid assets. The Fund
will segregate additional liquid assets if the value of the segregated
assets drops below 100% of the current value of the future. Because of
this segregation requirement, in no circumstances would that Fund's
receipt of an exercise notice as to that future require that Fund to
deliver a futures contract. It would simply put that Fund in a short
futures position, which is permitted by the Funds' hedging policies.
|_| Writing Put Options. Each Fund can sell 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. The Funds will not write puts
if, as a result, more than 50% of the Fund's net assets would be
required to be segregated to cover such put options.
If a Fund writes a put, the put must be covered by segregated
liquid assets. The premium the Funds receive from writing a put
represents a profit, as long as the price of the underlying investment
remains equal to or above the exercise price of the put. However, that
Fund also assumes the obligation during the option period to buy the
underlying investment from the buyer of the put at the exercise price,
even if the value of the investment falls below the exercise price. If
a put a Fund has written expires unexercised, that Fund realizes a
gain in the amount of the premium less the transaction costs incurred.
If the put is exercised, that Fund must fulfill its obligation to
purchase the underlying investment at the exercise price. That price
will usually exceed the market value of the investment at that time.
In that case, that Fund may incur a loss if it sells the underlying
investment. That loss will be 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 the Fund incurred.
When writing a put option on a security, to secure its obligation
to pay for the underlying security that Fund will deposit in escrow
liquid assets with a value equal to or greater than the exercise price
of the underlying securities. That Fund therefore forgoes the
opportunity of investing the segregated assets or writing calls
against those assets.
As long as a Fund's obligation as the put writer continues, it
may be assigned an exercise notice by the broker-dealer through which
the put was sold. That notice will require that Fund to take delivery
of the underlying security and pay the exercise price. No Fund has
control over when it may be required to purchase the underlying
security, since it may be assigned an exercise notice at any time
prior to the termination of its obligation as the writer of the put.
That obligation terminates upon expiration of the put. It may also
terminate if, before it receives an exercise notice, that Fund effects
a closing purchase transaction by purchasing a put of the same series
as it sold. Once a Fund has been assigned an exercise notice, it
cannot effect a closing purchase transaction.
A Fund may decide to effect a closing purchase transaction to
realize a profit on an outstanding put option it has written or to
prevent the underlying security from being put. Effecting a closing
purchase transaction will also permit that Fund to write another put
option on the security, or to sell the security and use the proceeds
from the sale for other investments. A Fund will realize a profit or
loss from a closing purchase transaction depending on whether the cost
of the transaction is less or more than the premium received from
writing the put option. Any profits from writing puts are considered
short-term capital gains for Federal tax purposes, and when
distributed by a Fund, is taxable as ordinary income.
|_| Purchasing Calls and Puts. Each Fund can purchase calls to
protect against the possibility that its portfolio will not
participate in an anticipated rise in the securities market. When a
Fund buys a call (other than in a closing purchase transaction), it
pays a premium. That Fund then 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. A Fund
benefits only if it sells the call 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 Fund exercises the call. If a Fund does not exercise
the call or sell it (whether or not at a profit), the call will become
worthless at its expiration date. In that case the Fund will have paid
the premium but lost the right to purchase the underlying investment.
A Fund can buy puts whether or not it holds the underlying
investment in its portfolio. When a Fund purchases a put, it pays a
premium and, except as to puts on indices, 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 that 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. In that case the Fund will have paid the premium but lost the
right to sell the underlying investment. However, the Fund may sell
the put prior to its expiration. That sale may or may not be at a
profit.
When a Fund purchases a call or put on an index or future, it
pays a premium, but settlement is in cash rather than by delivery of
the underlying investment to the Fund. A gain or loss depends on
changes in the index in question (and thus on price movements in the
securities market generally) rather than on price movements in
individual securities or futures contracts.
A Fund may buy a call or put only if, after the purchase, the
value of all call and put options held by the Fund will not exceed 5%
of the Fund's total assets.
|_| Buying and Selling Options on Foreign Currencies. A Fund can
buy and sell calls and puts on foreign currencies. They include puts
and calls that trade on a securities or commodities exchange or in the
over-the-counter markets or are quoted by major recognized dealers in
such options. A Fund could use these calls and puts to try to protect
against declines in the dollar value of foreign securities and
increases in the dollar cost of foreign securities the Fund wants to
acquire.
If the Manager anticipates a rise in the dollar value of a
foreign currency in which securities to be acquired are denominated,
the increased cost of those securities may be partially offset by
purchasing calls or writing puts on that foreign currency. If the
Manager anticipates a decline in the dollar value of a foreign
currency, the decline in the dollar value of portfolio securities
denominated in that currency might be partially offset by writing
calls or purchasing puts on that foreign currency. However, the
currency rates could fluctuate in a direction adverse to a Fund's
position. That Fund will then have incurred option premium payments
and transaction costs without a corresponding benefit.
A call the Fund writes on a foreign currency is "covered" if that
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 it can do so for additional
cash consideration held in a segregated account by its custodian bank)
upon conversion or exchange of other foreign currency held in its
portfolio.
A Fund could write a call on a foreign currency to provide a
hedge against a decline 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. That decline might be one that
occurs due to an expected adverse change in the exchange rate. This is
known as a "cross-hedging" strategy. In those circumstances, the Fund
covers the option by maintaining cash, U.S. government securities or
other liquid, high grade debt securities in an amount equal to the
exercise price of the option, in a segregated account with the Fund's
custodian bank.
|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment
techniques that are different than 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 a 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. A Fund's option activities could affect its
portfolio turnover rate and brokerage commissions. The exercise of
calls written by the Fund might cause a Fund to sell related portfolio
securities, thus increasing its turnover rate. The exercise by a Fund
of puts on securities will cause the sale of underlying investments,
increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within a Fund's control, holding a put
might cause that Fund to sell the related investments for reasons that
would not exist in the absence of the put.
A Fund could pay a brokerage commission each time it buys or
sells a call, a put or an underlying investment in connection with the
exercise of a call or put. Those commissions could be higher on a
relative basis than the commissions for direct purchases or sales of
the underlying investments. Premiums paid for options are small in
relation to the market value of the underlying investments.
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 values being more sensitive to changes in the value of the
underlying investment.
If a covered call written by a Fund is exercised on an investment
that has increased in value, that Fund will be required to sell the
investment at the call price. It will not be able to realize any
profit if the investment has increased in value above the call price.
An option position may be closed out only on a market that
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. A Fund might experience losses if it could not
close out a position because of an illiquid market for the future or
option.
There is a risk in using short hedging by selling futures or
purchasing puts on broadly-based indices or futures to attempt to
protect against declines in the value of a Fund's portfolio
securities. The risk is that the prices of the futures or the
applicable index will correlate imperfectly with the behavior of the
cash prices of that Fund's securities. For example, it is possible
that while a Fund has used a hedging instrument in a short hedge, the
market might advance and the value of the securities held in the
Fund's portfolio might decline. If that occurred, the Fund would lose
money on the hedging instrument and also experience a decline in the
value of its portfolio 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 securities will tend to move in the same
direction as the indices upon which the hedging instrument is based.
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 portfolio securities being hedged and
movements in the price of the hedging instruments, a Fund may use
hedging instruments in a greater dollar amount than the dollar amount
of portfolio securities being hedged. It might do so if the historical
volatility of the prices of the portfolio securities being hedged are
more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures
markets are subject to distortions, due to differences in the nature
of those markets. First, all participants in the futures market 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 market depends 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 market could be reduced, thus producing distortion. Third,
from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the
securities markets. Therefore, increased participation by speculators
in the futures market may cause temporary price distortions.
A Fund can use 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, broadly-based indices or on securities. It is possible
that when a Fund does so the market might decline. If that Fund then
concludes not to invest in securities because of concerns that the
market might decline further or for other reasons, the Fund will
realize a loss on the hedging instruments that is not offset by a
reduction in the price of the securities purchased.
|_| 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. A Fund uses them to "lock in" the
U.S. dollar price of a security denominated in a foreign currency that
the Fund has bought or sold, or to protect against possible losses
from changes in the relative values of the U.S. dollar and a foreign
currency. A Fund limits its exposure in foreign currency exchange
contracts in a particular foreign currency to the amount of its assets
denominated in that currency or a closely-correlated currency. A Fund
may also use "cross-hedging" where it hedges against changes in
currencies other than the currency in which a security it holds is
denominated.
Under a forward contract, one party agrees to purchase, and
another party agrees to sell, a specific currency at a future date.
That date may be any fixed number of days from the date of the
contract agreed upon by the parties. The transaction price is set at
the time the contract is entered into. These contracts are traded in
the inter-bank market conducted directly among 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 the risk of fluctuations in the prices of
the underlying securities a Fund owns or intends to acquire, but it
does fix a rate of exchange in advance. Although forward contracts may
reduce the risk of loss from a decline in the value of the hedged
currency, at the same time they limit any potential gain if the value
of the hedged currency increases.
When a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates
receiving dividend payments in a foreign currency, the Fund might
desire to "lock-in" the U.S. dollar price of the security or the U.S.
dollar equivalent of the dividend payments. To do so, that Fund could
enter into a forward contract for the purchase or sale of the amount
of foreign currency involved in the underlying transaction, in a fixed
amount of U.S. dollars per unit of the foreign currency. This is
called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in 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 the payments are made or received.
A Fund could also use forward contracts to lock in the U.S.
dollar value of a portfolio position. This is called a "position
hedge." When a Fund believes that foreign currency might suffer a
substantial decline against the U.S. dollar, it could enter into a
forward contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When a Fund believes
that the U.S. dollar might suffer a substantial decline against a
foreign currency, it could enter into a forward contract to buy that
foreign currency for a fixed dollar amount. Alternatively, a Fund
could enter into a forward contract to sell a different foreign
currency for a fixed U.S. dollar amount if the Fund believes that the
U.S. dollar value of the foreign currency to be sold pursuant to its
forward contract will fall whenever there is a decline in the U.S.
dollar value of the currency in which portfolio securities of the Fund
are denominated. That is referred to as a "cross hedge."
A Fund will cover its short position in these cases by
identifying to its custodian bank assets having a value equal to the
aggregate amount of the Fund's commitment under forward contracts. No
Fund will enter into forward contracts or maintain a net exposure to
such contracts if the consummation of the contracts would obligate a
Fund to deliver an amount of foreign currency in excess of the value
of that Fund's portfolio securities or other assets denominated in
that currency or another currency that is the subject of the hedge.
The precise matching of the amounts under forward contracts and
the value of the securities involved generally will not be possible
because the future value of securities denominated in foreign
currencies will change as a consequence of market movements between
the date the forward contract is entered into and the date it is sold.
In some cases the Manager might decide to sell the security and
deliver foreign currency to settle the original purchase obligation.
If the market value of the security is less than the amount of foreign
currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash)
market to settle the security trade. If the market value of the
security instead exceeds the amount of foreign currency the Fund is
obligated to deliver to settle the trade, the Fund might have to sell
on the spot market some of the foreign currency received upon the sale
of the security. There will be additional transaction costs on the
spot market in those cases.
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 to
pay additional transactions costs. The use of forward contracts in
this manner might reduce a Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if a
Fund had not entered into such contracts.
At or before the maturity of a forward contract requiring a Fund
to sell a currency, the Fund might sell a portfolio security and use
the sale proceeds to make delivery of the currency. In the alternative
a Fund might retain the security and offset its contractual obligation
to deliver the currency by purchasing a second contract. Under that
contract a Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, a
Fund might 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. The gain or loss will depend on the extent to which the
exchange rate or rates between the currencies involved moved between
the execution dates of the first contract and offsetting contract.
The costs to a 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 brokerage
fees or commissions are involved. Because these contracts are not
traded on an exchange, a Fund must evaluate the credit and performance
risk of the counterparty under each forward contract.
Although a 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. Funds may convert foreign currency from
time to time, and will incur costs in doing so. 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 might offer to
sell a foreign currency to a Fund at one rate, while offering a lesser
rate of exchange if the Fund desires to resell that currency to the
dealer.
|_| Regulatory Aspects of Hedging Instruments. When using futures
and options on futures, the Funds are required to operate within
certain guidelines and restrictions with respect to the use of futures
as established by the Commodities Futures Trading Commission (the
"CFTC"). In particular, a Fund is exempted from registration with the
CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit
the percentage of Bond Fund/VA's assets that may be used for futures
margin and related options premiums for a bona fide hedging position.
However, under the Rule, a Fund must limit its aggregate initial
futures margin and related options premiums to not more than 5% of the
Funds' net assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule. Under the Rule, a Fund must
also use short futures and options on futures solely for bona fide
hedging purposes within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by a Fund are subject to limitations
established by the option exchanges. The exchanges limit the maximum
number of options that may be written or held by a single investor or
group of investors acting in concert. Those limits apply 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
different exchanges or through one or more brokers. Thus, the number
of options that a Fund may write or hold may be affected by options
written or held by other entities, including other investment
companies having the same advisor as that Fund (or an adviser that is
an affiliate of the Funds' advisor). The exchanges also impose
position limits on futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and
may impose certain other sanctions.
Under the Investment Company Act, when a Fund purchases a future,
it must maintain cash or readily marketable short-term debt
instruments in an amount equal to the market value of the securities
underlying the future, less the margin deposit applicable to it.
|_| Tax Aspects of Certain Hedging Instruments. Certain foreign
currency exchange contracts are treated as "Section 1256 contracts"
under the Internal Revenue Code. In general, gains or losses relating
to Section 1256 contracts are characterized as 60% long-term and 40%
short-term capital gains or losses under the Code. However, foreign
currency gains or losses arising from Section 1256 contracts that are
forward contracts generally are treated as ordinary income or loss. In
addition, Section 1256 contracts held by the Funds at the end of each
taxable year are "marked-to-market," and unrealized gains or losses
are treated as though they were realized. These contracts also may be
marked-to-market for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by a Fund to exempt
those transactions from this marked-to-market treatment.
Certain forward contracts a Fund enters into may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character and timing of gains (or losses) recognized by
that Fund on straddle positions. Generally, a loss sustained on the
disposition of a position making up a straddle is allowed only to the
extent that the 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, the following gains or losses
are treated as ordinary income or loss: (1) gains or losses
attributable to fluctuations in exchange rates that occur between the
time a Fund accrues interest or other receivables or accrues expenses
or other liabilities denominated in a foreign currency and the time
that Fund actually collects such receivables or pays such liabilities,
and (2) gains or losses attributable to fluctuations in the value of a
foreign currency between the date of acquisition of a debt security
denominated in a foreign currency or foreign currency forward
contracts and the date of disposition.
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 a Fund's investment income
available for distribution to its shareholders.
|X| Temporary Defensive Investments. When market conditions are
unstable, or the Manager believes it is otherwise appropriate to
reduce holdings in stocks, the Funds can invest in a variety of debt
securities for defensive purposes. The Funds can also purchase these
securities for liquidity purposes to meet cash needs due to the
redemption of Fund shares, or to hold while waiting to reinvest cash
received from the sale of other portfolio securities. The Funds can
buy:
|_| obligations issued or guaranteed by the U. S. government or its
instrumentalities or agencies,
|_| commercial paper (short-term, unsecured, promissory notes of domestic
or foreign companies) rated in the three top rating categories of a
nationally recognized rating organization,
|_| short-term debt obligations of corporate issuers, rated investment
grade (rated at least Baa by Moody's Investors Service, Inc. or at least
BBB by Standard & Poor's Corporation, or a comparable rating by another
rating organization), or unrated securities judged by the Manager to have a
comparable quality to rated securities in those categories,
|_| certificates of deposit and bankers' acceptances of domestic and
foreign banks having total assets in excess of $1 billion, and
|_| repurchase agreements.
Short-term debt securities would normally be selected for
defensive or cash management purposes because they can normally be
disposed of quickly, are not generally subject to significant
fluctuations in principal value and their value will be less subject
to interest rate risk than longer-term debt securities.
-- Money Fund/VA Investment Policies. Under Rule 2a-7, Money
Fund/VA 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/VA 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/VA's best interests to
dispose of it; but if Money Fund/VA 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/VA'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 IBCA, Inc., Duff & Phelps, Inc., and
Thomson BankWatch, Inc. See Appendix A to this Statement of Additional
Information for a description of the rating categories of the Rating
Organizations.
-- Certificates of Deposit and Commercial Paper. Money Fund/VA 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/VA 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/VA, or (ii) subject to repurchase
agreements (explained in the prospectus), if the collateral for the
agreement complies with Rule 2a-7.
-- Bank Loan Participation Agreements. Money Fund/VA may invest in bank
loan participation agreements. They provide the Fund with an undivided
interest in a loan made by the issuing bank in the proportion the Fund's
interest bears to the total principal amount of the loan. In evaluating the
risk of these investments, the Fund looks to the creditworthiness of the
borrower that is obligated to make principal and interest payments on the
loan.
-- Time Deposits. Money Fund/VA 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% limitation
applicable to illiquid securities purchased by Money Fund/VA.
-- Floating Rate/Variable Rate Notes. Money Fund/VA 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/VA may invest have a demand feature
entitling the holder to demand payment at an amount approximately equal to
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. Generally, the changes in the interest rate on
such securities reduce the fluctuation in their market value. As interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than that for fixed-rate obligations of the same
maturity.
-- Master Demand Notes. Master demand notes are corporate obligations that
permit the investment of fluctuating amounts by Money Fund/VA at varying
rates of interest pursuant to direct arrangements between Money Fund/VA, as
lender, and the corporate borrower that issues the note. These notes permit
daily changes in the amounts borrowed. Money Fund/VA 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/VA'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/VA 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/VA'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/VA'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 10% limitation applicable to illiquid
securities purchased by Money Fund/VA.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are
those policies that the Fund has adopted to govern its investments
that can be changed only by the vote of a "majority" of the Fund's
outstanding voting securities. Under the Investment Company Act, a
"majority" vote is defined as the vote of the holders of the lesser
of:
|_| 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or
|_| more than 50% of the outstanding shares.
The Funds' investment objectives are fundamental policies. Other
policies described in the Prospectus or this Statement of Additional
Information are "fundamental" only if they are identified as such. The
Funds' Board of Trustees can change non-fundamental policies without
shareholder approval. However, significant changes to investment
policies will be described in supplements or updates to the Prospectus
or this Statement of Additional Information, as appropriate. The
Funds' most significant investment policies are described in the
Prospectus.
|X| Do the Funds Have Additional Fundamental Policies? The
following investment restrictions are fundamental policies of the
Funds.
|_| No Fund can buy securities issued or guaranteed by any one
issuer if (i) more than 5% of its total assets would be invested in
securities of that issuer or (ii) it would then own more than 10% of
that issuer's voting securities, or (iii) it would then own more than
10% in principal amount of that issuer's outstanding debt securities.
The restriction on debt securities does not apply to Strategic Bond
Fund/VA. All of the restrictions apply only to 75% of each Fund's
total assets. The limits do not apply to securities issued by the U.S.
Government or any of its agencies or instrumentalities.
|_| The Funds cannot lend money. However, they can invest in all
or a portion of an issue of bonds, debentures, commercial paper or
other similar corporate obligations of the types that are usually
purchased by institutions, whether or not they are publicly
distributed. The Funds may also enter into repurchase agreements, and
make loans of portfolio securities.
|_| The Funds cannot concentrate investments. That means they
cannot invest 25% or more of their total assets in companies in any
one industry. Obligations of the U.S. government, its agencies and
instrumentalities are not considered to be part of an "industry" for
the purposes of this restriction. This policy does not limit
investments by Money Fund/VA in obligations issued by banks.
|_| The Funds cannot buy or sell real estate or interests in real
estate. However, the Funds can purchase debt securities secured by
real estate or interests in real estate, or issued by companies,
including real estate investment trusts, which invest in real estate
or interests in real estate.
|_| The Funds cannot underwrite securities of other companies. A
permitted exception is in case a Fund is deemed to be an underwriter
under the Securities Act of 1933 when reselling any securities held in
its own portfolio.
|_| The Funds cannot invest in commodities or commodity
contracts, other than the hedging instruments permitted by any of its
other fundamental policies. It does not matter whether the hedging
instrument is considered to be a commodity or commodity contract.
|_| The Funds cannot invest in the securities issued by any
company for the purpose of exercising control of management of that
company.
|_| The Funds cannot invest in or hold securities of any issuer
if officers and Trustees of the Funds or the Manager individually
beneficially own more than 1/2 of 1% of the securities of that issuer
and together own more than 5% of the securities of that issuer.
|_| The Funds cannot mortgage, pledge, hypothecate or otherwise
encumber any of its assets to secure a debt or a loan. However, this
does not prohibit the Funds from entering into an escrow, collateral
or margin arrangement with any of its investments.
|_| The Funds cannot invest in oil, gas or other mineral
explorations or development programs. However, the Funds 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.
|_| The Funds cannot issue "senior securities," but this does not
prohibit certain investment activities for which assets of the Funds
are designated as segregated, or margin, collateral or escrow
arrangements are established, to cover the related obligations.
Examples of those activities include borrowing money, reverse
repurchase agreements, delayed-delivery and when-issued arrangements
for portfolio securities transactions, and contracts to buy or sell
derivatives, hedging instruments, options or futures.
Unless the Prospectus or this Statement of Additional Information
states that a percentage restriction applies on an ongoing basis, it
applies only at the time the Fund makes an investment. The 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.
For purposes of the Funds' policy not to concentrate its
investments as described above, the Funds have adopted the industry
classifications set forth in Appendix B to this Statement of
Additional Information. This is not a fundamental policy.
How the Funds Are Managed
Organization and History. Each Fund is an investment portfolio, or "series"
of Oppenheimer Variable Account Funds (the "Trust"), a multi-series
open-end diversified management investment company organized as a
Massachusetts business trust that presently includes ten series. Money
Fund/VA, Bond Fund/VA and Capital Appreciation Fund/VA were all organized
in 1983, High Income Fund/VA, Aggressive Growth Fund/VA and Multiple
Strategies Fund/VA, were all organized in 1986, Global Securities Fund/VA
was organized in 1990, Strategic Bond Fund/VA was organized in 1993, Main
Street Growth & Income Fund/VA was organized in 1995, and Small Cap Growth
Fund/VA was organized in 1998. The suffix "VA" was added to each Fund's
name on May 1, 1999. Prior to that date, Oppenheimer Capital Appreciation
Fund/VA was named "Oppenheimer Growth Fund," and Oppenheimer Main Street
Growth & Income Fund/VA was named "Oppenheimer Growth & Income Fund." Prior
to May 1, 1998, Oppenheimer Aggressive Growth Fund/VA was named
"Oppenheimer Capital Appreciation Fund." All references to the Fund's Board
of Trustees and Officers refer to the Trustees and Officers, respectively,
of Oppenheimer Variable Account Funds.
The Funds are 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 their performance, and review the actions of the
Manager. Although the Funds will not normally hold annual meetings of its
shareholders, they 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 Declaration of
Trust of Oppenheimer Variable Account Funds.
|X| Classes of Shares. The Board of Trustees has the power,
without shareholder approval, to divide unissued shares of any Fund
into two or more classes. While the Board has done so, and each Fund
currently has two classes of shares: Class 2 shares, and a class of
shares without numerical designation, no Class 2 shares of any Fund
are outstanding or have ever been offered as of the date of this
Statement of Additional Information. All classes invest in the same
investment portfolio. Each class of shares: o has its own dividends
and distributions, o pays certain expenses which may be different for
the different classes, o may have a different net asset value, o may
have separate voting rights on matters in which interests of one class
are different from interests of another class, and o votes as a class
on matters that affect that class alone.
Shares are freely transferable, and each share of each class has
one vote at shareholder meetings, with fractional shares voting
proportionally on matters submitted to the vote of shareholders. Each
share of each Fund represents an interest in that Fund proportionately
equal to the interest of each other share of the same class.
The Trustees are authorized to create new series and classes of
shares. The Trustees may reclassify unissued shares of the Funds into
additional series or classes of shares. The Trustees also may divide
or combine the shares of a class into a greater or lesser number of
shares without changing the proportionate beneficial interest of a
shareholder in the Funds. Shares do not have cumulative voting rights
or preemptive or subscription rights. Shares may be voted in person or
by proxy at shareholder meetings.
|X| Meetings of Shareholders. As a Massachusetts business trust,
the Funds are not required to hold, and do not plan to hold, regular
annual meetings of shareholders. The Funds will hold meetings when
required to do so by the Investment Company Act or other applicable
law. They will also do so when a shareholder meeting is called by the
Trustees or upon proper request of the shareholders.
Shareholders have the right, upon the declaration in writing or
vote of two-thirds of the outstanding shares of all the Funds, 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 all outstanding shares. If the Trustees
receive a request from at least 10 shareholders stating that they wish
to communicate with other shareholders to request a meeting to remove
a Trustee, the Trustees will then either make the shareholder list
available to the applicants or mail their communication to all other
shareholders at the applicants' expense. The shareholders making the
request must have been shareholders for at least six months and must
hold shares of the Funds valued at $25,000 or more or constituting at
least 1% of the Funds' outstanding shares, whichever is less. The
Trustees may also take other action as permitted by the Investment
Company Act.
|X| Shareholder and Trustee Liability. The Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for
the Funds' obligations. It also provides for indemnification and
reimbursement of expenses out of a Fund's property for any shareholder
held personally liable for its obligations. The Declaration of Trust
also states that upon request, a Fund shall assume the defense of any
claim made against a shareholder for any act or obligation of the Fund
and shall satisfy any judgment on that claim. Massachusetts law
permits a shareholder of a business trust (such as the Trust) to be
held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss
from being held liable as a "partner" of the Fund is limited to the
relatively remote circumstances in which a Fund would be unable to
meet its obligations.
The Funds' contractual arrangements state that any person doing
business with the Funds (and each shareholder of the Funds) agrees
under its Declaration of Trust to look solely to the assets of the
Fund for satisfaction of any claim or demand that may arise out of any
dealings with that Fund. The contracts further state that the Trustees
shall have no personal liability to any such person, to the extent
permitted by law.
Trustees and Officers of the Funds. The Trustees and officers of the Funds,
and their principal occupations and business affiliations during the past
five years are listed below. Trustees denoted with an asterisk (*) below
are deemed to be "interested persons" of the Funds under the Investment
Company Act. All of the Trustees are also trustees, directors or managing
general partners of the following Denver-based Oppenheimer funds1:
Oppenheimer Cash Reserves Oppenheimer Total Return Fund, Inc.
Oppenheimer Champion Income Fund Oppenheimer Variable Account Funds
Oppenheimer Capital Income Fund Panorama Series Fund, Inc.
Oppenheimer High Yield Fund Centennial America Fund, L. P.
Oppenheimer International Bond Fund Centennial California Tax Exempt Trust
Oppenheimer Integrity Funds Centennial Government Trust
Oppenheimer Limited-Term Government
Fund Centennial Money Market Trust
Oppenheimer Main Street Funds, Inc. Centennial New York Tax Exempt Trust
Oppenheimer Municipal Fund Centennial Tax Exempt Trust
Oppenheimer Real Asset Fund The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Strategic Income Fund
Ms. Macaskill and Messrs. Swain, Bishop, Donohue, Farrar and
Zack, who are officers of the Fund, respectively hold the same offices
with the other Denver-based Oppenheimer funds. As of April 1, 1999,
the Trustees and officers of the Fund as a group did not beneficially
own any shares of the Fund.
Robert G. Avis,* Trustee; Age: 67
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: 84
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 68
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., prior to which he was associated with the National Aeronautics
and Space Administration.
Jon S. Fossel, Trustee; Age: 56
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Manager, President and a director
of Oppenheimer Acquisition Corp., Shareholder Services, Inc. and
Shareholder Financial Services, Inc.
Sam Freedman, Trustee; Age: 58
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of Shareholder Services,
Inc. and Shareholder Financial Services, Inc., Vice President and a
director of Oppenheimer Acquisition Corp. and a director of the Manager.
Raymond J. Kalinowski, Trustee; Age: 69
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: 77
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
James C. Swain, Chairman, Chief Executive Officer and Trustee*; Age 65
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, and Chairman of the
Board of Shareholder Services, Inc.
Bridget A. Macaskill, President; Age: 50 Two World Trade Center, New York,
New York 10048 President (since June 1991), Chief Executive Officer (since
September 1995) and a director (since December 1994) of the Manager;
President and a director (since June 1991) of HarbourView Asset Management
Corp.; Chairman and a director (since August 1994) of Shareholder Services,
Inc. and (since September 1995) Shareholder Financial Services, Inc.;
President (since September 1995) and a director (since October 1990) of
Oppenheimer Acquisition Corp.; 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
management subsidiary of the Manager, and Oppenheimer Millennium Funds plc;
President and a director of other Oppenheimer funds; a director of
Hillsdown Holdings plc (a U.K. food company).
Ned M. Steel, Trustee; Age: 84
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
Charles Albers, Vice President and Main Street Growth & Income Fund/VA
Portfolio Manager, Age: 59.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since April 1998); an officer of
other Oppenheimer funds; a Certified Financial Analyst; formerly a Vice
President and portfolio manager for Guardian Investor Services, the
investment management subsidiary of The Guardian Life Insurance Company
(since 1972).
Bruce L. Bartlett, Vice President and Aggressive Growth Fund/VA Portfolio
Manager, Age: 49
Two World Trade Center, New York, New York 10048
Senior Vice President of the Manager (since January 1998); an officer of
other Oppenheimer funds; formerly a Vice President and Senior Portfolio
Manager at First of America Investment Corp.
John P. Doney, Vice President and Multiple Strategies Fund/VA Portfolio
Manager, Age: 69.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since June 1992); an officer of other
Oppenheimer funds; formerly Senior Vice President and Chief Investment
Officer - Equities of National Securities & Research (mutual fund adviser)
and Vice President of the National Affiliated Investment Companies.
Alan Gilston, Vice President and Small Cap Growth Fund/VA Portfolio
Manager, Age: 41
Two World Trade Center, New York, New York 10048
Vice President of the Manager (since September 1997); formerly a Vice
President and portfolio manager at Schroder Capital Management
International, Inc.
John S. Kowalik, Vice President and Bond Fund/VA Portfolio Manager, Age: 42
Two World Trade Center, New York, New York 10048
Senior Vice President of the Manager (since July 1998); an officer of other
Oppenheimer funds; formerly Managing Director and Senior Portfolio Manager
at Prudential Global Advisors (1989-1998).
Michael S. Levine, Vice President and Multiple Strategies Fund/VA Portfolio
Manager, Age: 33
Two World Trade Center, New York, New York 10048
Vice President of the Manager (since April 1996); formerly Assistant
Portfolio Manager of the Manager (from June 1994 to April 1996) and
formerly portfolio manager and research associate for Amas Securities, Inc.
(from February 1990 to February 1994).
Nikolaos D. Monoyios, Vice President and Main Street Growth & Income
Fund/VA Portfolio Manager, Age: 60.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since April 1998); an officer of other
Oppenheimer funds; a Certified Financial Analyst; formerly a Vice President
and portfolio manager for Guardian Investor Services, the investment
management subsidiary of The Guardian Life Insurance Company (since 1979).
David P. Negri, Vice President and High Income Fund/VA, Bond Fund/VA,
Strategic Bond Fund/VA Portfolio Manager, Age: 45
Two World Trade Center, New York, New York 10048
Senior Vice President of the Manager (since June 1989); an officer of other
Oppenheimer funds.
Jane Putnam, Vice President and Capital Appreciation Fund/VA Portfolio
Manager, Age: 38
Two World Trade Center, New York, New York 10048
Vice President of the Manager (since October 1995); an officer of other
Oppenheimer funds; previously a portfolio manager and equity research
analyst for Chemical Bank.
Thomas P. Reedy, Vice President and High Income Fund/VA Portfolio Manager,
Age: 37.
Two World Trade Center, New York, New York 10048
Vice President of the Manager (since June 1993); an officer of other
Oppenheimer funds.
Richard H. Rubinstein, Vice President and Multiple Strategies Fund/VA
Portfolio Manager, Age: 50
Two World Trade Center, New York, New York 10048
Senior Vice President of the Manager (since October 1995); an officer of
other Oppenheimer funds (since June 1990).
Arthur P. Steinmetz, Vice President and Strategic Bond Fund/VA Portfolio
Manager, Age: 40
Two World Trade Center, New York, New York 10048
Senior Vice President of the Manager (since March 1993); an officer of
other Oppenheimer funds.
Jay W. Tracey III, Vice President and Small Cap Growth Fund/VA Portfolio
Manager, Age: 45
Two World Trade Center, New York, New York 10048
Vice President of the Manager (since September 1994); an officer of other
OppenheimerFunds; formerly a Managing Director of Buckingham Capital
Management (February 1994-September 1994), prior to which he was Portfolio
Manager and Vice President of the Fund and other Oppenheimer funds and a
Vice President of the Manager (July 1991-February 1994).
Carol E. Wolf, Vice President and Money Fund/VA Portfolio Manager, Age: 47
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager and Centennial (since June 1990); an officer
of other Oppenheimer funds.
Arthur J. Zimmer, Vice President and Money Fund/VA Portfolio Manager, Age: 53
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President of the Manager (since June 1997); Vice President of
Centennial (since September 1991); an officer of other Oppenheimer funds;
formerly Vice President of the Manager (October 1990-June 1997).
William Wilby, Vice President and Global Securities Fund/VA Portfolio
Manager, Age: 54
Two World Trade Center, New York, NY 10048-0203
Senior Vice President and the Manager (since July 1994) and HarbourView
Asset Management Corporation (since October 1993); and 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: 48
Two World Trade Center, New York, New York 10048
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 Asset Management Corp., Shareholder Services,
Inc., Shareholder Financial Services, Inc. and Oppenheimer Partnership
Holdings, Inc. (since September 1995); President and a director of
Centennial Asset Management Corp. (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
Oppenheimer Acquisition Corp.; Vice President and a Director of
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
Brian W. Wixted, Treasurer; Age: 39
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (April 1999) of the Manger; formerly
Principal and Chief Operating Officer, Bankers Trust Company - Mutual Fund
Services Division (March 1995 - March 1999); Vice President and Chief
Financial Officer of CS First Boston Investment Management Corp. (September
1991 - March 1995); and Vice President and Accounting Manager, Merrill
Lynch Asset Management (November 1987 - September 1991).
Robert J. Bishop, Assistant Treasurer; Age: 40
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: 33
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: 50
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 Shareholder Services, Inc.
(since May 1985), and Shareholder Financial Services, Inc. (since November
1989); Assistant Secretary (since October 1997) of Oppenheimer Millennium
Funds plc and OppenheimerFunds International Ltd.; an officer of other
Oppenheimer funds.
|X| Remuneration of Trustees. The officers of the Funds and a
Trustee of the Fund (Mr. Swain) are affiliated with the Manager and
receive no salary or fee from the Funds. The remaining Trustees of the
Funds received the compensation shown below. The compensation from the
Funds were paid during their fiscal year ended December 31, 1998. The
compensation from all of the Denver-based Oppenheimer funds includes
the compensation from the Funds and represents compensation received
as a director, trustee, managing general partner or member of a
committee of the Board during the calendar year 1998.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
Trustee's Name and Other Positions from Oppenheimer Variable From all Denver-Based
Account Funds Oppenheimer Funds1
<S> <C> <C>
Robert G. Avis $3,908 $67,998
William A. Baker $4,026 $69,998
Charles Conrad, Jr. $3,908 $67,998
Jon. S. Fossel $3,880 $67,496
Sam Freedman
Audit and Review Committee Member $4,253 $73,998
Raymond J. Kalinowski
Audit and Review Committee Member
$4,253 $73,998
C. Howard Kast
Audit and Review Committee Chairman
$4,429 $76,998
Robert M. Kirchner $3,908 $67,998
Ned M. Steel $3,908 $67,998
</TABLE>
1. For the 1998 calendar year.
|X| Deferred Compensation Plan. The Board of Trustees has adopted
a Deferred Compensation Plan for disinterested Trustees that enables
them to elect to defer receipt of all or a portion of the annual fees
they are entitled to receive from the Funds. 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 Trustee's fees under the plan will not materially
affect the Funds' assets, liabilities and net income per share. The
plan will not obligate the fund 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 Securities and Exchange Commission,
the Funds 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.
-- Major Shareholders. As of April 1, 1999 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) GE
Life & Annuity Assurance Company ("GE"), 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 and Alexander Hamilton Life
Insurance Company of America, Concord, NH (collectively, "Jefferson
Pilot"); (viii) CUNA Mutual Group ("CUNA"), Madison, WI; (ix) American
General Annuity Insurance Company, Houston, TX ("American General"); and
(x) Protective Life Insurance Company, Birmingham, AL ("Protective"). Such
shares were held as shown in Appendix C. No shares of Class 2 shares of any
Fund were outstanding as of that date.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp.,
a holding company controlled by Massachusetts Mutual Life Insurance
Company. 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
the Fund's portfolio transactions. Compliance with the Code of Ethics is
carefully monitored and enforced by the Manager.
|X| The Investment Advisory Agreements. The Manager provides
investment advisory and management services to each Fund under an
investment advisory agreement between the Manager and the Trust for
each Fund. The Manager selects securities for the Funds' portfolios
and handles their day-to-day business. The portfolio managers of the
Funds are employed by the Manager and are the persons who are
principally responsible for the day-to-day management of the Funds'
portfolios. Other members of the Manager's Teams provide the portfolio
managers with counsel and support in managing the Funds' portfolios.
For Global Securities Fund/VA, this includes George Evans and Frank
Jennings. 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 fixed-income securities, provide the
portfolio managers of the High Income Fund/VA, Bond Fund/VA and
Strategic Bond Fund/VA with support in managing the portfolios of
those Funds.
The agreements require the Manager, at its expense, to provide
the Funds with adequate office space, facilities and equipment. It
also requires the Manager to provide and supervise the activities of
all administrative and clerical personnel required to provide
effective administration for the Funds. Those responsibilities include
the compilation and maintenance of records with respect to operations,
the preparation and filing of specified reports, and composition of
proxy materials and registration statements for continuous public sale
of shares of the Funds.
The Funds pay expenses not expressly assumed by the Manager under
the advisory agreement. The advisory agreement lists examples of
expenses paid by the Funds. The major categories 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. The management fees paid by the
Funds to the Manager are calculated at the rates described in the
Prospectus, which are applied to the assets of each Fund as a whole.
Prior to May 1, 1999, the advisory agreement for Aggressive Growth
Fund/VA did not include a breakpoint above $800 million. In the event
more than one class of shares is issued, the fees would be allocated
to each class of shares based upon the relative proportion of a Fund's
net assets represented by that class.
Management Fees for the Fiscal Year Ended December 31:
Fund: 1996 1997 1998
Money Fund/VA $ 445,899 $ 601,698 $ 619,030
High Income Fund/VA $1,777,754 $1,667,490 $2,383,008
Bond Fund/VA $2,188,350 $3,281,556 $4,218,231
Aggressive Growth
Fund/VA $3,382,840 $5,324,309 $6,564,650
Capital Appreciation
Fund/VA $1,139,2551 $2,859,202 $4,369,487
Multiple Strategies
Fund/VA $3,132,569 $4,068,887 $4,584,184
Global Securities
Fund/VA $ 3,395,740 $5,615,606 $7,167,836
Strategic Bond Fund/VA $ 618,338 $1,197,613 $1,860,227
Main Street Growth
& Income Fund/VA $ 160,819 $ 790,577 $1,742,253
Small Cap Growth Fund/VA N/A N/A $ 2,2192
____________________
(1) During the fiscal year ended December 31, 1996, the Manager reimbursed
Oppenheimer Capital Appreciation Fund/VA $27,276 for certain SEC
registration fees incurred in connection with the acquisition by that Fund
of J.P. Capital Appreciation Fund, Inc.
(2)From May 1, 1998 (commencement of operations) to December 31, 1998.
The investment advisory agreements state that in the absence of
willful misfeasance, bad faith, gross negligence in the performance of
its duties or reckless disregard of its obligations and duties under
the investment advisory agreement, the Manager is not liable for any
loss resulting from a good faith error or omission on its part with
respect to any of its duties under the agreement.
The agreements permit the Manager to act as investment advisor
for any other person, firm or corporation and 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 advisor to a Fund, the
Manager may withdraw the right of that Fund to use the name
"Oppenheimer" as part of its name.
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 advisory agreements
contain provisions relating to the employment of broker-dealers to effect
the Funds' portfolio transactions. The Manager is authorized by the
advisory agreements to employ broker-dealers, including "affiliated"
brokers, as that term is defined in the Investment Company Act. The Manager
may employ broker-dealers that the Manager thinks, in its best judgment
based on all relevant factors, will implement the policy of the Funds to
obtain, at reasonable expense, the "best execution" of the Funds' portfolio
transactions. "Best execution" means prompt and reliable execution at the
most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current
rates of eligible brokers and to minimize the commissions paid to the
extent consistent with the interests and policies of the Funds as
established by its Board of Trustees.
Under the investment advisory agreements, the Manager may select
brokers (other than affiliates) 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
charge, if the Manager makes a good faith determination that the
commission is fair and reasonable in relation to the services
provided. Subject to those considerations, as a factor in selecting
brokers for the Funds' portfolio transactions, the Manager may also
consider sales of shares of the Funds and other investment companies
for which the Manager or an affiliate serves as investment adviser.
Brokerage Practices Followed by the Manager. The Manager allocates
brokerage for the Funds subject to the provisions of the investment
advisory agreements and the procedures and rules described above.
Generally, the Manager's portfolio traders allocate brokerage based upon
recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and allocate
brokerage. In either case, the Manager's executive officers supervise the
allocation of brokerage.
Transactions in securities other than those for which an exchange
is the primary market are generally done with principals or market
makers. In transactions on foreign exchanges, the Funds may be
required to pay fixed brokerage commissions and therefore would not
have the benefit of negotiated commissions available in U.S. markets.
Brokerage commissions are paid primarily for transactions in listed
securities or for certain fixed-income agency transactions in the
secondary market. Otherwise brokerage commissions are paid only if it
appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Funds ordinarily use the same
broker for the purchase or sale of the option and any transaction in
the securities to which the option relates.
Other funds advised by the Manager have investment policies
similar to those of the Funds. Those other funds may purchase or sell
the same securities as the Funds at the same time as the Funds, which
could affect the supply and price of the securities. If two or more
funds advised by the Manager purchase the same security on the same
day from the same dealer, the transactions under those combined orders
are averaged as to price and allocated in accordance with the purchase
or sale orders actually placed for each account.
Most purchases of debt obligations are principal transactions at
net prices. This affects a substantial portion of the portfolio
transactions of Money Fund/VA, High Income Fund/VA, Bond Fund/VA and
Strategic Bond Fund/VA. Instead of using a broker for those
transactions, the Funds normally deal 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 the services
of a broker. Purchases of portfolio 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 investment advisory agreements permit the Manager to allocate
brokerage for research services. 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. The investment research
received for the commissions of those other accounts may be useful
both to one of the Funds and one or more of the Manager's other
accounts. Investment research may be supplied to the Manager by a
third party at the instance of a broker through which trades are
placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic
trends and portfolio strategy, 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 stated
commissions on secondary fixed-income agency trades to obtain
research if the broker represents 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 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 research services provided by brokers broadens the scope
and supplements the research activities of the Manager. That
research provides additional views and comparisons for
consideration, and helps the Manager to obtain market information
for the valuation of securities that are either held in the
Fund's portfolio or are being considered for purchase. The
Manager provides information to the Board about the commissions
paid to brokers furnishing such services, together with the
Manager's representation that the amount of such commissions was
reasonably related to the value or benefit of such services.
The (i) total brokerage commissions paid by the Funds (other
than Money Fund/VA, which paid no brokerage commissions), not
including spreads or concessions on principal transactions on a
net trade basis, for the Funds' fiscal year ended December 31,
1996, 1997 and 1998; and (ii) for the Funds' fiscal year ended
December 31, 1998, the amount of transactions directed to brokers
for research services, and the amount of the commissions paid to
broker-dealers for those services, is shown in the chart below:
<TABLE>
<CAPTION>
Total Amount Commissions Paid
Total Brokerage Commissions of Transactions For
Paid by the Funds
Fund 1996 1997 1998 1998 1998
<S> <C> <C> <C> <C> <C>
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
High Income
Fund/VA $ 24,248 $ 20,256 $ 62,251 $ 1,781,914 $ 447
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
Bond Fund/VA $ 13,852 $ 26,799 $ 91,170 $ 17,835,169 $ 1,500
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
Strategic Bond
Fund/VA $ 11,995 $ 17,121 $ 219,537 $ 13,052,225 $ 7,186
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
Aggressive Growth
Fund/VA $507,501 $810,749 $1,264,440 $244,597,427 $ 398,286
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
Capital Appreciation
Fund/VA $215,286 $506,443 $ 805,082 $332,363,432 $ 483,496
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
Small Cap Growth
Fund/VA -- -- $ 839 $ 19,016 $ 66
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
Global Securities
Fund/VA $2,101,076 $2,114,523 $2,900,162 $977,222,013 $2,552,195
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
Multiple Strategies
Fund/VA $ 351,373 $ 500,783 $ 430,211 $119,112,266 $ 238,988
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
Main Street Growth
& Income Fund/VA $ 71,023 $ 209,630 $ 458,120 $144,672,877 $ 293,175
- ------------------------- -------------- ------------------- ------------------ ------------------- ------------------
</TABLE>
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreements
with the Funds, OppenheimerFunds Distributor, Inc. will act as
the principal underwriter of the Funds, Class 2 shares, if and
when shares of that class are issued. There is no general
distributor for the Funds' shares without numerical designation.
Class 2 Service Plans
Each Fund has adopted a Service Plan for its Class 2 shares
under Rule 12b-1 of the Investment Company Act, pursuant to which
each Fund would make 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 a
Fund's 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.
Under the Plans, the Manager and the Distributor may make
payments to affiliates and, in their sole discretion, from time
to time may use their own resources (which, as to the Manager,
may include profits derived from the advisory fee it receives
from each respective Fund) to 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 and a majority of the
Independent Trustees.
While the plans are in effect and Class 2 shares are
outstanding, 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. These
reports are subject to the review and approval of the Independent
Trustees.
The Class 2 Plans provide for the Distributor to be
reimbursed for its distribution related services. The Distributor
will pay insurance company separate account sponsors that offer
Class 2 shares for certain activities, as described in the
Prospectus.
Performance of the Funds
Explanation of Performance Terminology. The Funds use a variety of terms to
illustrate their investment performance. Those terms include "cumulative
total return," "average annual total return," "average annual total return
at net asset value" and "total return at net asset value." An explanation
of how total returns are calculated is set forth below. The charts below
show the Funds' performance as of the Funds' most recent fiscal year end.
You can obtain current performance information by calling the Funds'
Transfer Agent at 1-888-470-0861.
The Funds' illustrations of their performance data in
advertisements must comply with rules of the Securities and
Exchange Commission. Those rules describe the types of
performance data that may be used and how it is to be calculated.
In general, any advertisement by a Fund of its performance data
must include the average annual total returns for the advertised
class of shares of that Fund. Those returns must be shown for the
1, 5 and 10-year periods (or the life of the class, if less)
ending as of the most recently ended calendar quarter prior to
the publication of the advertisement (or its submission for
publication).
Use of standardized performance calculations enables an
investor to compare the Funds' performance to the performance of
other funds for the same periods. However, a number of factors
should be considered before using the Funds' performance
information as a basis for comparison with other investments:
|_| Total returns measure the performance of a hypothetical
account in a Fund over various periods and do not show the
performance of each shareholder's account. Your account's
performance will vary from the model performance data if you buy
or sell shares during the period, or you bought your shares at a
different time and price than the shares used in the model.
|_| The Fund's performance does not reflect the charges
deducted from an investor's separate account by the insurance
company or other sponsor of that separate account, which vary
from product to product. If these charges were deducted,
performance will be lower than as described in the Fund's
Prospectus and Statement of Additional Information. In addition,
the separate accounts may have inception dates different from
those of the Funds.
|_| An investment in the Fund is not insured by the FDIC or
any other government agency.
|_| The Funds' performance returns do not reflect the effect
of taxes on dividends and capital gains distributions.
|_| The principal value of the Funds' shares and total
returns are not guaranteed and normally will fluctuate on a daily
basis.1
|_| When an investor's shares are redeemed, they may be
worth more or less than their original cost.1
|_| Total returns for any given past period represent
historical performance information and are not, and should not be
considered, a prediction of future returns. The Funds' total
returns should not be expected to be the same as the returns of
other Oppenheimer funds, whether or not such other funds have the
same portfolio managers and/or similar names.
The Funds' total returns are affected by market conditions,
the quality of that Funds' investments, the maturity of debt
investments, the types of investments that Fund holds, and its
operating expenses.
|X| Total Return Information. There are different types of
"total returns" to measure the Funds' 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 and that
the investment is redeemed at the end of the period. 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 actual
year-by-year performance. The Funds use standardized calculations
for its total returns as prescribed by the SEC. The methodology
is discussed below.
_________________
1. These statements do not apply to Money Fund/VA, which seeks to maintain
a stable net asset value of $1.00 per shares. There can be no assurance
that Money Fund/VA will be able to do so.
|_| Average Annual Total Return. The "average annual total
return" of each class is an average annual compounded rate of
return for each year in a specified number of years. It is the
rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for
a number of years ("n" in the formula) to achieve an Ending
Redeemable Value ("ERV" in the formula) of that investment,
according to the following formula:
1/n
( ERV )
( ------ ) - 1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. The "cumulative total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
The Funds' Total Returns for the Periods Ended 12/31/98
Average Annual Total Return For:
<TABLE>
<CAPTION>
Five Year Ten Year Cumulative
Fiscal Year Period Ended Period Inception Total Return
Ended 12/31/98 Ended to From Inception1
Fund 12/31/98 12/31/98 12/31/98 to 12/31/98
<S> <C> <C> <C> <C> <C>
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
High Income Fund/VA .31% 8.62% 12.71% 12.26% 230.92%
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
Bond Fund/VA 6.80% 7.01% 9.28% 9.66% 142.96%
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
Aggressive Growth Fund/VA 12.36% 13.06% 16.12% 15.07% 345.69%
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
Capital Appreciation Fund/VA
24.00% 22.10% 16.85% 16.03% 374.69%
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
Multiple Strategies Fund/VA 6.66% 11.43% 11.22% 11.57% 189.65%
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
Global Securities Fund/VA 14.11% 9.67% n/a 12.49% 160.49%
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
Strategic Bond Fund/VA 2.90% 6.83% n/a 6.79% 45.03%
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
Main Street Growth &
Income Fund/VA 4.70% n/a n/a 27.00% 130.22%
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
Small Cap Growth Fund/VA -4.00% n/a n/a -4.00% -4.00%
- ---------------------------------- --------------- -------------- ------------- ----------- -----------------
</TABLE>
_____________
(1)Inception dates are as follows: 4/30/86 for High Income Fund/VA; 4/3/85
for Bond Fund/VA and Capital Appreciation Fund/VA; 8/15/86 for Aggressive
Growth Fund/VA; 2/9/87 for Multiple Strategies Fund/VA; 11/12/90 for Global
Securities Fund/VA; 5/3/93 for Strategic Bond Fund/VA; 7/5/95 for Main
Street Growth & Income Fund/VA and 5/1/98 for Small Cap Growth Fund/VA.
|_| Standardized Yield. The "standardized yield" (sometimes referred to
just as "yield") is shown for a stated 30-day period. It is not based on
actual distributions paid by the Fixed Income Funds to shareholders in the
30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments for that period. It may
therefore differ from the "dividend yield" for the same class of shares,
described below.
Standardized yield is calculated using the following formula set forth in
rules adopted by the Securities and Exchange Commission, designed to assure
uniformity in the way that all funds calculate their yields:
a-b 6
Standardized Yield = 2 [( --- + 1) - 1]
cd
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 assumptions).
c = the average daily number of shares of that class outstanding during the
30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last day of
the period, adjusted for undistributed net investment income.
The standardized yield for a particular 30-day period may differ from the
yield for other periods. The SEC formula assumes that the standardized
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. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ for any
30-day period.
|_| Dividend Yield. The Fixed Income Funds may quote a "dividend yield" for
each class of its shares. Dividend yield is based on the dividends paid on
a class of shares during the actual dividend period. To calculate dividend
yield, the dividends of a class declared during a stated period are added
together, and the sum is multiplied by 12 (to annualize the yield) and
divided by the maximum offering price on the last day of the dividend
period. The formula is shown below:
Dividend Yield = dividends paid x 12/maximum offering price (payment date)
Yields for the 30-Day Periods Ended 12/31/98
Fund Standardized Yield Dividend Yield
High Income Fund/VA 9.47% 8.77%
Bond Fund/VA 6.24% 6.81%
Strategic Bond Fund/VA 8.38% 7.03%
|_| Money Fund/VA Yields. The current yield for Money
Fund/VA is calculated for a seven-day period of time 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 the 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 (1) adding 1 to the base period return (obtained as
described above), (2) raising the sum to a power equal to 365
divided by 7, and (3) subtracting 1 from the result.
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. 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.
Therefore, the return on dividends declared during a period may
not be the same on an annualized basis as the yield for that
period.
Other Performance Comparisons. The Funds may compare their performance
annually to that of an appropriate broadly-based market index in its Annual
Report to shareholders. You can obtain that information by contacting the
Transfer Agent at the addresses or telephone numbers shown on the cover of
this Statement of Additional Information. The Funds may also compare their
performance to that of other investments, including other mutual funds, or
use rankings of its performance by independent ranking entities. Examples
of these performance comparisons are set forth below.
|X| Lipper Rankings. From time to time the Funds may publish
the rankings of their performance by Lipper Analytical Services,
Inc. Lipper is a widely-recognized independent mutual fund
monitoring 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. Lipper currently ranks the Funds'
performance against other funds in the same investment category.
The Lipper performance rankings are based on total returns that
include the reinvestment of capital gain distributions and income
dividends but do not take sales charges or taxes into
consideration. Lipper also publishes "peer-group" indices of the
performance of all mutual funds in a category that it monitors
and averages of the performance of the funds in particular
categories.
|X| Morningstar Ratings and Rankings. From time to time the
star rating and ranking of the performance of separate accounts
that hold Fund shares will be determined by Morningstar, an
independent mutual fund monitoring service. Morningstar rates and
ranks separate accounts that hold mutual funds in broad
investment categories. The results may be published by or for the
Funds or the separate account sponsors.
Morningstar proprietary star ratings reflect historical
risk-adjusted total investment return. Investment return measures
one-, three-, five- and ten-year average annual total returns
(depending on the inception of the separate account) in excess of
90-day U.S. Treasury bill returns after considering the fund's
sales charges and expenses. Risk measures a separate account
performance below 90-day U.S. Treasury bill returns. Risk and
investment return are combined to produce star ratings reflecting
performance relative to the average fund in a fund's category.
Five stars is the highest rating (top 10% of separate accounts in
a category), 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%). The current overall
star rating is the separate account's 3-year rating or its
combined 3- and 5-year rating (weighted 60%/40% respectively), or
its combined 3-, 5-, and 10- year rating (weighted 40%, 30% and
30%, respectively), depending on the inception date of the
separate accounts. Ratings are subject to change monthly.
The total return rating of a separate account holding shares
of a Fund may also be compared to that of other separate accounts
in its Morningstar category, in addition to its star ratings.
Those total return ratings are percentages from one percent to
one hundred percent and are not risk adjusted. For example, if a
separate account is in the 94th percentile, that means that 94%
of the separate accounts in the same category performed better
than it did.
|X| Performance Rankings and Comparisons by Other Entities
and Publications. From time to time the Funds may include in
advertisements and sales literature performance information about
the Funds cited in newspapers and other periodicals such as The
New York Times, The Wall Street Journal, Barron's, or similar
publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The Funds'
performance may be compared in publications to the performance of
various market indices or other investments, and averages,
performance rankings or other benchmarks prepared by recognized
mutual fund statistical services.
Investors may also wish to compare the returns on the Funds'
shares to the return on fixed-income investments available from
banks and thrift institutions. Those include certificates of
deposit, ordinary interest-paying checking and savings accounts,
and other forms of fixed or variable time deposits, and various
other instruments such as Treasury bills. However, the Funds'
returns and share price are not guaranteed or insured by the FDIC
or any other agency and will fluctuate daily,1 while bank
depository obligations may be insured by the FDIC and may provide
fixed rates of return. Repayment of principal and payment of
interest on Treasury securities is backed by the full faith and
credit of the U.S. government.
From time to time, the Funds may publish rankings or ratings
of the Manager or Transfer Agent, and of the investor services
provided by them to shareholders of the Oppenheimer funds, other
than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder and investor services by
third parties may include comparisons of their services to those
provided by other mutual fund families selected by the rating or
ranking services. They may be based upon the opinions of the
rating or ranking service itself, using its research or judgment,
or based upon surveys of investors, brokers, insurance sponsors,
shareholders or others.
ABOUT YOUR ACCOUNT
How to Buy and Sell Shares
Shares of the Funds are sold to provide benefits under
variable life insurance policies and variable annuity and other
insurance company separate accounts, as explained in the Funds'
Prospectuses for the Funds and for the insurance product you have
selected. Therefore, instructions from an investor to buy or sell
shares of the Funds should be directed to the insurance sponsor
for the investor's separate account, or that insurance sponsor's
agent.
|X| Allocation of Expenses. The Funds pay expenses related
to its daily operations, such as custodian bank fees, Trustees'
fees, transfer agency fees, legal fees and auditing costs. Those
expenses are paid out of the Fund's 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.
If and when more than one class of the Funds' shares are
issued, the methodology for calculating the net asset value,
dividends and distributions of the Fund's share classes would
recognize two types of expenses. General expenses that do not
pertain specifically to any one class would be allocated pro rata
to the shares of all classes. The allocation would be based on
the percentage of the Fund's total assets that is represented by
the assets of each class, and then equally to each outstanding
share within a given class. Such general expenses include
management fees, legal, bookkeeping and audit fees, printing and
mailing costs of shareholder reports, Prospectuses, Statements of
Additional Information and other materials for current
shareholders, fees to unaffiliated Trustees, custodian bank
expenses, share issuance costs, organization and start-up costs,
interest, taxes and brokerage commissions, and non-recurring
expenses, such as litigation costs.
Other expenses that are directly attributable to a
particular class would be allocated equally to each outstanding
share within that class. Examples of such expenses include
service plan (12b-1) fees of Class 2 shares, transfer and
shareholder servicing agent fees and expenses, and shareholder
meeting expenses (to the extent that such expenses pertain only
to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share
of each class of shares of the Funds are determined as of the close of
business of The New York Stock Exchange on each day that the Exchange is
open. The calculation is done by dividing the value of the Fund's net
assets attributable to a class by the number of shares of that class that
are outstanding. The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some other days (for example, in case of weather
emergencies or on days falling before a holiday). The Exchange's most
recent annual announcement (which is subject to change) states that it will
close on New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends
and U.S. holidays) or after 4:00 P.M. on a regular business day. The
Funds' net asset values will not be calculated on those days, and the
values of some of the Fund's portfolio securities may change
significantly on those days, when shareholders may not purchase or
redeem shares. Additionally, trading on European and Asian stock
exchanges and over-the-counter markets normally is completed before
the close of The New York Stock Exchange.
Changes in the values of securities traded on foreign
exchanges or markets as a result of events that occur after the
prices of those securities are determined, but before the close
of The New York Stock Exchange, will not be reflected in the
Funds' calculation of their net asset values that day unless the
Board of Trustees determines that the event is likely to effect a
material change in the value of the security. The Manager may
make that determination, under procedures established by the
Board.
|X| Securities Valuation.1 The Funds' Board of Trustees has
established procedures for the valuation of the Funds'
securities. In general those procedures are as follows:
|_| Equity securities traded on a U.S. securities exchange
or on NASDAQ are valued as follows:
(1) if last sale information is regularly reported, they are valued at
the last reported sale price on the principal exchange on which they
are traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date,
they are valued at the last reported sale price preceding the
valuation date if it is within the spread of the closing "bid" and
"asked" prices on the valuation date or, if not, at the closing "bid"
price on the valuation date.
|_| Equity securities traded on a foreign securities
exchange generally are valued in one of the following ways:
(1) at the last sale price available to the pricing service
approved by the Board of Trustees, or
(2) at the mean between the "bid" and "asked" prices
obtained from the principal exchange on which the security is
traded or, on the basis of reasonable inquiry, from two market
makers in the security.
|_| 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
Funds' Board of Trustees or obtained by the Manager from two active
market makers in the security on the basis of reasonable inquiry.
|_| The following securities are valued at the mean between the "bid"
and "asked" prices determined by a pricing service approved by the
Funds' Board of Trustees or obtained by the Manager from two active
market makers in the security on the basis of reasonable inquiry:
________________
1. These statements do not apply to Money Fund/VA, which seeks to
maintain a stable net asset value of $1.00 per shares. There can be no
assurance that Money Fund/VA will be able to do so.
(1) debt instruments that have a maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when
issued and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days
or less when issued and which have a remaining maturity of 60 days or
less.
|_| The following securities are valued at cost, adjusted for
amortization of premiums and accretion of discounts: (1) money market
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 (2) debt instruments held by a money market fund
that have a remaining maturity of 397 days or less.
|_| 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, a 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).
In the case of U.S. government securities, mortgage-backed
securities, corporate bonds and foreign government securities,
when last sale information is not generally available, the
Manager may use pricing services approved by the Board of
Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
and maturity. Other special factors may be involved (such as the
tax-exempt status of the interest paid by municipal securities).
The Manager will monitor the accuracy of the pricing services.
That monitoring may include comparing prices used for portfolio
valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on
a particular business day that are provided to the Manager by a
bank, dealer or pricing service that the Manager has determined
to be reliable are used to value foreign currency, including
forward contracts, and to convert to U.S. dollars securities that
are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale 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, they shall be valued at the last sale price on the preceding
trading day if it is within the spread of the closing "bid" and
"asked" prices on the principal exchange or on NASDAQ on the
valuation date. If not, the 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 by the mean between "bid" and "asked"
prices obtained by the Manager from two active market makers. In
certain cases that may be at the "bid" price if no "asked" price
is available.
When a Fund writes an option, an amount equal to the premium
received is included in that Fund's Statement of Assets and
Liabilities as an asset. An equivalent credit is included in the
liability section. The credit is adjusted ("marked-to-market"")to
reflect the current market value of the option. In determining
the Fund's gain on investments, if a call or put written by a
Fund is exercised, the proceeds are increased by the premium
received. If a call or put written by a Fund expires, that Fund
has a gain in the amount of the premium. If that 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 that Fund receives on its sale of the
underlying investment is reduced by the amount of premium paid by
the Fund.
Money Fund/VA Net Asset Valuation Per Share. Money Fund/VA will seek
to maintain a net asset value of $1.00 per share for purchases and
redemptions. There can be no assurance it will do so. Money Fund/VA
operates under Rule 2a-7 under which it may use the amortized cost
method of valuing their shares. The Funds' Board of Trustees has
adopted procedures for that purpose. 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. This method does not take into account unrealized capital
gains or losses.
The Funds' Board of Trustees has established procedures
intended to stabilize Money Fund/VA's net asset value at $1.00
per share. If Money Fund/VA'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 shares of that Fund without monetary
consideration, or calculating net asset value per share by using
available market quotations.
As long as Money Fund/VA uses Rule 2a-7, it must abide by
certain conditions described in the Prospectus which limit the
maturity of securities that Fund buys. Under Rule 2a-7, 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 rate demand
and floating rate instruments. Repurchase agreements and
securities loan agreements are, in general, treated as having
maturity equal to the period scheduled until repurchase or
return, or if subject to demand, equal to the notice period.
While 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 Money Fund/VA would receive if it sold
the instrument. During periods of declining interest rates,
the daily yield on shares of that Fund may tend to be lower
(and net investment income and daily dividends higher) than
market prices or estimates of market prices for its
portfolio. Thus, if the use of amortized cost by the funds
resulted in a lower aggregate portfolio value on a
particular day, a prospective investor in Money Fund/VA
would be able to obtain a somewhat higher yield than would
result from investment in a fund utilizing solely market
values, and existing investors in that Fund would receive
less investment income than if Money Fund/VA were priced at
market value. Conversely, during periods of rising interest
rates, the daily yield on shares of that Fund will tend to
be higher and its aggregate value lower than that of a
portfolio priced at market value. A prospective investor
would receive a lower yield than from an investment in a
portfolio priced at market value, while existing investors
in Money Fund/VA would receive more investment income than
if that Fund were priced at market value.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The dividends and
distributions paid by a class of shares will vary from time
to time depending on market conditions, the composition of
the Funds' portfolios, and expenses borne by the Funds or
borne separately by a class (if more than one class of
shares are outstanding). Dividends are calculated in the
same manner, at the same time, and on the same day for each
class of shares. However, if and when Class 2 shares are
ever issued, dividends on Class 2 shares are expected to be
lower. That is because of the effect of the service fee on
Class 2 shares. Those dividends will also differ in amount
as a consequence of any difference in the net asset values
of the different classes of shares.
Tax Status of the Fund's Dividends and Distributions. The federal tax
treatment of the Funds' dividends and capital gains distributions is
briefly highlighted in the Prospectus, and may also be explained in
the prospectus for the insurance product you have selected.
The Funds intend to qualify as a "regulated investment
company" under the Internal Revenue Code (although it
reserves the right not to qualify). If the Funds qualify as
"regulated investment companies" under the Internal Revenue
Code, they will not be liable for federal income taxes on
amounts paid by it as dividends and distributions. The Funds
qualified as regulated investment companies in its last
fiscal year. The Internal Revenue Code contains a number of
complex tests relating to qualification which the Funds
might not meet in any particular year. If it did not so
qualify, the Funds would be treated for tax purposes as an
ordinary corporation and receive no tax deduction for
payments made to shareholders.
Additional Information About the Funds
The Transfer Agent. OppenheimerFunds Services, Inc., the Fund's
Transfer Agent, is a division of the Manager. It is responsible for
maintaining the Fund's shareholder registry and shareholder accounting
records, and for paying dividends and distributions to shareholders of
record (the participating insurance companies that hold shares in
their separate accounts). It also handles administrative functions. It
acts on an "at-cost" basis. It also acts as shareholder servicing
agent for the other Oppenheimer funds. Contract owners should refer
inquiries about their accounts as directed by the instructions in the
prospectus of their insurance product.
The Custodian Bank. The Bank of New York is the custodian bank for the
Funds' assets. The custodian bank's responsibilities include
safeguarding and controlling the Fund's portfolio securities and
handling the delivery of such securities to and from the Funds. It
will be the practice of the Funds to deal with the custodian bank in a
manner uninfluenced by any banking relationship the custodian bank may
have with the Manager and its affiliates. The Funds' cash balances
with the custodian bank in excess of $100,000 are not protected by
Federal deposit insurance. Those uninsured balances at times may be
substantial.
Independent Auditors. Deloitte & Touche LLP are the independent
auditors of the Funds. They audit the Funds' financial statements and
perform other related audit services. They also act as auditors for
certain other funds advised by the Manager and its affiliates.
<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 Aggressive Growth Fund (formerly
Oppenheimer Capital Appreciation Fund), Oppenheimer Growth Fund, Oppenheimer
Multiple Strategies Fund, Oppenheimer Global Securities Fund, Oppenheimer
Strategic Bond Fund, Oppenheimer Growth & Income Fund and Oppenheimer Small Cap
Growth Fund (all of which are series of Oppenheimer Variable Account Funds) as
of December 31, 1998, the related statements of operations for the year then
ended, the statements of changes in net assets for the years ended December 31,
1998 and 1997, and the financial highlights for the applicable periods ended
December 31, 1998, 1997, 1996, 1995 and 1994. 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 as of
December 31, 1998 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
Aggressive Growth Fund, Oppenheimer Growth Fund, Oppenheimer Multiple Strategies
Fund, Oppenheimer Global Securities Fund, Oppenheimer Strategic Bond Fund,
Oppenheimer Growth & Income Fund and Oppenheimer Small Cap Growth Fund as of
December 31, 1998, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods, in conformity
with generally accepted accounting principles.
- ---------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 25, 1999
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT NOTE 1
- -------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS - 1.2%
- -------------------------------------------------------------------------------------------
Repurchase agreement with PaineWebber, Inc., 6.25%, dated
12/31/98, to be repurchased at $1,801,250 on 1/4/99,
collateralized by Federal National Mortgage Assn.
Participation Nts., 6% 12/1/13, with a value of $1,842,032 $ 1,800,000 $ 1,800,000
- -------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 2.0%
- -------------------------------------------------------------------------------------------
Societe Generale, 5.80%, 3/31/99 3,000,000 3,000,215
- -------------------------------------------------------------------------------------------
LETTERS OF CREDIT - 9.6%
- -------------------------------------------------------------------------------------------
Abbey National plc, guaranteeing commercial paper of Abbey
National North America Corp., 5.50%, 2/4/99 3,500,000 3,481,820
- -------------------------------------------------------------------------------------------
Bank of America, NT & SA, guaranteeing commercial paper of
Minmetals Capitals & Securities, Inc., 4.95%, 3/8/99 4,000,000 3,963,700
- -------------------------------------------------------------------------------------------
Barclays Bank plc, guaranteeing commercial paper of:
Banca Serfin, SA, Institucion de Banca Multiple, Grupo
Financiero Serfin, Nassau Branch, 5.42%, 5/26/99 1,500,000 1,467,254
Pactual Overseas Corp., 5.05%, 5/14/99 2,750,000 2,698,693
- -------------------------------------------------------------------------------------------
Bayerische Veriensbank AG, guaranteeing commercial paper of
Unibanco-Uniao de Bancos Brasileiros, Series D, 5.05%,
4/16/99 3,000,000 2,955,813
---------------
Total Letters of Credit 14,567,280
- -------------------------------------------------------------------------------------------
SHORT-TERM NOTES - 86.9%
- -------------------------------------------------------------------------------------------
ASSET-BACKED - 11.1%
Atlantis One Funding Corp., 5.20%, 5/14/99(1) 2,500,000 2,451,326
- -------------------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers, Inc.:
Series A, 4.92%, 4/21/99 1,500,000 1,477,450
Series B, 4.92%, 4/23/99 1,000,000 984,693
- -------------------------------------------------------------------------------------------
Park Avenue Receivables Corp., 5.60%, 1/13/99(1) 4,000,000 3,992,600
- -------------------------------------------------------------------------------------------
Preferred Receivables Funding Corp., 4.93%, 6/21/99(1) 3,000,000 2,929,890
- -------------------------------------------------------------------------------------------
Sigma Finance, Inc.:
5.50%, 1/29/99(1) 2,500,000 2,489,500
5.50%, 2/12/99(1) 2,500,000 2,483,958
---------------
16,809,417
- -------------------------------------------------------------------------------------------
BANK HOLDING COMPANIES - 4.5%
Bankers Trust Co., New York:
5.01%, 7/15/99 2,000,000 1,945,725
5.05%, 6/2/99 5,000,000 4,893,389
---------------
6,839,114
- -------------------------------------------------------------------------------------------
BEVERAGES - 2.3%
Coca-Cola Enterprises, Inc., 5.11%, 3/4/99(1) 3,500,000 3,469,198
- -------------------------------------------------------------------------------------------
BROKER/DEALERS - 17.5%
Bear Stearns Cos., Inc., 4.92%, 2/18/99(2) 2,000,000 2,000,000
- -------------------------------------------------------------------------------------------
Goldman Sachs Group, LP:
5%, 4/20/99 4,000,000 3,939,445
5.10%, 3/22/99 3,000,000 2,966,000
</TABLE>
21
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT NOTE 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------
BROKER/DEALERS (CONTINUED)
Lehman Brothers Holdings, Inc., 5.495%, 2/25/99 $ 1,000,000 $ 991,605
- -------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.:
5.50%, 2/26/99 3,000,000 2,974,333
5.51%, 2/12/99 2,500,000 2,483,929
- -------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 5.50%, 1/4/99(2) 4,300,000 4,300,000
- -------------------------------------------------------------------------------------------
NationsBanc Montgomery Securities, LLC, 5.70%, 1/4/99(2) 5,000,000 5,000,000
- -------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc., 5.15%, 2/18/99 2,000,000 1,986,267
---------------
26,641,579
- -------------------------------------------------------------------------------------------
COMMERCIAL FINANCE - 12.6%
Countrywide Home Loans:
5.25%, 2/27/99(2) 1,200,000 1,200,000
5.50%, 1/8/99 4,000,000 3,995,722
- -------------------------------------------------------------------------------------------
FINOVA Capital Corp.:
5.32%, 5/7/99 2,300,000 2,257,174
5.33%, 2/26/99 1,250,000 1,239,597
5.38%, 5/21/99 1,000,000 979,311
- -------------------------------------------------------------------------------------------
Heller Financial, Inc.:
5.289%, 1/11/99(2) 1,500,000 1,500,000
6.51%, 9/20/99 2,080,000 2,095,221
- -------------------------------------------------------------------------------------------
Safeco Cedit Co., 4.95%, 6/11/99 2,000,000 1,955,725
- -------------------------------------------------------------------------------------------
TransAmerica Finance Corp., 5.11%, 3/1/99 4,000,000 3,966,501
---------------
19,189,251
- -------------------------------------------------------------------------------------------
CONSUMER FINANCE - 2.6%
Sears Roebuck Acceptance Corp., 4.90%, 6/23/99 4,000,000 3,905,811
- -------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 7.5%
General Motors Acceptance Corp.:
5.48%, 1/28/99 3,000,000 2,987,603
5.50%, 2/19/99 1,500,000 1,488,771
- -------------------------------------------------------------------------------------------
Household Finance Corp., 4.948%, 3/29/99(2) 5,000,000 4,999,178
- -------------------------------------------------------------------------------------------
Household International, Inc., 5.21%, 2/3/99(1) 2,000,000 1,990,448
---------------
11,466,000
- -------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 4.6%
Atlas Copco AB:
5.27%, 4/21/99(1) 3,000,000 2,951,692
5.42%, 1/19/99(1) 4,000,000 3,989,160
---------------
6,940,852
- -------------------------------------------------------------------------------------------
INSURANCE - 17.8%
AIG Life Insurance Co., 5.62%, 1/4/99(2)(3) 3,000,000 3,000,000
- -------------------------------------------------------------------------------------------
General American Life Insurance Co., 5.24%, 1/4/99(2) 5,000,000 5,000,000
- -------------------------------------------------------------------------------------------
Pacific Life Insurance Co., 4.73%, 1/4/99(2)(3) 5,000,000 5,000,000
- -------------------------------------------------------------------------------------------
Protective Life Insurance Co., 5.577%, 1/4/99(2) 5,000,000 5,000,000
- -------------------------------------------------------------------------------------------
Safeco Corp., 4.90%, 6/17/99 2,000,000 1,954,539
- -------------------------------------------------------------------------------------------
Security Benefit Life Insurance Co., 5.577%, 1/4/99(2) 5,000,000 5,000,000
</TABLE>
22
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT NOTE 1
- -------------------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE (CONTINUED)
Travelers Insurance Co., 5.034%, 1/4/99(2)(3) $ 2,000,000 $ 2,000,000
---------------
26,954,539
- -------------------------------------------------------------------------------------------
LEASING & FACTORING - 4.4%
American Honda Finance Corp., 5.219%, 1/20/99(2)(4) 3,000,000 3,000,000
- -------------------------------------------------------------------------------------------
International Lease Finance Corp., 6.625%, 4/1/99 3,675,000 3,685,758
---------------
6,685,758
- -------------------------------------------------------------------------------------------
SPECIAL PURPOSE FINANCIAL - 2.0%
SMM Trust, Series 1998-I, 5.624%, 5/28/99(2)(3) 3,000,000 3,000,000
---------------
Total Short-Term Notes 131,901,519
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE 99.7% 151,269,014
- -------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.3 529,786
----------- ---------------
NET ASSETS 100.0% $ 151,798,800
----------- ---------------
----------- ---------------
</TABLE>
Short-term notes 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. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $26,747,772, or 17.62% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
2. 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, 1998. This instrument may
also have a demand feature which allows, on up to 30 days' notice, the recovery
of principal at any time, or at specified intervals not exceeding one year.
Maturity date shown represents effective maturity based on variable rate and, if
applicable, demand feature.
3. Identifies issues considered to be illiquid or restricted -- See applicable
note of Notes to Financial Statements.
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 $3,000,000, or 1.98% of the Fund's net
assets as of December 31, 1998.
See accompanying Notes to Financial Statements.
23
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- -------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 2.5%
- -------------------------------------------------------------------------
AMRESCO Commercial Mortgage Funding
I Corp., Multiclass Mtg.
Pass-Through Certificates, Series
1997-C1, Cl. H, 7%, 6/17/29(2) $ 200,000 $ 137,562
- -------------------------------------------------------------------------
Asset Securitization Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1997-D4:
Cl. B1, 7.525%, 4/14/29(3) 167,000 133,913
Cl. B2, 7.525%, 4/14/29(3) 167,000 129,477
Cl. B3, 7.525%, 4/14/29(3) 166,000 117,186
- -------------------------------------------------------------------------
CBA Mortgage Corp., Mtg.
Pass-Through Certificates, Series
1993-C1:
Cl. E, 7.76%, 12/25/03(2)(3) 250,000 232,969
Cl. F, 7.76%, 12/25/03(2)(3) 700,000 571,594
- -------------------------------------------------------------------------
CS First Boston Mortgage Securities
Corp., Mtg. Pass-Through
Certificates, Series 1997-C1:
Cl. F, 7.50%, 6/20/13(2) 300,000 233,906
Cl. G, 7.50%, 6/20/14(2) 500,000 357,969
Cl. H, 7.50%, 8/20/14(2) 225,000 154,406
- -------------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1,
8.098%, 2/25/11-5/25/08(2)(3) 1,800,000 1,423,500
- -------------------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl.
E, 7.436%, 3/15/06(2)(3) 835,342 781,567
- -------------------------------------------------------------------------
Mortgage Capital Funding, Inc.,
Commercial Mtg. Pass-Through
Certificates, Series 1997-MC1, Cl.
F, 7.452%, 5/20/07(2) 254,890 211,768
- -------------------------------------------------------------------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates:
Series 1994-C1, Cl. E, 8%, 6/25/26 638,732 629,102
Series 1994-C2, Cl. G, 8%, 4/25/25 702,303 684,746
Series 1995-C1, Cl. F, 6.90%,
2/25/27 574,328 537,401
- -------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Series 1996-B, Cl.
1, 7.132%, 4/25/26(2) 1,452,915 1,072,433
- -------------------------------------------------------------------------
Structured Asset Securities Corp.,
Multiclass Pass-Through
Certificates, Series 1996-C3, Cl.
E, 8.458%, 6/25/30(4) 650,000 628,977
---------------
Total Mortgage-Backed Obligations
(Cost $7,948,598) 8,038,476
</TABLE>
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS -
2.2%
- -------------------------------------------------------------------------
Argentina (Republic of) Bonds,
Bonos de Consolidacion de Deudas,
Series I, 3.011%, 4/1/07(3)(ARP) 2,880,683 1,856,930
- -------------------------------------------------------------------------
Brazil (Federal Republic of)
Capitalization Bonds, 8%, 4/15/14 588,810 351,814
- -------------------------------------------------------------------------
Brazil (Federal Republic of)
Eligible Interest Bonds, 6.125%,
4/15/06(3) 1,056,000 681,120
- -------------------------------------------------------------------------
Bulgaria (Republic of) Front-Loaded
Interest Reduction Bearer Bonds,
Tranche A, 2.50%, 7/28/12(5) 500,000 286,250
- -------------------------------------------------------------------------
Bulgaria (Republic of) Interest
Arrears Bonds, 6.688%, 7/28/11(3) 1,450,000 975,125
- -------------------------------------------------------------------------
Germany (Republic of) Treasury
Bills, Zero Coupon, 3.404%,
1/15/99(6)(DEM) 3,000,000 1,799,162
- -------------------------------------------------------------------------
Panama (Government of) Interest
Reduction Bonds, 4%, 7/17/14(5) 275,000 205,563
- -------------------------------------------------------------------------
Peru (Republic of) Past Due
Interest Bonds, Series 20 yr., 4%,
3/7/17(5) 400,000 252,000
</TABLE>
24
<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>
FOREIGN GOVERNMENT OBLIGATIONS
(CONTINUED)
- -------------------------------------------------------------------------
Philippines (Republic of) Debs.,
6%, 12/1/09(3) $ 149,600 $ 122,298
- -------------------------------------------------------------------------
PT Hutama Karya Promissory Nts.,
Zero Coupon, 2/10/98 (2)(7)(IDR) 1,000,000,000 31,250
- -------------------------------------------------------------------------
Russia (Government of) Debs.,
5.969%, 12/15/15(3) 17,680 1,956
- -------------------------------------------------------------------------
Russia (Government of) Principal
Loan Debs., Series 24 yr., 5.969%,
12/15/20(3) 1,050,000 64,982
- -------------------------------------------------------------------------
United Mexican States Sr. Nts.,
8.625%, 3/12/08 500,000 463,750
---------------
Total Foreign Government
Obligations (Cost $7,573,982) 7,092,200
- -------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 77.1%
- -------------------------------------------------------------------------
AEROSPACE/DEFENSE - 3.5%
America West Airlines, Inc., 10.75%
Sr. Nts., 9/1/05 1,000,000 1,045,000
- -------------------------------------------------------------------------
Amtran, Inc.:
9.625% Nts., 12/15/05 800,000 804,000
10.50% Sr. Nts., 8/1/04 700,000 731,500
- -------------------------------------------------------------------------
Atlas Air, Inc.:
9.25% Sr. Nts., 4/15/08(2) 1,325,000 1,328,312
9.375% Sr. Nts., 11/15/06(4) 1,000,000 1,025,000
10.75% Sr. Nts., 8/1/05 700,000 738,500
- -------------------------------------------------------------------------
BE Aerospace, Inc., 9.50% Sr. Sub.
Nts., 11/1/08(4) 1,840,000 1,959,600
- -------------------------------------------------------------------------
Constellation Finance LLC, 9.80%
Airline Receivable Asset-Backed
Nts., Series 1997-1, 1/1/01(2) 800,000 784,000
- -------------------------------------------------------------------------
Decrane Aircraft Holdings, Inc.,
Units (each unit consists of $1,000
principal amount of 12% sr. sub.
nts., 9/30/08 and one warrant to
purchase 1.55 shares of common
stock)(4)(8) 1,750,000 1,758,750
- -------------------------------------------------------------------------
Pegasus Aircraft Lease
Securitization Trust, 11.76% Sr.
Nts., Series 1997-A, Cl. B,
6/15/04(2) 317,051 338,104
- -------------------------------------------------------------------------
Trans World Airlines Lease, 14%
Equipment Trust, 7/2/08(2) 855,765 847,208
---------------
11,359,974
- -------------------------------------------------------------------------
CHEMICALS - 1.5%
Brunner Mond Group plc, 12.50% Sr.
Sub. Nts., 7/15/08(4)(GBP) 1,200,000 1,840,381
- -------------------------------------------------------------------------
ClimaChem, Inc., 10.75% Sr. Unsec.
Nts., Series B, 12/1/07 500,000 505,000
- -------------------------------------------------------------------------
ICO, Inc., 10.375% Sr. Nts., 6/1/07 275,000 257,125
- -------------------------------------------------------------------------
Laroche Industries, Inc., 9.50% Sr.
Sub. Nts., Series B, 9/15/07 330,000 265,650
- -------------------------------------------------------------------------
PCI Chemicals Canada, Inc., 9.25%
Sec. Nts., 10/15/07 500,000 387,500
- -------------------------------------------------------------------------
Pioneer Americas Acquisition Corp.,
9.25% Sr. Nts., 6/15/07 400,000 322,000
- -------------------------------------------------------------------------
Sovereign Specialty Chemicals,
Inc., 9.50% Sr. Unsec. Sub. Nts.,
Series B, 8/1/07 795,000 810,900
- -------------------------------------------------------------------------
Sterling Chemicals, Inc., 11.25%
Sr. Sub. Nts., 4/1/07 250,000 211,250
- -------------------------------------------------------------------------
Texas Petrochemicals Corp., 11.125%
Sr. Sub. Nts., 7/1/06 280,000 277,200
---------------
4,877,006
- -------------------------------------------------------------------------
CONSUMER DURABLES - 0.3%
Holmes Products Corp., 9.875% Sr.
Unsec. Sub. Nts., Series B,
11/15/07 425,000 403,750
</TABLE>
25
<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 DURABLES (CONTINUED)
TAG Heuer International SA, 12% Sr.
Sub. Nts., 12/15/05(2) $ 350,000 $ 406,353
---------------
810,103
- -------------------------------------------------------------------------
CONSUMER NON-DURABLES - 3.0%
AKI Holdings, Inc.:
0%/13.50% Sr. Disc. Debs.,
7/1/09(4)(9) 1,080,000 426,600
10.50% Sr. Nts., 7/1/08(4) 1,000,000 955,000
- -------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr.
Sub. Nts., Series B, 11/15/05 880,000 506,000
- -------------------------------------------------------------------------
Bell Sports, Inc., 11% Sr. Sub.
Nts., 8/15/08(4) 900,000 918,000
- -------------------------------------------------------------------------
Globe Manufacturing, Inc., 10% Sr.
Sub. Nts., 8/1/08(4) 900,000 819,000
- -------------------------------------------------------------------------
Phillips-Van Heusen Corp., 9.50%
Sr. Unsec. Sub. Nts., 5/1/08 720,000 723,600
- -------------------------------------------------------------------------
Revlon Consumer Products Corp.:
8.625% Sr. Unsec. Sub. Nts., 2/1/08 2,200,000 2,013,000
9% Sr. Nts., 11/1/06(4) 1,000,000 1,000,000
- -------------------------------------------------------------------------
Revlon Worldwide Corp., Zero Coupon
Sr. Sec. Disc. Nts., Series B,
11.41%, 3/15/01(6) 1,250,000 718,750
- -------------------------------------------------------------------------
Salton/Maxim Housewares, Inc.,
10.75% Sr. Sub. Nts., 12/15/05(4) 1,000,000 1,011,250
- -------------------------------------------------------------------------
Styling Technology Corp., 10.875%
Sr. Sub. Nts., 7/1/08 600,000 573,000
- -------------------------------------------------------------------------
William Carter Co., 10.375% Sr.
Sub. Nts., Series A, 12/1/06 235,000 249,100
---------------
9,913,300
- -------------------------------------------------------------------------
ENERGY - 4.0%
AEI Resources, Inc., 11.50% Sr.
Sub. Nts., 12/15/06(4) 750,000 744,375
- -------------------------------------------------------------------------
Belden & Blake Corp., 9.875% Sr.
Sub. Nts., 6/15/07 480,000 391,200
- -------------------------------------------------------------------------
Clark Refinancing & Marketing,
Inc., 8.875% Sr. Sub. Nts.,
11/15/07 1,040,000 930,800
- -------------------------------------------------------------------------
Clark USA, Inc., 10.875% Sr. Nts.,
Series B, 12/1/05 275,000 254,375
- -------------------------------------------------------------------------
Dailey International, Inc., 9.50%
Sr. Unsec. Nts., Series B, 2/15/08 800,000 356,000
- -------------------------------------------------------------------------
Denbury Management, Inc., 9% Sr.
Sub. Nts., 3/1/08 800,000 676,000
- -------------------------------------------------------------------------
Empresa Electric Del Norte, 10.50%
Sr. Debs., 6/15/05(4) 1,000,000 685,000
- -------------------------------------------------------------------------
Gothic Production Corp., 11.125%
Sr. Sec. Nts., Series B, 5/1/05(4) 500,000 392,500
- -------------------------------------------------------------------------
Grant Geophysical, Inc., 9.75% Sr.
Unsec. Nts., Series B, 2/15/08 1,025,000 702,125
- -------------------------------------------------------------------------
National Energy Group, Inc., 10.75%
Sr. Nts., Series D, 11/1/06(7) 810,000 303,750
- -------------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr.
Sec. Nts., 6/1/08 1,420,000 1,143,100
- -------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr.
Sub. Nts., Series B, 5/15/08 1,800,000 1,827,000
- -------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.,
9.375% Sr. Sub. Debs., 2/1/06 1,175,000 1,104,500
- -------------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub.
Nts., 5/15/07 800,000 744,000
- -------------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec.
Nts., 2/15/08 1,060,000 747,300
- -------------------------------------------------------------------------
Statia Terminals
International/Statia Terminals
(Canada), Inc., 11.75% First Mtg.
Nts., Series B, 11/15/03 225,000 226,125
- -------------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub.
Nts., 9/15/07 735,000 712,950
- -------------------------------------------------------------------------
Universal Compression Holdings,
Inc.:
0%/9.875% Sr. Disc. Nts.,
2/15/08(9) 1,325,000 801,625
</TABLE>
26
<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>
ENERGY (CONTINUED)
Universal Compression Holdings,
Inc.: (Continued)
0%/11.375% Sr. Disc. Nts.,
2/15/09(9) $ 720,000 $ 432,000
---------------
13,174,725
- -------------------------------------------------------------------------
FINANCIAL - 1.5%
Bakrie Investindo, Zero Coupon
Promissory Nts., 3/26/98(2)(7)(IDR) 1,000,000,000 31,250
- -------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts.,
7/18/07 517,000 416,185
- -------------------------------------------------------------------------
CB Richard Ellis Services, Inc.,
8.875% Sr. Unsec. Sub. Nts., 6/1/06 900,000 886,500
- -------------------------------------------------------------------------
ECM Fund, L.P. I., 14% Sub. Nts.,
6/10/02(2) 36,714 36,807
- -------------------------------------------------------------------------
Local Financial Corp., 11% Sr.
Nts., 9/8/04(4) 800,000 812,000
- -------------------------------------------------------------------------
Ocwen Capital Trust I, 10.875%
Capital Nts., 8/1/27 450,000 362,250
- -------------------------------------------------------------------------
PT Polysindo Eka Perkasa, 24% Nts.,
6/19/03(IDR) 657,200,000 9,858
- -------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment
Trust, 9.75% Sr. Sec. Nts., Series
B, 4/1/08 2,000,000 1,870,000
- -------------------------------------------------------------------------
Southern Pacific Funding Corp.,
11.50% Sr. Nts., 11/1/04(7) 300,000 81,000
- -------------------------------------------------------------------------
Veritas Capital Trust, 10% Nts.,
1/1/28 550,000 496,375
---------------
5,002,225
- -------------------------------------------------------------------------
FOOD & DRUG - 1.7%
Fleming Cos., Inc.:
10.50% Sr. Sub. Nts., Series B,
12/1/04 300,000 285,000
10.625% Sr. Sub. Nts., Series B,
7/31/07 1,135,000 1,064,062
- -------------------------------------------------------------------------
Pathmark Stores, Inc.:
0%/10.75% Jr. Sub. Deferred Coupon
Nts., 11/1/03(9) 2,710,000 2,235,750
12.625% Sub. Nts., 6/15/02 900,000 882,000
- -------------------------------------------------------------------------
Randall's Food Markets, Inc.,
9.375% Sr. Sub. Nts., Series B,
7/1/07 1,060,000 1,152,750
---------------
5,619,562
- -------------------------------------------------------------------------
FOOD/TOBACCO - 1.6%
Aurora Foods, Inc., 8.75% Sr. Sub.
Nts., Series B, 7/1/08 520,000 543,400
- -------------------------------------------------------------------------
Del Monte Foods Co., 0%/12.50% Sr.
Disc. Nts., Series B, 12/15/07(9) 750,000 517,500
- -------------------------------------------------------------------------
Packaged Ice, Inc., 9.75% Sr.
Unsec. Nts., Series B, 2/1/05 1,600,000 1,608,000
- -------------------------------------------------------------------------
Purina Mills, Inc., 9% Sr. Unsec.
Sub. Nts., 3/15/10 400,000 410,000
- -------------------------------------------------------------------------
SmithField Foods, Inc., 7.625% Sr.
Unsec. Sub. Nts., 2/15/08 925,000 934,250
- -------------------------------------------------------------------------
Sparkling Spring Water Group Ltd.,
11.50% Sr. Sec. Sub. Nts., 11/15/07 1,175,000 1,139,750
---------------
5,152,900
- -------------------------------------------------------------------------
FOREST PRODUCTS/CONTAINERS - 1.0%
Ball Corp.:
7.75% Sr. Nts., 8/1/06(4) 700,000 735,000
8.25% Sr. Sub. Nts., 8/1/08(4) 800,000 836,000
- -------------------------------------------------------------------------
Four M Corp., 12% Sr. Sec. Nts.,
Series B, 6/1/06 190,000 141,550
- -------------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07 1,330,000 1,323,350
10.875% Sr. Sub. Nts., 4/1/08 200,000 182,000
</TABLE>
27
<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>
FOREST PRODUCTS/CONTAINERS
(CONTINUED)
SF Holdings Group, Inc., 0%/12.75%
Sr. Disc. Nts., 3/15/08(9) $ 600,000 $ 213,000
---------------
3,430,900
- -------------------------------------------------------------------------
GAMING/LEISURE - 5.5%
AP Holdings, Inc., 0%/11.25% Sr.
Disc. Nts., 3/15/08(9) 450,000 245,250
- -------------------------------------------------------------------------
Apcoa, Inc., 9.25% Sr. Unsec. Sub.
Nts., 3/15/08 940,000 869,500
- -------------------------------------------------------------------------
Capital Gaming International, Inc.,
11.50% Promissory Nts., 8/1/95(7) 9,500 --
- -------------------------------------------------------------------------
Capstar Hotel Co., 8.75% Sr. Sub.
Nts., 8/15/07 840,000 823,200
- -------------------------------------------------------------------------
Empress Entertainment, Inc., 8.125%
Sr. Sub. Nts., 7/1/06 500,000 500,000
- -------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% First
Mtg. Sec. Nts., 12/1/03 630,000 689,850
- -------------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr.
Sub. Nts., 4/1/05 1,600,000 1,608,000
- -------------------------------------------------------------------------
Harveys Casino Resorts, 10.625% Sr.
Unsec. Sub. Nts., 6/1/06 120,000 130,200
- -------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr.
Sub. Nts., 6/15/07 1,300,000 1,348,750
- -------------------------------------------------------------------------
Intrawest Corp.:
9.75% Sr. Nts., 8/15/08 900,000 927,000
9.75% Sr. Unsec. Nts., 8/15/08(4) 600,000 618,000
- -------------------------------------------------------------------------
Mohegan Tribal Gaming Authority
(Connecticut), 13.50% Sr. Sec.
Nts., Series B, 11/15/02 725,000 873,625
- -------------------------------------------------------------------------
Outboard Marine Corp., 10.75% Sr.
Nts., 6/1/08(4) 590,000 578,200
- -------------------------------------------------------------------------
Park Place Entertainment Corp.,
7.875% Sr. Sub. Nts., 12/15/05(4) 800,000 805,000
- -------------------------------------------------------------------------
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts., 4/1/08(9) 1,200,000 819,000
9.25% Sr. Nts., 4/1/06 600,000 623,250
- -------------------------------------------------------------------------
Rio Hotel & Casino, Inc.:
9.50% Sr. Sub. Nts., 4/15/07 1,000,000 1,110,000
10.625% Sr. Sub. Nts., 7/15/05 125,000 136,875
- -------------------------------------------------------------------------
Showboat Marina Casino
Partnership/Showboat Marina Finance
Corp., 13.50% First Mtg. Nts.,
Series B, 3/15/03 1,125,000 1,276,875
- -------------------------------------------------------------------------
Six Flags Entertainment Corp.,
8.875% Sr. Nts., 4/1/06 1,000,000 1,031,250
- -------------------------------------------------------------------------
Station Casinos, Inc.:
8.875% Sr. Sub. Nts., 12/1/08(4) 1,250,000 1,275,000
9.625% Sr. Sub. Nts., 6/1/03 200,000 207,220
9.75% Sr. Sub. Nts., 4/15/07 800,000 840,000
10.125% Sr. Sub. Nts., 3/15/06 800,000 842,000
---------------
18,178,045
- -------------------------------------------------------------------------
HEALTHCARE - 2.1%
Fresenius Medical Care Capital
Trust II, 7.875% Nts., 2/1/08 1,300,000 1,287,000
- -------------------------------------------------------------------------
Fresenius Medical Care Capital
Trust III, 7.375% Nts., 2/1/08(DEM) 1,225,000 775,957
- -------------------------------------------------------------------------
ICN Pharmaceutical, Inc., 8.75% Sr.
Nts., 11/15/08(4) 1,065,000 1,080,975
- -------------------------------------------------------------------------
Integrated Health Services, Inc.:
9.25% Sr. Sub. Nts., Series A,
1/15/08 90,000 84,600
9.50% Sr. Sub. Nts., 9/15/07 760,000 725,800
10.25% Sr. Sub. Nts., 4/30/06 35,000 34,475
- -------------------------------------------------------------------------
Magellan Health Services, Inc., 9%
Sr. Sub. Nts., 2/15/08 1,000,000 885,000
</TABLE>
28
<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>
HEALTHCARE (CONTINUED)
Oxford Health Plans, Inc., 11% Sr.
Nts., 5/15/05(4) $ 1,200,000 $ 1,134,000
- -------------------------------------------------------------------------
Sun Healthcare Group, Inc., 9.50%
Sr. Sub. Nts., 7/1/07 635,000 517,525
- -------------------------------------------------------------------------
Tenet Healthcare Corp., 8.125% Sr.
Sub. Nts., 12/1/08(4) 250,000 257,500
---------------
6,782,832
- -------------------------------------------------------------------------
HOUSING - 1.1%
Engle Homes, Inc., 9.25% Sr. Unsec.
Nts., Series C, 2/1/08 1,300,000 1,306,500
- -------------------------------------------------------------------------
Nortek, Inc.:
8.875% Sr. Nts., 8/1/08(4) 250,000 256,250
9.125% Sr. Nts., Series B, 9/1/07 1,400,000 1,449,000
9.25% Sr. Nts., Series B, 3/15/07 625,000 643,750
---------------
3,655,500
- -------------------------------------------------------------------------
INFORMATION TECHNOLOGY - 1.2%
Covad Communications Group, Inc.,
0%/13.50% Sr. Disc. Nts.,
3/15/08(9) 900,000 499,500
- -------------------------------------------------------------------------
Details, Inc., 10% Sr. Sub. Nts.,
Series B, 11/15/05 1,125,000 1,074,375
- -------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts.,
3/1/07 625,000 628,125
- -------------------------------------------------------------------------
Unisys Corp., 11.75% Sr. Nts.,
10/15/04 275,000 320,375
- -------------------------------------------------------------------------
WAM!NET, Inc., 0%/13.25% Sr. Unsec.
Disc. Nts., Series B, 3/1/05(9) 1,750,000 962,500
- -------------------------------------------------------------------------
Wavetek Corp., 10.125% Sr. Sub.
Nts., 6/15/07 500,000 477,500
---------------
3,962,375
- -------------------------------------------------------------------------
MANUFACTURING - 2.8%
American Standard Cos., Inc.,
7.625% Sr. Nts., 2/15/10(10) 1,500,000 1,507,500
- -------------------------------------------------------------------------
Axia, Inc. (New), 10.75% Sr. Sub.
Nts., 7/15/08 420,000 428,400
- -------------------------------------------------------------------------
Burke Industries, Inc., 10% Sr.
Sub. Nts., 8/15/07 400,000 390,000
- -------------------------------------------------------------------------
Eagle-Picher Industries, Inc.,
9.375% Sr. Unsec. Sub. Nts., 3/1/08 850,000 803,250
- -------------------------------------------------------------------------
Grove Worldwide LLC, 9.25% Sr. Sub.
Nts., 5/1/08 635,000 574,675
- -------------------------------------------------------------------------
Hydrochem Industrial Services,
Inc., 10.375% Sr. Sub. Nts., 8/1/07 725,000 692,375
- -------------------------------------------------------------------------
Insilco Corp., Units (each unit
consists of $1,000 principal amount
of 12% Sr. Sub. Nts., 8/15/07 and
one warrant to purchase 0.52 shares
of common stock)(4)(8) 765,000 795,600
- -------------------------------------------------------------------------
International Wire Group, Inc.,
11.75% Sr. Sub. Nts., Series B,
6/1/05 500,000 528,750
- -------------------------------------------------------------------------
MOLL Industries, Inc., 10.50% Sr.
Sub. Nts., 7/1/08(4) 560,000 551,600
- -------------------------------------------------------------------------
Polymer Group, Inc.:
8.75% Sr. Sub. Nts., 3/1/08 1,500,000 1,481,250
9% Sr. Sub. Nts., 7/1/07 250,000 248,750
- -------------------------------------------------------------------------
Roller Bearing Co. of America,
Inc., 9.625% Sr. Sub. Nts., Series
B, 6/15/07 560,000 546,000
- -------------------------------------------------------------------------
Terex Corp., 8.875% Sr. Unsec. Sub.
Nts., 4/1/08 630,000 620,550
---------------
9,168,700
- -------------------------------------------------------------------------
MEDIA/ENTERTAINMENT-BROADCASTING -
2.3%
Capstar Broadcasting Partners,
Inc., 9.25% Sr. Sub. Nts., 7/1/07 915,000 951,600
</TABLE>
29
<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>
MEDIA/ENTERTAINMENT-BROADCASTING
(CONTINUED)
Chancellor Media Corp.:
8.75% Sr. Unsec. Sub. Nts., Series
B, 6/15/07 $ 975,000 $ 1,004,250
9% Sr. Sub. Nts., 10/1/08(4) 2,200,000 2,332,000
10.50% Sr. Sub. Nts., Series B,
1/15/07 450,000 495,000
- -------------------------------------------------------------------------
Jacor Communications, Inc., 8% Sr.
Sub. Nts., 2/15/10 1,180,000 1,250,800
- -------------------------------------------------------------------------
Radio One, Inc., 7% Sr. Sub. Nts.,
Series B, 5/15/04(5) 400,000 402,000
- -------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 9%
Sr. Unsec. Sub. Nts., 7/15/07 1,085,000 1,112,125
- -------------------------------------------------------------------------
Spanish Broadcasting Systems, Inc.,
11% Sr. Nts., 3/15/04 25,000 26,625
---------------
7,574,400
- -------------------------------------------------------------------------
MEDIA/ENTERTAINMENT-CABLE/WIRELESS
VIDEO - 5.0%
Adelphia Communications Corp.:
8.125% Sr. Nts., Series B, 7/15/03 1,000,000 1,028,750
8.375% Sr. Nts., Series B, 2/1/08 1,000,000 1,037,500
9.25% Sr. Nts., 10/1/02 390,000 413,400
9.875% Sr. Nts., Series B, 3/1/07 140,000 155,400
10.50% Sr. Unsec. Nts., Series B,
7/15/04 340,000 382,500
- -------------------------------------------------------------------------
CSC Holdings, Inc.:
7.875% Sr. Unsec. Debs., 2/15/18 1,000,000 1,041,600
9.875% Sr. Sub. Debs., 4/1/23 1,000,000 1,117,500
9.875% Sr. Sub. Nts., 5/15/06 550,000 602,250
10.50% Sr. Sub. Debs., 5/15/16 250,000 295,000
- -------------------------------------------------------------------------
Diva Systems Corp., Units (each
unit consists of $1,000 principal
amount of 0%/12.625% sr. disc.
nts., 3/1/08 and three warrants to
purchase three shares of common
stock)(4)(8)(9) 500,000 207,500
- -------------------------------------------------------------------------
EchoStar Communications Corp.,
0%/12.875% Sr. Disc. Nts.,
6/1/04(9) 200,000 206,000
- -------------------------------------------------------------------------
EchoStar DBS Corp., 12.50% Sr. Sec.
Nts., 7/1/02 1,700,000 1,963,500
- -------------------------------------------------------------------------
EchoStar Satellite Broadcasting
Corp., 0%/13.125% Sr. Sec. Disc.
Nts., 3/15/04(9) 2,005,000 2,010,012
- -------------------------------------------------------------------------
Falcon Holding Group LP, 0%/9.285%
Sr. Disc. Debs., Series B,
4/15/10(9) 1,300,000 897,000
- -------------------------------------------------------------------------
Falcon Holding Group LP, 8.375% Sr.
Unsec. Debs., Series B, 4/15/10 2,200,000 2,288,000
- -------------------------------------------------------------------------
Helicon Group LP/Helicon Capital
Corp., 11% Sr. Sec. Nts., Series B,
11/1/03(3) 885,000 924,825
- -------------------------------------------------------------------------
Optel, Inc., 13% Sr. Nts., Series
B, 2/15/05 1,020,000 1,014,900
- -------------------------------------------------------------------------
Rogers Communications, Inc., 8.75%
Sr. Nts., 7/15/07(CAD) 500,000 315,299
- -------------------------------------------------------------------------
United International Holdings,
Inc., 0%/10.75% Sr. Disc. Nts.,
Series B, 2/15/08(9)(10) 1,040,000 566,800
---------------
16,467,736
- -------------------------------------------------------------------------
MEDIA/ENTERTAINMENT-DIVERSIFIED
MEDIA - 2.0%
Ackerley Group, Inc., 9% Sr. Sub.
Nts., 1/15/09(4) 1,250,000 1,275,000
- -------------------------------------------------------------------------
GSP I Corp., 10.15% First Mtg.
Bonds, 6/24/10(2) 452,782 461,956
- -------------------------------------------------------------------------
Hollywood Theaters, Inc., 10.625%
Sr. Sub. Nts., 8/1/07 225,000 167,062
- -------------------------------------------------------------------------
Regal Cinemas, Inc.:
8.875% Sr. Sub. Nts., 12/15/10(4) 1,250,000 1,246,875
</TABLE>
30
<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>
MEDIA/ENTERTAINMENT-DIVERSIFIED
MEDIA (CONTINUED)
Regal Cinemas, Inc.: (Continued)
9.50% Sr. Sub. Nts., 6/1/08(4) $ 750,000 $ 783,750
- -------------------------------------------------------------------------
SFX Entertainment, Inc.:
9.125% Sr. Sub. Nts., 12/1/08(4) 900,000 905,625
9.125% Sr. Unsec. Sub. Nts., Series
B, 2/1/08 1,800,000 1,791,000
---------------
6,631,268
- -------------------------------------------------------------------------
MEDIA/ENTERTAINMENT-TELECOMMUNICATIONS
- -16.3%
Amazon.Com, Inc., 0%/10% Sr. Unsec.
Disc. Nts., 5/1/08(9) 2,500,000 1,662,500
- -------------------------------------------------------------------------
COLT Telecom Group plc:
0%/12% Sr. Unsec. Disc. Nts.,
12/15/06(9) 225,000 190,125
7.625% Bonds, 7/31/08(DEM) 1,925,000 1,143,511
8.875% Sr. Nts., 11/30/07(DEM) 250,000 154,231
10.125% Sr. Nts., 11/30/07(GBP) 400,000 699,676
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 common
shares)(8)(9) 1,775,000 1,499,875
- -------------------------------------------------------------------------
Concentric Network Corp., 12.75%
Sr. Unsec. Nts., 12/15/07 800,000 820,000
- -------------------------------------------------------------------------
Convergent Communications, Inc.,
13% Sr. Nts., 4/1/08 800,000 388,000
- -------------------------------------------------------------------------
Diamond Cable Communications plc,
0%/11.75% Sr. Disc. Nts.,
12/15/05(9) 2,100,000 1,748,250
- -------------------------------------------------------------------------
Diamond Holdings plc, 9.125% Sr.
Nts., 2/1/08 400,000 384,000
- -------------------------------------------------------------------------
DTI Holdings, Inc., 0%/12.50% Sr.
Unsec. Disc. Nts., Series B,
3/1/08(9) 1,500,000 397,500
- -------------------------------------------------------------------------
e.spire Communications, Inc.,
13.75% Sr. Nts., 7/15/07 725,000 679,687
- -------------------------------------------------------------------------
Exodus Communications, Inc., 11.25%
Sr. Nts., 7/1/08 715,000 718,575
- -------------------------------------------------------------------------
FaciliCom International, Inc.,
10.50% Sr. Nts., Series B, 1/15/08 545,000 438,725
- -------------------------------------------------------------------------
FirstWorld Communications, Inc.,
0%/13% Sr. Disc. Nts., 4/15/08(9) 1,100,000 335,500
- -------------------------------------------------------------------------
Focal Communications Corp.,
0%/12.125% Sr. Unsec. Disc. Nts.,
2/15/08(9) 810,000 433,350
- -------------------------------------------------------------------------
Global Crossing Holdings Ltd.,
9.625% Sr. Nts., 5/15/08 950,000 1,011,750
- -------------------------------------------------------------------------
Globix Corp., 13% Sr. Unsec. Nts.,
5/1/05 1,800,000 1,485,000
- -------------------------------------------------------------------------
GST Telecommunications, Inc.:
0%/13.875% Cv. Sr. Sub. Disc. Nts.,
12/15/05(4)(9) 178,000 141,287
12.75% Sr. Sub. Nts., 11/15/07 1,250,000 1,168,750
- -------------------------------------------------------------------------
ICG Holdings, Inc.:
0%/10% Sr. Unsec. Disc. Nts.,
2/15/08(9) 1,220,000 652,700
0%/12.50% Sr. Sec. Disc. Nts.,
5/1/06(9) 115,000 86,250
0%/13.50% Sr. Disc. Nts.,
9/15/05(9) 980,000 813,400
- -------------------------------------------------------------------------
Intermedia Communications, Inc.:
8.60% Sr. Unsec. Nts., Series B,
6/1/08 905,000 864,275
8.875% Sr. Nts., 11/1/07 460,000 446,200
- -------------------------------------------------------------------------
ITC Deltacom, Inc.:
8.875% Sr. Nts., 3/1/08 1,000,000 980,000
11% Sr. Nts., 6/1/07 750,000 806,250
</TABLE>
31
<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>
MEDIA/ENTERTAINMENT-TELECOMMUNICATIONS
(CONTINUED)
KMC Telecom Holdings, Inc.,
0%/12.50% Sr. Unsec. Disc. Nts.,
2/15/08(9) $ 2,455,000 $ 1,190,675
- -------------------------------------------------------------------------
Level 3 Communications, Inc.:
0%/10.50% Sr. Disc. 12/1/08(4)(9) 900,000 528,750
9.125% Sr. Unsec. Nts., 5/1/08 2,000,000 1,985,000
- -------------------------------------------------------------------------
Long Distance International, Inc.,
12.25% Sr. Nts., 4/15/08(4) 800,000 668,000
- -------------------------------------------------------------------------
Metromedia Fiber Network, Inc., 10%
Sr. Nts., 11/15/08(4) 1,600,000 1,652,000
- -------------------------------------------------------------------------
Netia Holdings BV, 0%/11% Sr. Disc.
Nts., 11/1/07(9)(DEM) 700,000 240,615
- -------------------------------------------------------------------------
NEXTLINK Communications, Inc.:
0%/9.45% Sr. Disc. Unsec. Nts.,
4/15/08(9) 1,015,000 583,625
9% Sr. Nts., 3/15/08 800,000 756,000
9.625% Sr. Nts., 10/1/07 1,210,000 1,161,600
10.75% Sr. Nts., 11/15/08(4) 1,200,000 1,227,000
- -------------------------------------------------------------------------
NorthEast Optic Network, Inc.,
12.75% Sr. Nts., 8/15/08 750,000 738,750
- -------------------------------------------------------------------------
NTL, Inc.:
0%/9.75% Sr. Deferred Coupon Nts.,
4/1/08(4)(9) 350,000 218,750
0%/12.375% Sr. Nts., 10/1/08(4)(9) 3,400,000 2,146,250
7% Cv. Sub. Nts., 12/15/08(4) 1,500,000 1,623,750
10% Sr. Nts., Series B, 2/15/07 1,055,000 1,086,650
11.50% Sr. Nts., 10/1/08(4) 1,600,000 1,756,000
- -------------------------------------------------------------------------
Petersburg Long Distance, Inc., 9%
Cv. Sub. Nts., 6/1/06(4) 170,000 63,112
- -------------------------------------------------------------------------
PSINet, Inc., 10% Sr. Unsec. Nts.,
Series B, 2/15/05 3,170,000 3,154,150
- -------------------------------------------------------------------------
Qwest Communications International,
Inc., 0%/9.47% Sr. Disc. Nts.,
10/15/07(9) 1,460,000 1,135,150
- -------------------------------------------------------------------------
RSL Communications plc:
0%/10.125% Sr. Disc. Nts.,
3/1/08(9) 720,000 415,800
9.125% Sr. Unsec. Nts., 3/1/08 500,000 462,500
10.50% Sr. Nts., 11/15/08(4) 1,450,000 1,417,375
- -------------------------------------------------------------------------
TeleWest Communications plc:
0%/11% Sr. Disc. Debs., 10/1/07(9) 990,000 831,600
11.25% Sr. Nts., 11/1/08(4) 1,610,000 1,811,250
- -------------------------------------------------------------------------
Time Warner Telecom LLC, 9.75% Sr.
Nts., 7/15/08 1,300,000 1,371,500
- -------------------------------------------------------------------------
US Xchange LLC, 15% Sr. Nts.,
7/1/08 800,000 824,000
- -------------------------------------------------------------------------
Verio, Inc.:
10.375% Sr. Unsec. Nts., 4/1/05 1,480,000 1,457,800
11.25% Sr. Nts., 12/1/08(4) 1,300,000 1,313,000
13.50% Sr. Unsec. Nts., 6/15/04 385,000 417,725
- -------------------------------------------------------------------------
Viatel, Inc.:
0%/12.50% Sr. Unsec. Disc. Nts.,
4/15/08(9) 765,000 455,175
11.25% Sr. Sec. Nts., 4/15/08 580,000 595,950
---------------
53,438,869
- -------------------------------------------------------------------------
MEDIA/ENTERTAINMENT-WIRELESS
COMMUNICATIONS - 7.0%
Arch Communications, Inc., 12.75%
Sr. Nts., 7/1/07(4) 200,000 201,000
- -------------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/14%
Sr. Disc. Nts., 10/1/07(9) 2,319,000 591,345
</TABLE>
32
<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>
MEDIA/ENTERTAINMENT-WIRELESS
COMMUNICATIONS (CONTINUED)
Cellular Communications
International, Inc., 0%/9.50%
Bonds, 4/1/05(9)(XEU) $ 2,750,000 $ 2,728,674
- -------------------------------------------------------------------------
Centennial Cellular Corp., 10.75%
Sr. Sub. Nts., 12/15/08(4) 800,000 800,000
- -------------------------------------------------------------------------
Crown Castle International Corp.,
0%/10.625% Sr. Unsec. Disc. Nts.,
11/15/07(9) 940,000 662,700
- -------------------------------------------------------------------------
CTI Holdings SA, 0%/11.50% Sr.
Deferred Coupon Nts., 4/15/08(9) 1,000,000 455,000
- -------------------------------------------------------------------------
Dobson Communications Corp., 11.75%
Sr. Nts., 4/15/07 240,000 246,000
- -------------------------------------------------------------------------
Geotek Communications, Inc., 0%/15%
Sr. Sec. Disc. Nts., Series B,
7/15/05(7)(9) 226,000 46,330
- -------------------------------------------------------------------------
ICO Global Communications
(Holdings) Ltd., Units (each unit
consists of $1,000 principal amount
of 15% sr. nts., 8/1/05 and one
warrant to purchase 19.85 shares of
common stock)(8) 700,000 525,000
- -------------------------------------------------------------------------
Millicom International Cellular SA,
0%/13.50% Sr. Disc. Nts., 6/1/06(9) 300,000 213,750
- -------------------------------------------------------------------------
Nextel Communications, Inc.:
0%/9.75% Sr. Disc. Nts.,
10/31/07(9) 1,130,000 689,300
0%/10.65% Sr. Disc. Nts.,
9/15/07(9) 1,095,000 703,538
- -------------------------------------------------------------------------
Omnipoint Corp., 11.625% Sr. Nts.,
Series A, 8/15/06 2,765,000 1,935,500
- -------------------------------------------------------------------------
Orange plc:
7.625% Sr. Nts., 8/1/08(GBP) 400,000 478,509
8% Sr. Nts., 8/1/08 2,600,000 2,639,000
- -------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital
Corp., 14% Sr. Nts., 8/15/04 1,125,000 1,164,375
- -------------------------------------------------------------------------
Orion Network Systems, Inc.,
0%/12.50% Sr. Disc. Nts.,
1/15/07(9) 1,150,000 724,500
- -------------------------------------------------------------------------
Pinnacle Holdings, Inc., 0%/10% Sr.
Unsec. Disc. Nts., 3/15/08(9) 2,400,000 1,410,000
- -------------------------------------------------------------------------
Price Communications Cellular
Holdings, Inc., 11.25% Sr. Nts.,
8/15/08(11) 425,000 403,750
- -------------------------------------------------------------------------
Price Communications Wireless,
Inc.:
9.125% Sr. Sec. Nts., 12/15/06(4) 800,000 812,000
11.75% Sr. Sub. Nts., 7/15/07 425,000 450,500
- -------------------------------------------------------------------------
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 common
shares)(4)(8)(9) 1,000,000 465,000
- -------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr.
Sub. Nts., Series B, 5/15/08 1,900,000 1,914,250
- -------------------------------------------------------------------------
SBA Communications Corp., 0%/12%
Sr. Unsec. Disc. Nts., 3/1/08(9) 3,220,000 1,867,600
- -------------------------------------------------------------------------
Spectrasite Holdings, Inc., 0%/12%
Sr. Disc. Nts., 7/15/08(4)(9) 1,640,000 828,200
---------------
22,955,821
- -------------------------------------------------------------------------
METALS/MINERALS - 2.1%
AK Steel Corp., 9.125% Sr. Nts.,
12/15/06 885,000 924,825
- -------------------------------------------------------------------------
Algoma Steel, Inc., 12.375% First
Mtg. Nts., 7/15/05 340,000 260,100
- -------------------------------------------------------------------------
Bar Technologies, Inc., 13.50% Sr.
Sec. Nts., 4/1/01 320,000 343,200
- -------------------------------------------------------------------------
Great Lakes Carbon Corp., 10.25%
Sr. Sub. Nts., Series B, 5/15/08 1,500,000 1,518,750
- -------------------------------------------------------------------------
International Utility Structures,
Inc., 10.75% Sr. Sub. Nts., 2/1/08 400,000 378,000
- -------------------------------------------------------------------------
Keystone Consolidated Industries,
Inc., 9.625% Sr. Sec. Nts., 8/1/07 850,000 816,000
</TABLE>
33
<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>
METALS/MINERALS (CONTINUED)
Metallurg Holdings, Inc., 0%/12.75%
Sr. Disc. Nts., 7/15/08(9) $ 2,000,000 $ 690,000
- -------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts.,
12/1/07 540,000 504,900
- -------------------------------------------------------------------------
Republic Engineered Steels, Inc.,
9.875% First Mtg. Nts., 12/15/01 1,400,000 1,438,500
---------------
6,874,275
- -------------------------------------------------------------------------
RETAIL - 1.5%
Boyds Collection Ltd., 9% Sr. Sub.
Nts., 5/15/08(4) 1,250,000 1,281,250
- -------------------------------------------------------------------------
Eye Care Centers of America, Inc.,
9.125% Sr. Sub. Nts., 5/1/08(4) 1,100,000 1,050,500
- -------------------------------------------------------------------------
Finlay Enterprises, Inc., 9% Debs.,
5/1/08 900,000 796,500
- -------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375%
Sr. Nts., 5/1/08 600,000 555,000
- -------------------------------------------------------------------------
Home Interiors & Gifts, Inc.,
10.125% Sr. Sub. Nts., 6/1/08(4) 1,000,000 995,000
- -------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub.
Nts., 10/15/07 325,000 342,063
---------------
5,020,313
- -------------------------------------------------------------------------
SERVICE - 4.5%
Allied Waste North America, Inc.,
7.875% Sr. Nts., 1/1/09(4) 835,000 849,613
- -------------------------------------------------------------------------
Borg-Warner Security Corp., 9.625%
Sr. Sub. Nts., 3/15/07 125,000 135,625
- -------------------------------------------------------------------------
Coinstar, Inc., 0%/13% Sr. Disc.
Nts., 10/1/06(9) 775,000 639,375
- -------------------------------------------------------------------------
Comforce Operating, Inc., 12% Sr.
Nts., Series B, 12/1/07 750,000 753,750
- -------------------------------------------------------------------------
Fisher Scientific International,
Inc.:
9% Sr. Sub. Nts., 2/1/08(4) 365,000 366,825
9% Sr. Unsec. Sub. Nts., 2/1/08 2,050,000 2,060,250
- -------------------------------------------------------------------------
Great Lakes Dredge & Dock Corp.,
11.25% Sr. Sub. Nts., 8/15/08(4) 915,000 933,300
- -------------------------------------------------------------------------
Intermedia Communications, Inc.,
8.50% Sr. Nts., Series B, 1/15/08 660,000 630,300
- -------------------------------------------------------------------------
Lamar Advertising Co.:
8.625% Sr. Sub. Nts., 9/15/07 1,225,000 1,292,375
9.625% Sr. Sub. Nts., 12/1/06 815,000 876,125
- -------------------------------------------------------------------------
Newcor, Inc., 9.875% Sr. Unsec.
Sub. Nts., Series B, 3/1/08 1,500,000 1,402,500
- -------------------------------------------------------------------------
Norse CBO Ltd., 9.342% Sub. Bonds,
Series 1A, Cl. C2, 8/13/10(2) 1,500,000 1,500,000
- -------------------------------------------------------------------------
Protection One Alarm Monitoring,
Inc.:
6.75% Cv. Sr. Sub. Nts., 9/15/03 950,000 974,938
13.625% Sr. Sub. Disc. Nts.,
6/30/05 400,000 458,000
- -------------------------------------------------------------------------
United Rentals, Inc., 9.25% Sr.
Sub. Nts., 1/15/09(4) 2,000,000 2,015,000
---------------
14,887,976
- -------------------------------------------------------------------------
TRANSPORTATION - 4.1%
Cambridge Industries, Inc., 10.25%
Sr. Sub. Nts., Series B, 7/15/07 500,000 432,500
- -------------------------------------------------------------------------
Coach USA, Inc., 9.375% Sr. Sub.
Nts., Series B, 7/1/07 390,000 399,750
- -------------------------------------------------------------------------
Collins & Aikman Products Co.,
11.50% Sr. Unsec. Sub. Nts.,
4/15/06 125,000 130,625
- -------------------------------------------------------------------------
Hayes Wheels International, Inc.,
11% Sr. Sub. Nts., 7/15/06 600,000 669,000
- -------------------------------------------------------------------------
HDA Parts System, Inc., 12% Sr.
Sub. Nts., 8/1/05(4) 950,000 859,750
- -------------------------------------------------------------------------
Key Plastics, Inc., 10.25% Sr. Sub.
Nts., Series B, 3/15/07 25,000 23,500
</TABLE>
34
<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>
TRANSPORTATION (CONTINUED)
Millenium Seacarriers, Inc., Units
(each unit consists of $1,000
principal amount of 12% first
priority ship mtg. nts., 7/15/05
and one warrant to purchase five
shares of common stock)(4)(8) $ 1,500,000 $ 1,207,500
- -------------------------------------------------------------------------
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg.
Nts., 6/30/07(4) 1,175,000 1,039,875
Units (each unit consists of $1,000
principal amount of 12% second
priority ship mtg. nts., 6/30/07
and 7.66 warrants)(4)(8) 500,000 452,500
- -------------------------------------------------------------------------
Oxford Automotive, Inc.:
10.125% Sr. Sub. Nts., 6/15/07(2) 600,000 627,000
10.125% Sr. Unsec. Sub. Nts.,
6/15/07 1,525,000 1,586,000
- -------------------------------------------------------------------------
Pacific & Atlantic Holdings, Inc.,
11.50% First Preferred Ship Mtg.
Nts., 5/30/08 700,000 528,500
- -------------------------------------------------------------------------
Sea Containers Ltd., 7.875% Sr.
Nts., 2/15/08 1,500,000 1,432,500
- -------------------------------------------------------------------------
Trans World Airlines, Inc., 11.50%
Sr. Sec. Nts., 12/15/04(10) 1,850,000 1,563,250
- -------------------------------------------------------------------------
Transtar Holdings LP/Transtar
Capital Corp., 0%/13.375% Sr. Disc.
Nts., Series B, 12/15/03(9) 2,600,000 2,509,000
---------------
13,461,250
- -------------------------------------------------------------------------
UTILITY - 1.5%
Calpine Corp.:
8.75% Sr. Nts., 7/15/07 545,000 553,175
10.50% Sr. Nts., 5/15/06 25,000 27,688
- -------------------------------------------------------------------------
El Paso Electric Co., 9.40% First
Mtg. Sec. Nts., Series E,
5/1/11(12) 555,000 645,188
- -------------------------------------------------------------------------
ESI Tractebel Acquisition Corp.,
7.99% Bonds, 12/30/11 1,000,000 987,312
- -------------------------------------------------------------------------
Niagara Mohawk Power Corp., 7.75%
Sr. Unsec. Nts., Series G, 10/1/08 2,400,000 2,637,211
---------------
4,850,574
---------------
Total Corporate Bonds and Notes
(Cost $261,935,960) 253,250,629
</TABLE>
<TABLE>
<CAPTION>
SHARES
- --------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS - 5.3%
- --------------------------------------------------------------------
CGA Group Ltd., Preferred Stock,
Series A(2)(11) 74,045 1,851,125
- --------------------------------------------------------------------
Chesapeake Energy Corp., 7% Cum.
Cv.(4) 24,575 251,894
- --------------------------------------------------------------------
Clark USA, Inc., 11.50% Cum.
Exchangeable(11) 430 362,275
- --------------------------------------------------------------------
Concentric Network Corp., 13.50%
Preferred, Series B(11) 532 456,190
- --------------------------------------------------------------------
Dobson Communications Corp., 12.25%
Sr. Exchangeable(11) 1,092 974,610
- --------------------------------------------------------------------
e.spire Communications, Inc.,
12.75% Jr. Redeemable Preferred
Stock 1,167 574,747
- --------------------------------------------------------------------
Eagle-Picher Holdings, Inc., Cum.
Exchangeable, Series B, 3/1/08,
Non-Vtg.(13) 8,000 406,000
- --------------------------------------------------------------------
EchoStar Communications Corp.,
12.125% Sr. Redeemable
Exchangeable, Series B,
Non-Vtg.(11) 819 952,087
- --------------------------------------------------------------------
Fidelity Federal Bank FSB Glendale
California, l2% Non-Cum.
Exchangeable Perpetual Preferred
Stock, Series A 20 465
- --------------------------------------------------------------------
Global Crossing Holdings Ltd.,
10.50% Sr. Exchangeable Preferred,
12/1/08(4)(13) 15,000 1,473,750
- --------------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable(11) 264 291,060
- --------------------------------------------------------------------
Intermedia Communications, Inc.,
13.50% Exchangeable, Series B(11) 792 786,060
</TABLE>
35
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
<S> <C> <C>
- --------------------------------------------------------------------
PREFERRED STOCKS (CONTINUED)
- --------------------------------------------------------------------
Nebco Evans Holdings, Inc., 11.25%
Cum. Exchangeable(11) 6,510 327,127
- --------------------------------------------------------------------
Nextel Communications, Inc.,
11.125% Exchangeable, Series E(11) 790 712,975
- --------------------------------------------------------------------
NEXTLINK Communications, Inc., 14%
Cum. Exchangeable, Vtg.(11) 32,362 1,723,277
- --------------------------------------------------------------------
Paxson Communications Corp., 13.25%
Cum. Jr. Exchangeable, Non-Vtg.(11) 40 341,000
- --------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.,
Jr. Cv. Preferred Stock(13) 3,963 6,935
- --------------------------------------------------------------------
PRIMEDIA, Inc.:
8.625% Exchangeable 10,000 965,000
9.20% Exchangeable, Series F 2,500 246,250
- --------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum.
Sr., Series B, Non-Vtg.(11) 1,057 985,653
- --------------------------------------------------------------------
SD Warren Co., 14% Cum.
Exchangeable, Series B,
Non-Vtg.(13) 25,000 1,281,250
- --------------------------------------------------------------------
SF Holdings Group, Inc., 13.75%
Cum. Nts., Series B, 3/15/09,
Non-Vtg.(11) 196 847,700
- --------------------------------------------------------------------
SFX Broadcasting, Inc./Capstar
Broadcasting Corp., 12.625% Cum.,
Series E, Non-Vtg.(11) 1,314 158,994
- --------------------------------------------------------------------
Spanish Broadcasting Systems, Inc.,
14.25% Cum. Exchangeable,
Non-Vtg.(4)(11) 602 615,545
- --------------------------------------------------------------------
Viatel, Inc., 10% Cv., Series A(11) 672 74,088
- --------------------------------------------------------------------
Walden Residential Properties,
Inc.:
9.16% Cv., Series B 30,000 690,000
9.20% Preferred 8,950 194,663
---------------
Total Preferred Stocks (Cost
$21,439,498) 17,550,720
- --------------------------------------------------------------------
COMMON STOCKS - 0.2%
- --------------------------------------------------------------------
Celcaribe SA(4)(13) 121,950 259,144
- --------------------------------------------------------------------
Coinstar, Inc.(13) 5,250 56,437
- --------------------------------------------------------------------
ECM Fund, L.P. I.(2) 150 132,750
- --------------------------------------------------------------------
Equitable Bag, Inc.(2)(13) 3,723 3,723
- --------------------------------------------------------------------
Golden State Bancorp, Inc.(13) 15,626 259,782
- --------------------------------------------------------------------
Gulfstream Holding, Inc.(13) 56 --
- --------------------------------------------------------------------
Horizon Group Properties, Inc.(13) 851 3,298
- --------------------------------------------------------------------
Intermedia Communications, Inc.(13) 206 3,554
- --------------------------------------------------------------------
Omnipoint Corp.(13) 5,000 46,563
- --------------------------------------------------------------------
Optel, Inc.(13) 945 9
- --------------------------------------------------------------------
SF Holdings Group, Inc., Cl. C(13) 8,452 16,904
---------------
Total Common Stocks (Cost $542,407) 782,164
UNITS
- --------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES -
0.4%
- --------------------------------------------------------------------
American Telecasting, Inc. Wts.,
Exp. 6/99(2) 6,000 60
- --------------------------------------------------------------------
Ames Department Stores, Inc.,
Litigation Trust(2) 39,658 397
- --------------------------------------------------------------------
Australis Holdings PTY
Ltd./Australia Media Ltd. Wts.,
Exp. 5/00(2) 125 1
</TABLE>
36
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
UNITS NOTE 1
<S> <C> <C>
- --------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES
(CONTINUED)
- --------------------------------------------------------------------
Capital Gaming International, Inc.
Wts., Exp. 2/99 21,112 $ --
- --------------------------------------------------------------------
CellNet Data Systems, Inc. Wts.,
Exp. 10/07(4) 1,919 9,835
- --------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 12/49(2) 62,000 18,600
- --------------------------------------------------------------------
Clearnet Communications, Inc. Wts.,
Exp. 9/05 660 1,567
- --------------------------------------------------------------------
Concentric Network Corp. Wts., Exp.
12/07(2) 750 111,682
- --------------------------------------------------------------------
Covad Communications Group, Inc.
Wts., Exp. 3/08(2) 900 45,000
- --------------------------------------------------------------------
Covergent Communications, Inc.
Wts., Exp. 4/08(2) 3,200 4,000
- --------------------------------------------------------------------
DTI Holdings, Inc. Wts., Exp.
3/08(2) 7,500 375
- --------------------------------------------------------------------
e.spire Communications, Inc. Wts.,
Exp. 11/05 475 11,465
- --------------------------------------------------------------------
FirstWorld Communications, Inc.
Wts., Exp. 4/08(2) 1,100 11,000
- --------------------------------------------------------------------
Foamex LP/JPS Automotive Corp.
Wts., Exp. 7/99(2) 500 10,500
- --------------------------------------------------------------------
Geotek Communications, Inc. Wts.,
Exp. 7/05(2) 52,500 525
- --------------------------------------------------------------------
Globix Corp. Wts., Exp. 5/05(2) 1,800 18,000
- --------------------------------------------------------------------
Golden State Bancorp, Inc. Wts.,
Exp. 1/01 15,626 71,294
- --------------------------------------------------------------------
Gothic Energy Corp. Wts.:
Exp. 1/03(4) 13,117 131
Exp. 9/04(2) 14,000 15,750
- --------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp.
9/05(2) 5,940 81,411
- --------------------------------------------------------------------
IHF Capital, Inc.:
Series I Wts., Exp. 11/99(2) 400 4
Wts., Exp. 11/99(5) 250 2
- --------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp.
8/02 950 --
- --------------------------------------------------------------------
KMC Telecom Holdings, Inc. Wts.,
Exp. 4/08(2) 2,455 6,444
- --------------------------------------------------------------------
Long Distance International, Inc.
Wts., 4/08(2) 800 2,000
- --------------------------------------------------------------------
Microcell Telecommunications, Inc.
Wts., Exp. 6/06(2) 3,200 58,000
- --------------------------------------------------------------------
Millenium Seacarriers, Inc. Wts.,
Exp. 7/05(2) 1,500 9,375
- --------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/00(2) 7,500 69,844
- --------------------------------------------------------------------
Orion Network Systems, Inc. Wts.,
Exp. 1/07(2) 800 10,000
- --------------------------------------------------------------------
Price Communications Corp. Wts.,
Exp. 8/07(2) 8,600 410,650
- --------------------------------------------------------------------
Protection One, Inc. Wts.:
Exp. 11/03(2) 28,000 350,000
Exp. 6/05(2) 1,600 16,000
- --------------------------------------------------------------------
Trizec Hahn Corp. Wts., Exp. 7/99 3,970 11,665
- --------------------------------------------------------------------
United International Holdings, Inc.
Wts., Exp. 11/99(2) 1,440 21,780
- --------------------------------------------------------------------
Venezuela (Republic of) Oil Linked
Payment Obligation Wts., Exp. 4/20 3,570 --
- --------------------------------------------------------------------
WAM!NET, Inc. Wts., Exp. 3/05(2) 5,250 42,000
---------------
Total Rights, Warrants and
Certificates (Cost $368,233) 1,419,357
</TABLE>
37
<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>
- --------------------------------------------------------------------
STRUCTURED INSTRUMENTS - 8.4%
- --------------------------------------------------------------------
Bankers Trust/Bear Stearns High
Yield Composite Index Linked Nts.,
8.55%, 4/5/99-5/4/99 $ 6,000,000 5,765,550
- --------------------------------------------------------------------
Bear Stearns High Yield Composite
Index Linked Nts.:
8.5%, 4/9/99-5/14/99 12,000,000 11,805,840
9%, 2/5/99 1,500,000 1,382,865
- --------------------------------------------------------------------
Goldman Sachs Group LP, High Yield
Index Nts., 8%, 3/4/99 1,500,000 1,403,400
- --------------------------------------------------------------------
J.P. Morgan & Co., Inc., The
Emerging Markets Bond Index Linked
Nts., 9.50%, 1/29/99(14) 3,000,000 2,515,290
- --------------------------------------------------------------------
Shoshone Partners Loan Trust Sr.
Nts., 6.97%, 4/28/02 (representing
a basket of reference loans and a
total return swap between Chase
Manhattan Bank and the Trust)(2)(3) 5,360,000 4,806,894
---------------
Total Structured Instruments (Cost
$29,503,421) 27,679,839
- --------------------------------------------------------------------
REPURCHASE AGREEMENTS - 1.6%
- --------------------------------------------------------------------
Repurchase agreement with First
Chicago Capital Markets, 4.75%,
dated 12/31/98, to be repurchased
at $5,102,692 on 1/4/99,
collateralized by U.S. Treasury
Nts., 4%-8.875%, 2/15/99-7/15/06,
with a value of $5,204,061 (Cost
$5,100,000) 5,100,000 5,100,000
- --------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$334,412,099) 97.7% 320,913,385
- --------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.3 7,649,272
-------------- ---------------
NET ASSETS 100.0% $ 328,562,657
-------------- ---------------
-------------- ---------------
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP - Argentine Peso
CAD - Canadian Dollar
DEM - German Mark
GBP - British Pound Sterling
IDR - Indonesian Rupiah
XEU - European Currency Units
2. Identifies issues considered to be illiquid or restricted - See applicable
note 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 $62,611,444 or 19.06% of the Fund's net
assets as of December 31, 1998.
5. Represents the current interest rate for an increasing rate security.
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Non-income producing - issuer is in default.
8. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
9. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
10. Securities with an aggregate market value of $2,919,300 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See applicable note of Notes to Financial Statements.
38
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
11. Interest or dividend is paid in kind.
12. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See applicable note of Notes to
Financial Statements.
13. Non-income producing security.
14. Security is linked to the Emerging Markets Bond Index (EMBI). The EMBI
tracks total returns for currency denominated debt instruments of the emerging
markets. Countries covered are Argentina, Brazil, Bulgaria, Ecuador, Mexico,
Morocco, Nigeria, Panama, Peru, the Philippines, Poland, Russia and Venezuela.
See accompanying Notes to Financial Statements.
39
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT (1) NOTE 1
- ------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 43.5%
- ------------------------------------------------------------------
GOVERNMENT AGENCY - 26.6%
- ------------------------------------------------------------------
FHLMC/FNMA/SPONSORED - 12.7%
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 $ 3,181,890
Series 151, Cl. F, 9%, 5/15/21 866,526 912,825
Series 1541, Cl. H, 7%, 10/15/22 4,750,000 4,987,500
Series 1712, Cl. B, 6%, 3/15/09 1,000,000 995,930
Series 1714, Cl. M, 7%, 8/15/23 2,000,000 2,038,120
- ------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Gtd. Multiclass Mtg. Participation
Certificates, 7%, 4/1/26 3,854,379 3,930,812
- ------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit
Pass-Through Certificates, Series
1914, Cl. G, 6.50%, 2/15/24 3,000,000 3,036,540
- ------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed
Security, Series 197, Cl. IO,
9.643%, 4/1/28(2) 14,642,987 3,807,177
- ------------------------------------------------------------------
Federal Home Loan Mortgage
Corp.-Government National Mortgage
Assn., Gtd. Multiclass Mtg.
Participation Certificates, Series
26, Cl. B, 6%, 5/25/15 6,499,999 6,485,764
- ------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 1/25/28(4) 16,500,000 16,610,880
6.50%, 3/1/11-11/1/28 9,097,770 9,165,493
7%, 1/25/28(4) 15,000,000 15,302,400
7%, 4/1/04-11/1/25 986,546 1,004,337
7.50%, 1/1/08-1/1/26 3,076,835 3,161,912
8%, 5/1/17 425,154 443,491
- ------------------------------------------------------------------
Federal National Mortgage Assn.,
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates,
8.75%, 11/25/05 1,894,061 1,970,411
- ------------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit
Pass-Through Certificates:
Trust 1989-17, Cl. E, 10.40%,
4/25/19 877,884 967,315
Trust 1997-25, Cl. B, 7%, 12/18/22 1,370,000 1,390,975
- ------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped Mtg.-Backed
Security:
Trust 277-C1, 21.711%, 4/1/27(5) 632,721 555,806
Trust 294, Cl. 1, 5.206%, 2/1/28(5) 3,557,954 3,024,262
-------------
82,973,840
- ------------------------------------------------------------------
GUARANTEED - 13.9%
Government National Mortgage Assn.:
6.50%, 9/15/24 15,628,113 15,805,493
7%, 1/1/28(4) 15,000,000 15,346,950
7%, 1/15/09-8/15/28 8,941,590 9,154,395
7.50%, 1/15/27-9/15/28 39,204,128 40,441,375
8%, 1/15/28-9/15/28 9,884,125 10,273,267
-------------
91,021,480
</TABLE>
40
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT (1) NOTE 1
- ------------------------------------------------------------------
<S> <C> <C>
PRIVATE - 16.9%
- ------------------------------------------------------------------
COMMERCIAL - 12.5%
Asset Securitization Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-D5, Cl. A6, 7.185%,
2/14/41(6) $ 3,000,000 $ 2,746,406
Series 1997-D5, Cl. B2, 6.93%,
2/14/41 5,400,000 3,904,875
Series 1998-MD6, Cl. A3, 6.98%,
3/15/28(6) 6,000,000 6,143,437
- ------------------------------------------------------------------
Asset Securitization Corp.,
Interest-Only Stripped Mtg.-Backed
Security,
Series 1997-D5, Cl. PS1, 9.092%,
2/14/41(2) 18,497,284 1,789,034
- ------------------------------------------------------------------
BKB Commercial Mortgage Trust,
Commercial Mtg. Obligations,
Series 1997-C1, Cl. C, 7.45%,
10/25/00(3) 815,000 813,727
- ------------------------------------------------------------------
Capital Lease Funding
Securitization LP, Interest-Only
Stripped Mtg.-Backed Security,
Series 1997-CTL1, 10.611%,
6/22/24(2)(3) 31,405,361 1,293,901
- ------------------------------------------------------------------
Commercial Mortgage Acceptance
Corp., Collateralized Mtg.
Obligations,
Series 1996-C1, Cl. D, 7.746%,
12/25/20(3)(6) 2,500,000 2,464,844
- ------------------------------------------------------------------
CRIMMI MAE Trust I, Collateralized
Mtg. Obligations,
Series 1996-C1, Cl. A2, 8/30/05(7) 2,000,000 1,961,909
- ------------------------------------------------------------------
CS First Boston Mortgage Securities
Corp., Interest-Only Stripped
Mtg.-Backed Security, Series
1998-C1, Cl. AX, 8.082%,
4/11/30(2)(3) 25,105,463 1,796,610
- ------------------------------------------------------------------
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 1,530,000
Series 1994-C1, Cl. 2-E, 8.70%,
9/25/25 1,500,000 1,494,375
- ------------------------------------------------------------------
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 1,731,250
- ------------------------------------------------------------------
First Union-Lehman Brothers
Commercial Mortgage Trust,
Interest-Only Stripped Mtg.-Backed
Security:
Series 1997-C1, Cl. IO, 10.173%,
4/18/27(2) 8,454,887 587,218
Series 1997-C1, 8.357%-8.992%,
4/18/27(2) 24,962,333 1,733,712
Series 1998-C2, 8.971%, 5/18/28(2) 29,808,827 1,227,285
- ------------------------------------------------------------------
General Motors Acceptance Corp.,
Collateralized Mtg. Obligations:
Series 1997-C2, Cl. D, 7.192%,
1/15/08 3,500,000 3,469,375
Series 1998-C1, Cl. E, 7.086%,
3/15/11(6) 3,500,000 3,520,781
- ------------------------------------------------------------------
General Motors Acceptance Corp.,
Interest-Only Stripped Mtg.-Backed
Security,
Series 1997-C1, Cl. X,
8.665%-9.155%, 7/15/27(2) 28,232,978 2,523,322
- ------------------------------------------------------------------
GS Mortgage Securities Corp. II,
Commercial Mtg. Pass-Through
Certificates,
Series 1997-CL1, Cl. F,
7.309%-7.779%, 7/13/30(6) 5,000,000 4,752,187
- ------------------------------------------------------------------
Lehman Brothers Commercial Conduit
Mortgage Trust, Interest-Only
Stripped
Mtg.-Backed Security, Series
1998-C1, Cl. IO, 8.783%, 2/18/28(2) 44,613,659 2,718,645
- ------------------------------------------------------------------
Merrill Lynch Mortgage Investors,
Inc., Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. D, 7.42%,
4/25/28 2,000,000 2,047,500
Series 1997-C2, Cl. D, 7.072%,
12/10/29(6) 4,000,000 3,877,500
- ------------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. D-1, 7.436%,
2/15/28(3)(6) 1,000,000 1,028,125
Series 1997-RR, Cl. D, 7.436%,
4/30/39(3) 4,300,000 4,055,437
Series 1997-XL1, Cl. F, 7.413%,
10/3/30(6) 2,500,000 2,523,437
- ------------------------------------------------------------------
NationsCommercial Corp., NB
Commercial Mtg. Pass-Through
Certificates,
Series-DMC, Cl. B, 8.562%-8.921%,
8/12/11(3) 6,000,000 6,319,000
</TABLE>
41
<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)
Potomac Gurnee Financial Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 1, Cl. C, 7.21%, 12/21/26(3) $ 250,000 $ 247,891
Series 1, Cl. D, 7.68%, 12/21/26(3) 500,000 501,563
- ------------------------------------------------------------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates:
Series 1994-C1, Cl. C, 8%, 6/25/26 1,500,000 1,505,391
Series 1995-C1, Cl. D, 6.90%,
2/25/27 3,000,000 2,981,953
- ------------------------------------------------------------------
Structured Asset Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1997-LLI, Cl.
E, 7.30%, 4/12/12 4,000,000 3,773,750
- ------------------------------------------------------------------
Structured Asset Securities Corp.,
Multiclass Pass-Through
Certificates:
Series 1996-C3, Cl. C, 7.375%,
6/25/30(3)(6) 3,000,000 3,044,063
Series 1996-CFL, Cl. D, 7.034%,
2/25/28 1,800,000 1,815,750
-------------
81,924,253
- ------------------------------------------------------------------
MULTI-FAMILY - 0.2%
Countrywide Funding Corp., Mtg.
Pass-Through Certificates, Series
1993-12, Cl. B1, 6.625%, 2/25/24 996,193 970,043
- ------------------------------------------------------------------
Merrill Lynch Trust, Collateralized
Mtg. Obligations, Gtd. Multiclass
Mtg. Participation Certificates,
Series 43, Cl. E, 6.50%, 8/27/15 444,793 445,487
- ------------------------------------------------------------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates,
Series 1991-M5, Cl. A, 9%,
3/25/17(3) 189,239 187,820
-------------
1,603,350
- ------------------------------------------------------------------
OTHER - 0.0%
Salomon Brothers Mortgage
Securities VI, Interest-Only
Stripped Mtg.-Backed Security,
Series 1987-3, Cl. B,
23.059%-24.103%, 10/23/17(2) 74,644 20,155
- ------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VI, Principal-Only
Stripped Mtg.-Backed Security,
Series 1987-3, Cl. A,
16.254%-24.103%, 10/23/17(5) 110,461 95,169
-------------
115,324
- ------------------------------------------------------------------
RESIDENTIAL - 4.2%
CS First Boston Mortgage Securities
Corp., Mtg. Pass-Through
Certificates,
Series 1997-C1, Cl. E, 7.50%,
3/1/11(3) 5,006,000 4,790,116
- ------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates,
Series 1997-CHL1, 8.098%,
7/25/06(3)(6) 4,024,000 3,939,748
- ------------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-HF1, Cl. E, 7.55%,
7/15/29(3) 1,500,000 1,543,125
Series 1997-WF1, Cl. E, 7.49%,
5/15/09(3) 1,000,000 1,012,813
- ------------------------------------------------------------------
NationsBank Trust, Lease
Pass-Through Certificates, Series
1997A-1, 7.442%, 1/10/11(6) 2,500,000 2,656,641
- ------------------------------------------------------------------
Residential Accredit Loans, Inc.,
Mtg. Asset-Backed Pass-Through
Certificates, Series 1997-QS11, 7%,
10/25/12 13,039,614 13,259,658
- ------------------------------------------------------------------
Ryland Mortgage Securities Corp.
III Sub. Bonds, Series 1992-A, Cl.
1A, 8.256%, 3/29/30(6) 310,293 314,075
-------------
27,516,176
-------------
Total Mortgage-Backed Obligations
(Cost $285,512,044) 285,154,423
</TABLE>
42
<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>
- -----------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS -
0.1%
- -----------------------------------------------------------------------
Ontario, Canada (Province of)
Bonds, 8%, 10/17/01 $ 750,000 $ 803,977
- -----------------------------------------------------------------------
PT Hutama Karya Medium-Term Nts.,
Zero Coupon, 3/17/99 (3)(8)IDR 1,000,000,000 31,250
-------------
Total Foreign Government
Obligations (Cost $1,102,252) 835,227
- -----------------------------------------------------------------------
LOAN PARTICIPATIONS - 0.1%
- -----------------------------------------------------------------------
Colombia (Republic of) 1989-1990
Integrated Loan Facility Bonds,
6.375%, 7/1/01(3)(6) (Cost
$795,958) 825,799 761,800
- -----------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES - 0.8%
- -----------------------------------------------------------------------
Dade County, FL Educational
Facilities Authority Exchangeable
Revenue Bonds, University of Miami,
Prerefunded, MBIA Insured, 7.65%,
4/1/10 175,000 187,808
- -----------------------------------------------------------------------
Dade County, FL Educational
Facilities Authority Revenue Bonds,
University of Miami, MBIA Insured,
7.65%, 4/1/10 205,000 219,252
- -----------------------------------------------------------------------
Dade County, FL Educational
Facilities Authority Taxable
Exchange Revenue Bonds, University
of Miami, MBIA Insured, 7.65%,
4/1/10 120,000 128,342
- -----------------------------------------------------------------------
Pinole, CA Redevelopment Agency Tax
Allocation Taxable Bonds, Pinole
Vista Redevelopment, Series B,
8.35%, 8/1/17 670,000 708,659
- -----------------------------------------------------------------------
Port of Portland, OR Special
Obligation Taxable Revenue Bonds,
PAMCO Project, 9.20%, 5/15/22 500,000 552,200
- -----------------------------------------------------------------------
Virgin Islands Public Finance
Authority Taxable Revenue Refunding
Bonds, Sr. Lien Loan Nts., Series
B, 6.99%, 10/1/01 3,265,000 3,337,124
-------------
Total Municipal Bonds and Notes
(Cost $4,928,533) 5,133,385
- -----------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 54.1%
- -----------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.6%
Amtran, Inc., 9.625% Nts., 12/15/05 800,000 804,000
- -----------------------------------------------------------------------
Atlas Air, Inc., 8.01% Nts., 1/2/10 3,000,000 3,022,332
-------------
3,826,332
- -----------------------------------------------------------------------
CHEMICALS - 1.4%
ClimaChem, Inc., 10.75% Sr. Unsec.
Nts., Series B, 12/1/07 300,000 303,000
- -----------------------------------------------------------------------
IMC Global, Inc., 7.625% Bonds,
11/1/05 9,000,000 9,222,048
-------------
9,525,048
- -----------------------------------------------------------------------
CONSUMER DURABLES - 0.1%
Toro Co., 7.125% Nts., 6/15/07 1,000,000 969,152
- -----------------------------------------------------------------------
CONSUMER NON-DURABLES - 1.2%
AKI Holdings, Inc., 10.50% Sr.
Nts., 7/1/08(7) 300,000 286,500
- -----------------------------------------------------------------------
Bell Sports, Inc., 11% Sr. Sub.
Nts., 8/15/08(7) 110,000 112,200
- -----------------------------------------------------------------------
Fruit of the Loom, Inc., 7% Debs.,
3/15/11 1,097,000 988,345
- -----------------------------------------------------------------------
Harman International Industries,
Inc., 7.32% Nts., 7/1/07 5,000,000 5,244,195
- -----------------------------------------------------------------------
Procter & Gamble Co., 9.36% Debs.,
Series A, 1/1/21 500,000 664,743
- -----------------------------------------------------------------------
Revlon Consumer Products Corp., 9%
Sr. Nts., 11/1/06(7) 500,000 500,000
</TABLE>
43
<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>
CONSUMER NON-DURABLES (CONTINUED)
Styling Technology Corp., 10.875%
Sr. Sub. Nts., 7/1/08 $ 360,000 $ 343,800
-------------
8,139,783
- -----------------------------------------------------------------------
ENERGY - 5.0%
BP America, Inc., 10.875% Unsec.
Unsub. Nts., 8/1/01CAD 1,000,000 737,839
- -----------------------------------------------------------------------
Coastal Corp., 8.75% Sr. Nts.,
5/15/99 500,000 505,244
- -----------------------------------------------------------------------
Colorado Interstate Gas Corp., 10%
Sr. Debs., 6/15/05 500,000 615,642
- -----------------------------------------------------------------------
Eastern Energy Ltd., 6.75% Sr.
Nts., 12/1/06(7) 2,000,000 2,104,710
- -----------------------------------------------------------------------
Enron Corp., 9.875% Debs., 6/15/03 375,000 427,440
- -----------------------------------------------------------------------
ENSCO International, Inc.:
6.75% Nts., 11/15/07 5,000,000 5,096,110
7.20% Debs., 11/15/27 3,000,000 3,047,355
- -----------------------------------------------------------------------
Enterprise Oil plc, 6.70% Sr. Nts.,
9/15/07 4,000,000 3,981,300
- -----------------------------------------------------------------------
Global Marine, Inc., 7.125% Nts.,
9/1/07 8,000,000 8,128,224
- -----------------------------------------------------------------------
Gothic Production Corp., 11.125%
Sr. Sec. Nts., Series B, 5/1/05(7) 300,000 235,500
- -----------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.375%
Sr. Nts., 11/15/05 500,000 495,000
- -----------------------------------------------------------------------
HNG Internorth/Enron Corp., 9.625%
Debs., 3/15/06 500,000 612,929
- -----------------------------------------------------------------------
McDermott, Inc., 9.375% Nts.,
3/15/02 400,000 427,277
- -----------------------------------------------------------------------
Mitchell Energy & Development
Corp., 9.25% Sr. Nts., 1/15/02 55,000 58,200
- -----------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr.
Sec. Nts., 6/1/08 400,000 322,000
- -----------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr.
Sub. Nts., Series B, 5/15/08 1,200,000 1,218,000
- -----------------------------------------------------------------------
Saga Petroleum ASA, 7.25% Debs.,
9/23/27 1,000,000 920,550
- -----------------------------------------------------------------------
Talisman Energy, Inc., 7.25% Debs.,
10/15/27 2,500,000 2,411,257
- -----------------------------------------------------------------------
Texaco Capital, Inc., 8.875% Gtd.
Debs., 9/1/21 500,000 648,127
- -----------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875%
Debs., 1/1/21 750,000 961,927
-------------
32,954,631
- -----------------------------------------------------------------------
FINANCIAL - 13.7%
Aeltus CBO II Ltd./Aeltus CBO II
Corp., 7.982% Sr. Sec. Sub. Bonds,
8/6/09(3) 5,000,000 4,831,250
- -----------------------------------------------------------------------
Aetna Services, Inc., 7.125% Nts.,
8/15/06 1,000,000 1,051,813
- -----------------------------------------------------------------------
Allmerica Capital I, 8.207% Debs.,
2/3/27(9) 2,000,000 2,241,142
- -----------------------------------------------------------------------
American General Finance Corp.,
5.875% Sr. Nts., 7/1/00 196,000 197,088
- -----------------------------------------------------------------------
BankAmerica Corp. (New), 7.75% Sub.
Nts., 7/15/02 750,000 805,140
- -----------------------------------------------------------------------
Banque Centrale de Tunisie, 7.50%
Nts., 9/19/07 900,000 821,056
- -----------------------------------------------------------------------
Chase Manhattan Corp. (New),
10.125% Sub. Nts., 11/1/00 750,000 809,707
- -----------------------------------------------------------------------
Citicorp Capital I, 7.933% Gtd.
Bonds, 2/15/27 2,000,000 2,193,572
- -----------------------------------------------------------------------
CNA Financial Corp., 6.25% Nts.,
11/15/06 2,195,000 2,199,572
- -----------------------------------------------------------------------
EOP Operating LP, 6.625% Sr. Unsec.
Nts., 2/15/05 1,000,000 985,431
- -----------------------------------------------------------------------
Farmers Exchange Capital, 7.05%
Trust Surplus Nts., 7/15/28(7) 3,000,000 3,027,762
</TABLE>
44
<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>
FINANCIAL (CONTINUED)
First Chicago Corp.:
11.25% Sub. Nts., 2/20/01 $ 750,000 $ 834,676
9% Sub. Nts., 6/15/99 150,000 152,283
- -----------------------------------------------------------------------
Fleet Mtg. Group, Inc., 6.50% Nts.,
9/15/99 500,000 502,804
- -----------------------------------------------------------------------
Ford Motor Credit Co., 6.75% Nts.,
8/15/08 1,000,000 1,064,037
- -----------------------------------------------------------------------
Franchise Finance Corp. of America,
8.25% Sr. Unsec. Nts., 10/30/03 7,850,000 7,984,047
- -----------------------------------------------------------------------
Household Finance Corp.:
6.40% Sr. Unsec. Unsub. Nts.,
Series EMTN, 6/17/08 2,000,000 2,063,900
8.95% Debs., 9/15/99 500,000 511,410
- -----------------------------------------------------------------------
Household International BV, 6% Gtd.
Sr. Nts., 3/15/99 131,000 131,127
- -----------------------------------------------------------------------
HSBC America Capital Trust II,
8.38% Capital Securities,
5/15/27(7) 3,000,000 3,061,941
- -----------------------------------------------------------------------
Lehman Brothers, Inc., 6.625% Sr.
Sub. Nts., 2/15/08 3,000,000 3,000,228
- -----------------------------------------------------------------------
Liberty Mutual Insurance Co.,
7.697% Unsec. Nts., 10/15/2097(7) 7,000,000 7,069,440
- -----------------------------------------------------------------------
Long Island Savings Bank, 6.20%
Nts., 4/2/01 4,000,000 4,038,592
- -----------------------------------------------------------------------
Lumbermens Mutual Casualty Co.,
8.30% Surplus Nts., 12/1/37(7) 2,000,000 2,242,676
- -----------------------------------------------------------------------
Merrill Lynch & Co., Inc.:
6.56% Nts., 12/16/07 2,000,000 2,084,358
6.875% Nts., 3/1/03-11/15/18 7,450,000 7,774,573
- -----------------------------------------------------------------------
Metropolitan Life Insurance Co.,
6.30% Nts., 11/1/03(7) 3,000,000 3,016,956
- -----------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.,
7% Debs., 10/1/13 1,000,000 1,059,171
- -----------------------------------------------------------------------
Penske Truck Leasing Co. LP, 7.75%
Sr. Nts., 5/15/99 1,000,000 1,009,119
- -----------------------------------------------------------------------
Prudential Insurance Co. of
America, 6.875% Nts., 4/15/03(7) 3,000,000 3,108,741
- -----------------------------------------------------------------------
Rank Group Finance plc, 6.75% Gtd.
Nts., 11/30/04 3,000,000 3,018,534
- -----------------------------------------------------------------------
Salomon Smith Barney Holdings,
Inc., 6.25% Bonds, 1/15/05 3,000,000 3,037,068
- -----------------------------------------------------------------------
Salomon, Inc., 7.30% Nts., 5/15/02 1,000,000 1,044,339
- -----------------------------------------------------------------------
SunAmerica, Inc.:
9% Sr. Nts., 1/15/99 196,000 196,152
9.95% Unsec. Debs., 8/1/08 3,000,000 3,814,737
- -----------------------------------------------------------------------
Travelers Group, Inc.:
6.875% Debs., 2/15/2098 1,000,000 1,018,395
7.25% Sr. Unsec. Nts., 5/1/01 3,300,000 3,414,117
- -----------------------------------------------------------------------
U.S. Leasing International, Inc.,
6.625% Sr. Nts., 5/15/03 750,000 774,986
- -----------------------------------------------------------------------
Washington Mutual Capital I, 8.375%
Sub. Capital Income Nts., 6/1/27 3,000,000 3,314,010
-------------
89,505,950
- -----------------------------------------------------------------------
FOOD & DRUG - 0.2%
Pathmark Stores, Inc.:
0%/10.75% Jr. Sub. Deferred Coupon
Nts., 11/1/03(10) 1,095,000 903,375
12.625% Sub. Nts., 6/15/02 400,000 392,000
-------------
1,295,375
- -----------------------------------------------------------------------
FOOD/TOBACCO - 0.3%
Aurora Foods, Inc., 8.75% Sr. Sub.
Nts., Series B, 7/1/08 300,000 313,500
- -----------------------------------------------------------------------
Bass America, Inc., 6.75% Gtd.
Nts., 8/1/99 750,000 755,815
</TABLE>
45
<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>
FOOD/TOBACCO (CONTINUED)
Coca-Cola Enterprises, Inc., 6.95%
Debs., 11/15/26 $ 1,000,000 $ 1,067,105
-------------
2,136,420
- -----------------------------------------------------------------------
FOREST PRODUCTS/CONTAINERS - 0.6%
Boise Cascade Corp., 9.90% Nts.,
3/15/00 750,000 774,358
- -----------------------------------------------------------------------
Fletcher Challenge Capital Canada,
Inc., 7.75% Nts., 6/20/06 1,800,000 1,834,477
- -----------------------------------------------------------------------
Mail-Well I Corp., 8.75% Sr. Sub.
Nts., 12/15/08(7) 800,000 804,000
- -----------------------------------------------------------------------
Potlatch Corp., 9.46% Medium-Term
Nts., 4/2/02 500,000 548,572
-------------
3,961,407
- -----------------------------------------------------------------------
GAMING/LEISURE - 2.5%
Circus Circus Enterprises, Inc.,
6.75% Nts., 7/15/03 375,000 348,440
- -----------------------------------------------------------------------
Hilton Hotels Corp., 7.95% Sr.
Nts., 4/15/07 4,000,000 4,150,864
- -----------------------------------------------------------------------
HMH Properties, Inc., 8.45% Sr.
Nts., Series C, 12/1/08 300,000 301,500
- -----------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts.,
8/15/08 950,000 978,500
- -----------------------------------------------------------------------
Marriott International, Inc.,
6.875% Nts., 11/15/05(7) 8,500,000 8,542,373
- -----------------------------------------------------------------------
Park Place Entertainment Corp.,
7.875% Sr. Sub. Nts., 12/15/05(7) 600,000 603,750
- -----------------------------------------------------------------------
Premier Parks, Inc., 0%/10% Sr.
Disc. Nts., 4/1/08(10) 300,000 204,750
- -----------------------------------------------------------------------
Station Casinos, Inc.:
8.875% Sr. Sub. Nts., 12/1/08(7) 400,000 408,000
9.75% Sr. Sub. Nts., 4/15/07 550,000 577,500
-------------
16,115,677
- -----------------------------------------------------------------------
HEALTHCARE - 0.3%
Fresenius Medical Care Capital
Trust II, 7.875% Nts., 2/1/08 600,000 594,000
- -----------------------------------------------------------------------
ICN Pharmaceutical, Inc., 8.75% Sr.
Nts., 11/15/08(7) 125,000 126,875
- -----------------------------------------------------------------------
Roche Holdings, Inc., 2.75% Bonds,
4/14/00 1,250,000 1,210,938
-------------
1,931,813
- -----------------------------------------------------------------------
HOUSING - 1.2%
Building Materials Corp. of
America, 8% Sr. Nts., 12/1/08(7) 800,000 802,000
- -----------------------------------------------------------------------
Nationwide Health Properties, Inc.,
7.60% Nts., Series C, 11/20/28 6,900,000 6,934,500
-------------
7,736,500
- -----------------------------------------------------------------------
INFORMATION TECHNOLOGY - 1.6%
Motorola, Inc., 6.50% Unsec. Debs.,
11/15/28 10,000,000 10,185,970
- -----------------------------------------------------------------------
MANUFACTURING - 0.4%
MOLL Industries, Inc., 10.50% Sr.
Sub. Nts., 7/1/08(7) 250,000 246,250
- -----------------------------------------------------------------------
Norsk Hydro AS, 8.75% Bonds,
10/23/01 1,000,000 1,073,750
- -----------------------------------------------------------------------
Tenneco, Inc. (New):
10.20% Debs., 3/15/08 400,000 490,210
8.075% Nts., 10/1/02 650,000 694,406
-------------
2,504,616
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-BROADCASTING -
1.9%
Chancellor Media Corp.:
8.75% Sr. Unsec. Sub. Nts., Series
B, 6/15/07 2,500,000 2,575,000
9% Sr. Sub. Nts., 10/1/08(7) 2,200,000 2,332,000
</TABLE>
46
<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>
MEDIA/ENTERTAINMENT-BROADCASTING
(CONTINUED)
Clear Channel Communications, Inc.,
6.625% Nts., 6/15/08 $ 3,000,000 $ 3,045,828
- -----------------------------------------------------------------------
Time Warner, Inc., 6.95% Debs.,
1/15/28 4,000,000 4,250,416
-------------
12,203,244
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-CABLE/WIRELESS
VIDEO - 1.4%
Comcast Cable Communications, Inc.,
8.125% Unsec. Nts., 5/1/04 5,000,000 5,524,825
- -----------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr.
Unsec. Debs., 7/15/18 1,500,000 1,478,400
- -----------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr.
Debs., 10/30/07 2,200,000 2,395,351
-------------
9,398,576
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-DIVERSIFIED
MEDIA - 3.3%
GSP I Corp., 10.15% First Mtg.
Bonds, 6/24/10(3) 1,086,678 1,108,694
- -----------------------------------------------------------------------
Imax Corp., 7.875% Sr. Nts.,
12/1/05 900,000 913,500
- -----------------------------------------------------------------------
Reed Elsevier, Inc., 6.625% Nts.,
10/15/23(7) 600,000 591,516
- -----------------------------------------------------------------------
Reed Publishing (USA), Inc., 7.66%
Medium-Term Nts., 2/19/99 500,000 501,083
- -----------------------------------------------------------------------
Regal Cinemas, Inc., 9.50% Sr. Sub.
Nts., 6/1/08(7) 500,000 522,500
- -----------------------------------------------------------------------
SFX Entertainment, Inc., 9.125% Sr.
Sub. Nts., 12/1/08(7) 600,000 603,750
- -----------------------------------------------------------------------
Time Warner Entertainment Co. LP,
8.375% Sr. Debs., 3/15/23 1,295,000 1,588,491
- -----------------------------------------------------------------------
Time Warner, Inc., 9.15% Debs.,
2/1/23 12,000,000 15,822,516
-------------
21,652,050
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-TELECOMMUNICATIONS
- -1.9%
Cable & Wireless Communications
plc, 6.625% Nts., 3/6/05 1,000,000 1,010,803
- -----------------------------------------------------------------------
Intermedia Communications, Inc.,
8.60% Sr. Unsec. Nts., Series B,
6/1/08 905,000 864,275
- -----------------------------------------------------------------------
NEXTLINK Communications, Inc.,
9.625% Sr. Nts., 10/1/07 2,200,000 2,112,000
- -----------------------------------------------------------------------
NTL, Inc., 11.50% Sr. Nts.,
10/1/08(7) 1,000,000 1,097,500
- -----------------------------------------------------------------------
PSINet, Inc.:
10% Sr. Unsec. Nts., Series B,
2/15/05 1,000,000 995,000
11.50% Sr. Nts., 11/1/08(7) 1,000,000 1,052,500
- -----------------------------------------------------------------------
Qwest Communications International,
Inc., 0%/8.29% Sr. Unsec. Disc.
Nts., Series B, 2/1/08(10) 1,350,000 1,026,000
- -----------------------------------------------------------------------
Shaw Communications, Inc., 8.54%
Debs., 9/30/27CAD 3,000,000 2,031,401
- -----------------------------------------------------------------------
TCI Communications, Inc., 6.875%
Sr. Unsec. Nts., 2/15/06 2,000,000 2,150,738
-------------
12,340,217
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-WIRELESS
COMMUNICATIONS - 0.9%
Arch Communications, Inc., 12.75%
Sr. Nts., 7/1/07(7) 200,000 201,000
- -----------------------------------------------------------------------
Price Communications Wireless,
Inc., 9.125% Sr. Sec. Nts.,
12/15/06(7) 1,000,000 1,015,000
- -----------------------------------------------------------------------
SBA Communications Corp., 0%/12%
Sr. Unsec. Disc. Nts., 3/1/08(10) 700,000 406,000
- -----------------------------------------------------------------------
Spectrasite Holdings, Inc., 0%/12%
Sr. Disc. Nts., 7/15/08(7)(10) 600,000 303,000
- -----------------------------------------------------------------------
U.S. Cellular Corp., 7.25% Nts.,
8/15/07 4,000,000 4,253,488
-------------
6,178,488
- -----------------------------------------------------------------------
METALS/MINERALS - 0.1%
Great Lakes Carbon Corp., 10.25%
Sr. Sub. Nts., Series B, 5/15/08 750,000 759,375
</TABLE>
47
<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>
RETAIL - 1.3%
Eye Care Centers of America, Inc.,
9.125% Sr. Sub. Nts., 5/1/08(7) $ 250,000 $ 238,750
- -----------------------------------------------------------------------
Neiman Marcus Group, Inc., 6.65%
Sr. Nts., 6/1/08 3,000,000 3,014,988
- -----------------------------------------------------------------------
Staples, Inc., 7.125% Sr. Nts.,
8/15/07 5,000,000 5,159,805
-------------
8,413,543
- -----------------------------------------------------------------------
SERVICE - 4.3%
Allied Waste North America, Inc.,
7.875% Sr. Nts., 1/1/09(7) 665,000 676,638
- -----------------------------------------------------------------------
Archer Daniels Midland Co., 7.125%
Debs., 3/1/13 750,000 849,599
- -----------------------------------------------------------------------
Arvin Industries, Inc., 6.75% Nts.,
3/15/08 2,500,000 2,585,635
- -----------------------------------------------------------------------
Cendant Corp., 7.75% Sr. Unsec.
Nts., 12/1/03(11) 10,000,000 10,230,150
- -----------------------------------------------------------------------
Great Lakes Dredge & Dock Corp.,
11.25% Sr. Sub. Nts., 8/15/08(7) 135,000 137,700
- -----------------------------------------------------------------------
Tyco International Group SA, 5.875%
Nts., 11/1/04(7) 13,500,000 13,436,375
-------------
27,916,097
- -----------------------------------------------------------------------
TRANSPORTATION - 4.7%
Chrysler Corp., 7.40% Debs.,
8/1/2097 2,000,000 2,262,372
- -----------------------------------------------------------------------
CSX Corp.:
6.80% Fixed Nts., 12/1/28 2,700,000 2,697,808
7.25% Sr. Unsec. Debs., 5/1/27 4,820,000 5,145,480
- -----------------------------------------------------------------------
Johnson Controls, Inc., 7.70%
Debs., 3/1/15 500,000 574,979
- -----------------------------------------------------------------------
Kansas City Southern Industries,
Inc., 6.625% Nts., 3/1/05 750,000 777,202
- -----------------------------------------------------------------------
UAL Corp., 9.125% Debs., 1/15/12 5,000,000 5,780,190
- -----------------------------------------------------------------------
Union Pacific Corp.:
6.39% Medium-Term Nts., Series E,
11/1/04 13,000,000 13,152,724
9.65% Medium-Term Nts., 4/17/00 400,000 418,300
-------------
30,809,055
- -----------------------------------------------------------------------
UTILITY - 5.2%
AES Corp., 8% Sr. Nts., 12/31/08 6,600,000 6,537,762
- -----------------------------------------------------------------------
Alltel Corp., 6.50% Debs., 11/1/13 1,000,000 1,051,429
- -----------------------------------------------------------------------
Cincinnati Bell Telephone Co.,
6.30% Sr. Unsec. Bonds, 12/1/28 1,000,000 1,005,723
- -----------------------------------------------------------------------
Cleveland Electric Illuminating
Co./Toledo Edison Co., 7.13% Sec.
Nts., Series B, 7/1/07 3,000,000 3,218,124
- -----------------------------------------------------------------------
Consolidated Natural Gas Co.,
6.625% Debs., 12/1/13 1,000,000 1,032,508
- -----------------------------------------------------------------------
GTE Corp., 9.375% Debs., 12/1/00 500,000 538,142
- -----------------------------------------------------------------------
Long Island Lighting Co., 8.20%
Debs., 3/15/23 3,300,000 3,574,250
- -----------------------------------------------------------------------
National Fuel Gas Co., 7.75% Debs.,
2/1/04 500,000 546,822
- -----------------------------------------------------------------------
Northern Telecom Ltd., 6.875% Nts.,
10/1/02 500,000 525,985
- -----------------------------------------------------------------------
Public Service Co. of Colorado,
8.75% First Mtg. Bonds, 3/1/22 750,000 826,739
- -----------------------------------------------------------------------
South Carolina Electric & Gas Co.,
9% Mtg. Bonds, 7/15/06 500,000 601,390
- -----------------------------------------------------------------------
Sprint Capital Corp., 6.875% Sr.
Unsec. Nts., 11/15/28 6,000,000 6,250,440
- -----------------------------------------------------------------------
TE Products Pipeline Co., 6.45% Sr.
Nts., 1/15/08 4,000,000 4,061,760
- -----------------------------------------------------------------------
Texas Gas Transmission Corp.,
8.625% Nts., 4/1/04 500,000 565,720
- -----------------------------------------------------------------------
Washington Gas Light Co., 8.75%
First Mtg. Bonds, 7/1/19 500,000 506,909
</TABLE>
48
<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>
UTILITY (CONTINUED)
Williams Cos., Inc., 6.125% Sec.
Nts., 2/15/02 $ 3,000,000 $ 3,026,301
-------------
33,870,004
-------------
Total Corporate Bonds and Notes
(Cost $347,798,759) 354,329,323
</TABLE>
<TABLE>
<CAPTION>
SHARES
- -----------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS - 1.6%
- -----------------------------------------------------------------
Centaur Funding Corp., 9.08%, Cum.
Preferred Shares, 4/21/20(3)(12) 6,600 6,917,625
- -----------------------------------------------------------------
United Dominion Realty Trust, Inc.,
8.50% Unsec. Unsub. Preferred Nts. 135,000 3,493,125
-------------
Total Preferred Stocks (Cost
$9,975,000) 10,410,750
- -----------------------------------------------------------------
OTHER SECURITIES - 0.5%
- -----------------------------------------------------------------
Allstate Financing I, 7.95% Gtd.
Quarterly Income Preferred
Securities, Series A (Cost
$3,000,000) 120,000 3,120,000
PRINCIPAL
AMOUNT (1)
- -----------------------------------------------------------------
STRUCTURED INSTRUMENTS - 3.9%
- -----------------------------------------------------------------
Bankers Trust/Bear Stearns High
Yield Composite Index Linked Nts.,
8.135%, 6/1/99 $ 5,000,000 5,088,850
- -----------------------------------------------------------------
Bankers Trust/Lehman High Yield
Composite Index Linked Nts., 7.70%,
5/4/99 1,000,000 1,033,950
- -----------------------------------------------------------------
Bayerische Landesbank Girozentrale
(New York Branch), Lehman High
Yield Index Nts., 8.50%, 3/8/99 6,000,000 5,655,000
- -----------------------------------------------------------------
Bear Stearns High Yield Composite
Index Linked Nts., 8.50%, 4/9/99 3,000,000 2,788,140
- -----------------------------------------------------------------
Commerzbank International SA,
Lehman High Yield Composite Index
Linked Nts., 7.80%, 2/5/99-4/5/99 10,000,000 9,973,000
- -----------------------------------------------------------------
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)(3) 1,000,000 1,130,000
-------------
Total Structured Instruments (Cost
$26,100,540) 25,668,940
- -----------------------------------------------------------------
REPURCHASE AGREEMENTS - 0.4%
- -----------------------------------------------------------------
Repurchase agreement with First
Chicago Capital Markets, 4.75%,
dated 12/31/98, to be repurchased
at $2,601,372 on 1/4/99,
collateralized by U.S. Treasury
Nts., 4%-8.875%, 2/15/99-7/15/06,
with a value of $2,653,050 (Cost
$2,600,000) 2,600,000 2,600,000
- -----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$681,813,086) 105.0% 688,013,848
- -----------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (5.0) (32,471,149)
------------- -------------
NET ASSETS 100.0% $655,542,699
------------- -------------
------------- -------------
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
CAD - Canadian Dollar
IDR - Indonesian Rupiah
49
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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. Identifies issues considered to be illiquid or restricted - See applicable
note of Notes to Financial Statements.
4. When-issued security to be delivered and settled after December 31, 1998.
5. 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.
6. Represents the current interest rate for a variable rate security.
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 $60,469,812 or 9.22% of the Fund's net
assets as of December 31, 1998.
8. Non-income producing - issuer is in default.
9. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See applicable note of Notes to
Financial Statements.
10. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
11. Securities with an aggregate market value of $5,115,075 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See applicable note of Notes to Financial Statements.
12. Non-income producing security.
See accompanying Notes to Financial Statements.
50
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER AGGRESSIVE GROWTH FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 88.6%
- ------------------------------------------------------------------------------------------
CAPITAL GOODS - 9.8%
- ------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 1.2%
Gulfstream Aerospace Corp.(1) 242,200 $ 12,897,150
- ------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 4.9%
Allied Waste Industries, Inc. (New)(1) 875,835 20,691,602
- ------------------------------------------------------------------------------------------
Republic Services, Inc., Cl. A(1) 325,200 5,995,875
- ------------------------------------------------------------------------------------------
United Rentals, Inc.(1) 294,693 9,761,706
- ------------------------------------------------------------------------------------------
Waste Management, Inc. (New) 344,600 16,066,975
--------------
52,516,158
- ------------------------------------------------------------------------------------------
MANUFACTURING - 3.7%
Tyco International Ltd. 525,000 39,604,687
- ------------------------------------------------------------------------------------------
CONSUMER CYCLICALS - 10.5%
- ------------------------------------------------------------------------------------------
MEDIA - 1.0%
Infinity Broadcasting Corp., Cl. A(1) 391,900 10,728,262
- ------------------------------------------------------------------------------------------
RETAIL: GENERAL - 3.9%
Fred Meyer, Inc.(1) 220,000 13,255,000
- ------------------------------------------------------------------------------------------
Kohl's Corp.(1) 200,000 12,287,500
- ------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 200,000 16,287,500
--------------
41,830,000
- ------------------------------------------------------------------------------------------
RETAIL: SPECIALTY - 5.6%
Abercrombie & Fitch Co., Cl. A(1) 105,000 7,428,750
- ------------------------------------------------------------------------------------------
Guitar Center, Inc.(1) 120,000 2,955,000
- ------------------------------------------------------------------------------------------
Home Depot, Inc. 375,000 22,945,312
- ------------------------------------------------------------------------------------------
Linens 'N Things, Inc.(1) 669,000 26,509,125
--------------
59,838,187
- ------------------------------------------------------------------------------------------
CONSUMER STAPLES - 7.5%
- ------------------------------------------------------------------------------------------
CONSUMER SERVICES - 0.6%
Young & Rubicam, Inc.(1) 186,300 6,031,462
- ------------------------------------------------------------------------------------------
ENTERTAINMENT - 3.5%
Outback Steakhouse, Inc.(1) 210,000 8,373,750
- ------------------------------------------------------------------------------------------
SFX Entertainment, Inc., Cl. A(1) 275,000 15,090,625
- ------------------------------------------------------------------------------------------
Starbucks Corp.(1) 250,000 14,031,250
--------------
37,495,625
- ------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS - 3.4%
CVS Corp. 665,000 36,575,000
- ------------------------------------------------------------------------------------------
FINANCIAL - 10.9%
- ------------------------------------------------------------------------------------------
BANKS - 2.0%
Fifth Third Bancorp 200,000 14,262,500
- ------------------------------------------------------------------------------------------
First Tennessee National Corp. 200,000 7,612,500
--------------
21,875,000
</TABLE>
51
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER AGGRESSIVE GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED FINANCIAL - 8.9%
Associates First Capital Corp., Cl. A 432,000 $ 18,306,000
- ------------------------------------------------------------------------------------------
Freddie Mac 380,000 24,486,250
- ------------------------------------------------------------------------------------------
Providian Financial Corp. 375,000 28,125,000
- ------------------------------------------------------------------------------------------
Schwab (Charles) Corp. 450,000 25,284,375
--------------
96,201,625
- ------------------------------------------------------------------------------------------
HEALTHCARE - 12.1%
- ------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 4.7%
Biogen, Inc.(1) 260,000 21,580,000
- ------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 50,000 6,690,625
- ------------------------------------------------------------------------------------------
Pfizer, Inc. 75,000 9,407,812
- ------------------------------------------------------------------------------------------
Warner Lambert Co. 175,000 13,157,812
--------------
50,836,249
- ------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 7.4%
Cardinal Health, Inc. 450,000 34,143,750
- ------------------------------------------------------------------------------------------
Guidant Corp. 100,000 11,025,000
- ------------------------------------------------------------------------------------------
HEALTHSOUTH Corp.(1) 59,300 915,444
- ------------------------------------------------------------------------------------------
McKesson Corp. 230,000 18,184,375
- ------------------------------------------------------------------------------------------
Medtronic, Inc. 125,900 9,348,075
- ------------------------------------------------------------------------------------------
Sofamor Danek Group, Inc.(1) 50,000 6,087,500
--------------
79,704,144
- ------------------------------------------------------------------------------------------
TECHNOLOGY - 33.3%
- ------------------------------------------------------------------------------------------
COMPUTER HARDWARE - 7.7%
3Com Corp.(1) 25,000 1,120,313
- ------------------------------------------------------------------------------------------
Ascend Communications, Inc.(1) 300,000 19,725,000
- ------------------------------------------------------------------------------------------
Cisco Systems, Inc.(1) 225,000 20,882,813
- ------------------------------------------------------------------------------------------
Dell Computer Corp.(1) 175,000 12,807,813
- ------------------------------------------------------------------------------------------
EMC Corp.(1) 340,000 28,900,000
--------------
83,435,939
- ------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 16.8%
Affiliated Computer Services, Inc., Cl. A(1) 200,000 9,000,000
- ------------------------------------------------------------------------------------------
Cap Gemini SA 116,666 18,734,205
- ------------------------------------------------------------------------------------------
Citrix Systems, Inc.(1) 360,000 34,942,500
- ------------------------------------------------------------------------------------------
Compuware Corp.(1) 400,000 31,250,000
- ------------------------------------------------------------------------------------------
Electronic Arts, Inc.(1) 200,000 11,225,000
- ------------------------------------------------------------------------------------------
HBO & Co. 760,000 21,802,500
- ------------------------------------------------------------------------------------------
Lernout & Hauspie Speech Products NV(1) 317,600 10,361,700
- ------------------------------------------------------------------------------------------
Microsoft Corp.(1) 225,000 31,204,688
- ------------------------------------------------------------------------------------------
Visio Corp.(1) 345,000 12,614,063
--------------
181,134,656
- ------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.3%
General Instrument Corp.(1) 100,000 3,393,750
- ------------------------------------------------------------------------------------------
Lucent Technologies, Inc. 100,000 11,000,000
--------------
14,393,750
</TABLE>
52
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER AGGRESSIVE GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRONICS - 7.5%
JDS Fitel, Inc.(1) 425,000 $ 10,545,217
- ------------------------------------------------------------------------------------------
Level One Communications, Inc.(1) 200,000 7,100,000
- ------------------------------------------------------------------------------------------
Uniphase Corp.(1)(2) 228,000 15,817,500
- ------------------------------------------------------------------------------------------
Vitesse Semiconductor Corp.(1) 420,000 19,162,500
- ------------------------------------------------------------------------------------------
Waters Corp.(1) 325,000 28,356,250
--------------
80,981,467
- ------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.5%
- ------------------------------------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY - 4.5%
Global Crossing Ltd.(1) 362,700 16,366,838
- ------------------------------------------------------------------------------------------
MCI WorldCom, Inc.(1) 350,000 25,112,500
- ------------------------------------------------------------------------------------------
Qwest Communications International, Inc.(1) 146,610 7,330,500
--------------
48,809,838
--------------
Total Common Stocks (Cost $603,144,720) 954,889,199
- ------------------------------------------------------------------------------------------
OTHER SECURITIES - 0.8%
- ------------------------------------------------------------------------------------------
L & H Capital Trust, Inc., 4.75% Cv. Preferred Income Equity
Redeemable Securities(3) 132,500 4,223,437
- ------------------------------------------------------------------------------------------
United Rental Trust I, 6.50% Cv. Quarterly Income Preferred
Securities(3) 100,000 4,812,500
--------------
Total Other Securities (Cost $11,695,000) 9,035,937
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) $ 2,000,000 3,137,500
- ------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 10.4%
- ------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets,
4.75%, dated 12/31/98, to be repurchased at $112,559,375 on
1/4/99, collateralized by U.S. Treasury Nts., 4%-8.875%,
2/15/99-7/15/06, with a value of $114,795,454 (Cost
$112,500,000) 112,500,000 112,500,000
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $729,339,720) 100.1% 1,079,562,636
- ------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1) (1,602,476)
------------ --------------
NET ASSETS 100.0% $1,077,960,160
------------ --------------
------------ --------------
</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 MARKET
SUBJECT EXPIRATION EXERCISE PREMIUM VALUE
TO CALL DATE PRICE RECEIVED NOTE 1
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Uniphase Corp. 13,800 1/99 $70 $34,764 $32,775
</TABLE>
3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $9,035,937, or 0.84% of the Fund's net
assets as of December 31, 1998.
See accompanying Notes to Financial Statements.
53
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- -----------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 91.5%
- -----------------------------------------------------------------
BASIC MATERIALS - 1.7%
- -----------------------------------------------------------------
CHEMICALS - 1.5%
Crompton & Knowles Corp. 100,200 $ 2,072,887
- -----------------------------------------------------------------
Morton International, Inc. 139,000 3,405,500
- -----------------------------------------------------------------
PPG Industries, Inc. 100,000 5,825,000
-------------
11,303,387
- -----------------------------------------------------------------
PAPER - 0.2%
Rayonier, Inc. 32,400 1,488,375
- -----------------------------------------------------------------
CAPITAL GOODS - 4.1%
- -----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.4%
Emerson Electric Co. 45,000 2,815,312
- -----------------------------------------------------------------
Sanmina Corp.(1) 128,500 8,031,250
-------------
10,846,562
- -----------------------------------------------------------------
INDUSTRIAL SERVICES - 0.9%
Coflexip SA, Sponsored ADR 49,200 1,580,550
- -----------------------------------------------------------------
Southdown, Inc. 95,500 5,652,406
-------------
7,232,956
- -----------------------------------------------------------------
MANUFACTURING - 1.8%
Herman Miller, Inc. 120,000 3,225,000
- -----------------------------------------------------------------
Illinois Tool Works, Inc. 57,500 3,335,000
- -----------------------------------------------------------------
Owens-Illinois, Inc.(1) 40,000 1,225,000
- -----------------------------------------------------------------
Tyco International Ltd. 75,022 5,659,472
-------------
13,444,472
- -----------------------------------------------------------------
CONSUMER CYCLICALS - 16.8%
- -----------------------------------------------------------------
AUTOS & HOUSING - 3.3%
Arvin Industries, Inc. 99,300 4,139,569
- -----------------------------------------------------------------
Centex Corp. 136,000 6,128,500
- -----------------------------------------------------------------
Ethan Allen Interiors, Inc. 80,000 3,280,000
- -----------------------------------------------------------------
Magna International, Inc., Cl. A 22,000 1,364,000
- -----------------------------------------------------------------
Pulte Corp. 44,000 1,223,750
- -----------------------------------------------------------------
Toll Brothers, Inc.(1) 156,200 3,524,262
- -----------------------------------------------------------------
USG Corp. 110,000 5,603,125
-------------
25,263,206
- -----------------------------------------------------------------
LEISURE & ENTERTAINMENT - 4.1%
Callaway Golf Co. 95,000 973,750
- -----------------------------------------------------------------
Carnival Corp. 410,000 19,680,000
- -----------------------------------------------------------------
Harley-Davidson, Inc. 70,000 3,316,250
- -----------------------------------------------------------------
Harrah's Entertainment, Inc.(1) 153,000 2,400,187
- -----------------------------------------------------------------
International Game Technology 50,000 1,215,625
</TABLE>
54
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- -----------------------------------------------------------------
<S> <C> <C>
LEISURE & ENTERTAINMENT (CONTINUED)
Premier Parks, Inc.(1) 130,000 $ 3,932,500
-------------
31,518,312
- -----------------------------------------------------------------
MEDIA - 3.2%
CBS Corp. 150,000 4,912,500
- -----------------------------------------------------------------
Chancellor Media Corp.(1) 130,000 6,223,750
- -----------------------------------------------------------------
Infinity Broadcasting Corp., Cl.
A(1) 223,900 6,129,262
- -----------------------------------------------------------------
New York Times Co., Cl. A 200,000 6,937,500
-------------
24,203,012
- -----------------------------------------------------------------
RETAIL: GENERAL - 4.2%
Dayton Hudson Corp. 65,000 3,526,250
- -----------------------------------------------------------------
Federated Department Stores,
Inc.(1) 50,000 2,178,125
- -----------------------------------------------------------------
Fred Meyer, Inc.(1) 160,000 9,640,000
- -----------------------------------------------------------------
Jones Apparel Group, Inc.(1) 200,000 4,412,500
- -----------------------------------------------------------------
Nordstrom, Inc. 125,000 4,335,937
- -----------------------------------------------------------------
Tommy Hilfiger Corp.(1) 120,000 7,200,000
- -----------------------------------------------------------------
WestPoint Stevens, Inc.(1) 35,000 1,104,687
-------------
32,397,499
- -----------------------------------------------------------------
RETAIL: SPECIALTY - 2.0%
Barnes & Noble, Inc.(1) 80,000 3,400,000
- -----------------------------------------------------------------
Intimate Brands, Inc., Cl. A 62,000 1,852,250
- -----------------------------------------------------------------
Nine West Group, Inc.(1) 130,000 2,023,125
- -----------------------------------------------------------------
Republic Industries, Inc.(1) 206,000 3,038,500
- -----------------------------------------------------------------
TJX Cos., Inc. 184,000 5,336,000
-------------
15,649,875
- -----------------------------------------------------------------
CONSUMER STAPLES - 12.6%
- -----------------------------------------------------------------
CONSUMER SERVICES - 2.5%
Budget Group, Inc., Cl. A(1) 271,800 4,314,825
- -----------------------------------------------------------------
Hertz Corp., Cl. A 73,000 3,330,625
- -----------------------------------------------------------------
Omnicom Group, Inc. 145,000 8,410,000
- -----------------------------------------------------------------
Young & Rubicam, Inc.(1) 94,500 3,059,437
-------------
19,114,887
- -----------------------------------------------------------------
ENTERTAINMENT - 2.9%
CKE Restaurants, Inc. 127,270 3,746,511
- -----------------------------------------------------------------
Royal Caribbean Cruises Ltd. 190,000 7,030,000
- -----------------------------------------------------------------
Time Warner, Inc. 180,000 11,171,250
-------------
21,947,761
- -----------------------------------------------------------------
FOOD - 1.0%
IBP, Inc. 72,800 2,120,300
- -----------------------------------------------------------------
Keebler Foods Co.(1) 145,000 5,455,625
-------------
7,575,925
</TABLE>
55
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- -----------------------------------------------------------------
<S> <C> <C>
FOOD & DRUG RETAILERS - 4.5%
CVS Corp. 280,000 $ 15,400,000
- -----------------------------------------------------------------
Safeway, Inc.(1) 310,000 18,890,625
-------------
34,290,625
- -----------------------------------------------------------------
HOUSEHOLD GOODS - 1.7%
Avon Products, Inc. 287,000 12,699,750
- -----------------------------------------------------------------
ENERGY - 1.6%
- -----------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.8%
BJ Services Co.(1) 50,000 781,250
- -----------------------------------------------------------------
Global Industries Ltd.(1) 60,100 368,112
- -----------------------------------------------------------------
Halliburton Co. 129,800 3,845,325
- -----------------------------------------------------------------
Varco International, Inc.(1) 166,200 1,288,050
-------------
6,282,737
- -----------------------------------------------------------------
OIL - DOMESTIC - 0.4%
Mobil Corp. 18,200 1,585,675
- -----------------------------------------------------------------
Texaco, Inc. 29,000 1,533,375
-------------
3,119,050
- -----------------------------------------------------------------
OIL - INTERNATIONAL - 0.4%
Total SA, Sponsored ADR 60,000 2,985,000
- -----------------------------------------------------------------
FINANCIAL - 11.9%
- -----------------------------------------------------------------
BANKS - 2.9%
Bank One Corp. 124,488 6,356,668
- -----------------------------------------------------------------
BankBoston Corp. 30,000 1,168,125
- -----------------------------------------------------------------
Chase Manhattan Corp. (New) 31,280 2,128,995
- -----------------------------------------------------------------
Credito Italiano SpA 376,000 2,233,572
- -----------------------------------------------------------------
Fleet Financial Group, Inc. 150,000 6,703,125
- -----------------------------------------------------------------
Skandinaviska Enskilda Banken Group 177,500 1,872,330
- -----------------------------------------------------------------
Unibanco-Uniao de Bancos
Brasileiros SA, Sponsored GDR 133,000 1,920,188
-------------
22,383,003
- -----------------------------------------------------------------
DIVERSIFIED FINANCIAL - 6.5%
Associates First Capital Corp., Cl.
A 180,000 7,627,500
- -----------------------------------------------------------------
Boston Properties, Inc. 110,000 3,355,000
- -----------------------------------------------------------------
Citigroup, Inc. 228,499 11,310,701
- -----------------------------------------------------------------
Fannie Mae 36,000 2,664,000
- -----------------------------------------------------------------
Finova Group, Inc. 60,800 3,279,400
- -----------------------------------------------------------------
Franklin Resources, Inc. 71,200 2,278,400
- -----------------------------------------------------------------
Freddie Mac 60,000 3,866,250
- -----------------------------------------------------------------
Merrill Lynch & Co., Inc. 70,000 4,672,500
- -----------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 80,000 5,680,000
- -----------------------------------------------------------------
Price (T. Rowe) Associates, Inc. 65,000 2,226,250
</TABLE>
56
<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)
Schwab (Charles) Corp. 60,000 $ 3,371,250
-------------
50,331,251
INSURANCE - 2.5%
CMAC Investment Corp. 30,000 1,378,125
- -----------------------------------------------------------------
Conseco, Inc. 190,000 5,806,875
- -----------------------------------------------------------------
Equitable Cos., Inc. 100,000 5,787,500
- -----------------------------------------------------------------
SunAmerica, Inc. 78,500 6,368,313
-------------
19,340,813
- -----------------------------------------------------------------
HEALTHCARE - 8.7%
- -----------------------------------------------------------------
HEALTHCARE/DRUGS - 5.2%
Elan Corp. plc, ADR(1) 100,000 6,956,250
- -----------------------------------------------------------------
Lilly (Eli) & Co. 45,000 3,999,375
- -----------------------------------------------------------------
Pfizer, Inc. 142,000 17,812,125
- -----------------------------------------------------------------
Schering-Plough Corp. 205,600 11,359,400
-------------
40,127,150
- -----------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES -
3.5%
Baxter International, Inc. 63,000 4,051,688
- -----------------------------------------------------------------
Cardinal Health, Inc. 95,400 7,238,475
- -----------------------------------------------------------------
First Health Group Corp.(1) 157,600 2,610,250
- -----------------------------------------------------------------
HEALTHSOUTH Corp.(1) 88,000 1,358,500
- -----------------------------------------------------------------
Lincare Holdings, Inc.(1) 30,000 1,216,875
- -----------------------------------------------------------------
Medtronic, Inc. 55,000 4,083,750
- -----------------------------------------------------------------
Safeskin Corp.(1) 130,000 3,136,250
- -----------------------------------------------------------------
Total Renal Care Holdings, Inc.(1) 101,750 3,007,984
-------------
26,703,772
- -----------------------------------------------------------------
TECHNOLOGY - 29.0%
- -----------------------------------------------------------------
COMPUTER HARDWARE - 7.7%
Cisco Systems, Inc.(1) 200,000 18,562,500
- -----------------------------------------------------------------
Compaq Computer Corp. 250,000 10,484,375
- -----------------------------------------------------------------
Data General Corp.(1) 159,000 2,613,563
- -----------------------------------------------------------------
Dell Computer Corp.(1) 25,000 1,829,688
- -----------------------------------------------------------------
EMC Corp.(1) 94,000 7,990,000
- -----------------------------------------------------------------
Gateway 2000, Inc.(1) 100,000 5,118,750
- -----------------------------------------------------------------
Seagate Technology, Inc.(1) 210,000 6,352,500
- -----------------------------------------------------------------
Sun Microsystems, Inc.(1) 74,000 6,336,250
-------------
59,287,626
- -----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 10.2%
BMC Software, Inc.(1) 180,000 8,021,250
- -----------------------------------------------------------------
Cambridge Technology Partners,
Inc.(1) 50,000 1,106,250
- -----------------------------------------------------------------
Gartner Group, Inc., Cl. A(1) 91,000 1,933,750
</TABLE>
57
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- -----------------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES
(CONTINUED)
HBO & Co. 170,000 $ 4,876,875
- -----------------------------------------------------------------
Microsoft Corp.(1) 185,000 25,657,188
- -----------------------------------------------------------------
Network Associates, Inc.(1) 120,000 7,950,000
- -----------------------------------------------------------------
Oracle Corp.(1) 180,000 7,762,500
- -----------------------------------------------------------------
Peoplesoft, Inc.(1) 188,000 3,560,250
- -----------------------------------------------------------------
PLATINUM Technology, Inc.(1) 148,300 2,836,238
- -----------------------------------------------------------------
Saville Systems Ireland plc,
Sponsored ADR(1) 85,000 1,615,000
- -----------------------------------------------------------------
Sungard Data Systems, Inc.(1) 163,300 6,480,969
- -----------------------------------------------------------------
Unisys Corp.(1) 110,000 3,788,125
- -----------------------------------------------------------------
Veritas Software Corp.(1) 50,000 2,996,875
-------------
78,585,270
- -----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 5.3%
Alcatel SA, Sponsored ADR 140,000 3,421,250
- -----------------------------------------------------------------
CIENA Corp.(1) 100,000 1,462,500
- -----------------------------------------------------------------
General Instrument Corp.(1) 250,000 8,484,375
- -----------------------------------------------------------------
Lucent Technologies, Inc. 35,000 3,850,000
- -----------------------------------------------------------------
Premisys Communications, Inc.(1) 160,000 1,470,000
- -----------------------------------------------------------------
Tellabs, Inc.(1) 323,000 22,145,688
-------------
40,833,813
- -----------------------------------------------------------------
ELECTRONICS - 5.8%
Applied Materials, Inc.(1) 70,000 2,988,125
- -----------------------------------------------------------------
LSI Logic Corp.(1) 63,000 1,015,875
- -----------------------------------------------------------------
Micron Technology, Inc.(1) 105,000 5,309,063
- -----------------------------------------------------------------
Motorola, Inc. 70,000 4,274,375
- -----------------------------------------------------------------
Novellus Systems, Inc.(1) 78,000 3,861,000
- -----------------------------------------------------------------
Uniphase Corp.(1) 80,000 5,550,000
- -----------------------------------------------------------------
Vitesse Semiconductor Corp.(1) 286,100 13,053,313
- -----------------------------------------------------------------
Waters Corp.(1) 100,000 8,725,000
-------------
44,776,751
- -----------------------------------------------------------------
TELECOMMUNICATIONS - 3.9%
- -----------------------------------------------------------------
TELEPHONE UTILITIES - 1.2%
Embratel Participacoes SA, ADR(1) 80,000 1,115,000
- -----------------------------------------------------------------
SBC Communications, Inc. 70,000 3,753,750
- -----------------------------------------------------------------
Telesp Celular Participacoes SA,
ADR(1) 100,000 1,750,000
- -----------------------------------------------------------------
Telesp Participacoes SA, ADR(1) 115,000 2,544,375
-------------
9,163,125
- -----------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY -
2.7%
MCI WorldCom, Inc.(1) 211,000 15,139,250
- -----------------------------------------------------------------
Qwest Communications International,
Inc.(1) 113,942 5,697,100
-------------
20,836,350
</TABLE>
58
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- -----------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 1.2%
- -----------------------------------------------------------------
RAILROADS & TRUCKERS - 1.2%
Kansas City Southern Industries,
Inc. 190,000 $ 9,345,625
-------------
Total Common Stocks (Cost
$511,894,542) 703,077,940
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS - 8.4%
- -----------------------------------------------------------------
Repurchase agreement with First
Chicago Capital Markets, 4.75%,
dated 12/31/98, to be repurchased
at $64,433,989 on 1/4/99,
collateralized by U.S. Treasury
Nts.,
4%-8.875%, 2/15/99-7/15/06, with a
value of $65,714,020 (Cost
$64,400,000) $ 64,400,000 64,400,000
- -----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$576,294,542) 99.9% 767,477,940
- -----------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.1 1,071,756
------------ -------------
NET ASSETS 100.0% $768,549,696
------------ -------------
------------ -------------
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
59
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 48.3%
- --------------------------------------------------------------------------
BASIC MATERIALS - 1.5%
- --------------------------------------------------------------------------
CHEMICALS - 0.9%
Bayer AG, Sponsored ADR 47,000 $ 1,962,659
- --------------------------------------------------------------------------
Du Pont (E.I.) De Nemours & Co. 27,000 1,432,687
- --------------------------------------------------------------------------
Potash Corp. of Saskatchewan, Inc.(1) 32,500 2,075,937
---------------
5,471,283
- --------------------------------------------------------------------------
METALS - 0.2%
De Beers Consolidated Mines Ltd., ADR 100,000 1,275,000
- --------------------------------------------------------------------------
PAPER - 0.4%
MacMillan Bloedel Ltd. 130,883 1,307,548
- --------------------------------------------------------------------------
Wausau-Mosinee Paper Corp. 77,000 1,361,937
---------------
2,669,485
- --------------------------------------------------------------------------
CAPITAL GOODS - 1.8%
- --------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.3%
Rockwell International Corp. 42,500 2,063,906
- --------------------------------------------------------------------------
MANUFACTURING - 1.5%
AGCO Corp. 90,000 708,750
- --------------------------------------------------------------------------
ASM Lithography Holding NV(1)(2) 50,400 1,537,200
- --------------------------------------------------------------------------
Cognex Corp.(2) 70,000 1,400,000
- --------------------------------------------------------------------------
Hexcel Corp. (New)(2) 125,000 1,046,875
- --------------------------------------------------------------------------
Hutchison Whampoa Ltd. 35,000 247,353
- --------------------------------------------------------------------------
JLK Direct Distribution, Inc.(2) 30,000 305,625
- --------------------------------------------------------------------------
Pall Corp. 105,000 2,657,812
- --------------------------------------------------------------------------
Tenneco, Inc. (New) 50,000 1,703,125
---------------
9,606,740
- --------------------------------------------------------------------------
CONSUMER CYCLICALS - 8.1%
- --------------------------------------------------------------------------
AUTOS & HOUSING - 1.3%
Dana Corp. 37,500 1,532,812
- --------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 10,000 410,000
- --------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA 363,877 997,923
- --------------------------------------------------------------------------
Lear Corp.(2) 52,500 2,021,250
- --------------------------------------------------------------------------
Owens Corning 58,000 2,055,375
- --------------------------------------------------------------------------
Toll Brothers, Inc.(2) 46,000 1,037,875
---------------
8,055,235
- --------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 2.9%
Berjaya Sports Toto Berhad(3) 410,000 409,137
- --------------------------------------------------------------------------
Brunswick Corp. 65,000 1,608,750
- --------------------------------------------------------------------------
Callaway Golf Co. 87,000 891,750
- --------------------------------------------------------------------------
Carnival Corp. 27,500 1,320,000
</TABLE>
60
<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)
Crestline Capital Corp.(2) 9,000 $ 138,375
- --------------------------------------------------------------------------
Host Marriott Corp.(2) 90,000 1,243,125
- --------------------------------------------------------------------------
International Game Technology 120,000 2,917,500
- --------------------------------------------------------------------------
Marriott International, Inc., Cl. A 35,000 1,015,000
- --------------------------------------------------------------------------
Mattel, Inc. -- 6
- --------------------------------------------------------------------------
Mirage Resorts, Inc.(2) 170,000 2,539,375
- --------------------------------------------------------------------------
Nintendo Co. Ltd. 32,000 3,094,040
- --------------------------------------------------------------------------
Shimano, Inc. 100,000 2,573,951
---------------
17,751,009
- --------------------------------------------------------------------------
MEDIA - 1.6%
CBS Corp.(1) 110,000 3,602,500
- --------------------------------------------------------------------------
MediaOne Group, Inc.(2) 57,600 2,707,200
- --------------------------------------------------------------------------
RCN Corp.(2) 135,000 2,387,812
- --------------------------------------------------------------------------
South China Morning Post Holdings Ltd. 2,258,000 1,158,580
---------------
9,856,092
- --------------------------------------------------------------------------
RETAIL: GENERAL - 1.6%
Cone Mills Corp.(2) 154,000 866,250
- --------------------------------------------------------------------------
Dayton Hudson Corp. 28,000 1,519,000
- --------------------------------------------------------------------------
Federated Department Stores, Inc.(1)(2) 47,500 2,069,219
- --------------------------------------------------------------------------
Jones Apparel Group, Inc.(2) 77,000 1,698,812
- --------------------------------------------------------------------------
Neiman Marcus Group, Inc.(2) 79,000 1,970,062
- --------------------------------------------------------------------------
Saks, Inc.(2) 51,660 1,630,519
---------------
9,753,862
- --------------------------------------------------------------------------
RETAIL: SPECIALTY - 0.7%
AutoZone, Inc.(1)(2) 57,000 1,877,437
- --------------------------------------------------------------------------
General Nutrition Cos., Inc.(2) 104,000 1,690,000
- --------------------------------------------------------------------------
Petco Animal Supplies, Inc.(2) 60,000 603,750
---------------
4,171,187
- --------------------------------------------------------------------------
CONSUMER STAPLES - 4.5%
- --------------------------------------------------------------------------
BEVERAGES - 0.6%
Coca-Cola Beverages plc(2) 55,000 95,750
- --------------------------------------------------------------------------
Diageo plc 155,800 1,744,928
- --------------------------------------------------------------------------
Whitman Corp.(1) 62,000 1,573,250
---------------
3,413,928
- --------------------------------------------------------------------------
CONSUMER SERVICES - 0.4%
Alternative Living Services, Inc.(2) 74,000 2,534,500
- --------------------------------------------------------------------------
Intermedia Communications, Inc.(2) 462 7,969
- --------------------------------------------------------------------------
Intermedia Communications, Inc.(2)(3) 58 800
---------------
2,543,269
</TABLE>
61
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT - 1.0%
Cracker Barrel Old Country Store, Inc. 76,000 $ 1,771,750
- --------------------------------------------------------------------------
Luby's Cafeterias, Inc. 90,000 1,389,375
- --------------------------------------------------------------------------
Time Warner, Inc. 48,000 2,979,000
---------------
6,140,125
- --------------------------------------------------------------------------
FOOD - 0.7%
Groupe Danone 10,000 2,864,300
- --------------------------------------------------------------------------
Nestle SA, Sponsored ADR 14,000 1,523,866
---------------
4,388,166
- --------------------------------------------------------------------------
FOOD & DRUG RETAILERS - 0.0%
Cia Brasileira de Distribuicao Grupo Pao
de Acucar, Sponsored ADR 14,000 217,000
- --------------------------------------------------------------------------
HOUSEHOLD GOODS - 0.7%
Fort James Corp. 43,000 1,720,000
- --------------------------------------------------------------------------
Rexall Sundown, Inc.(2) 52,100 729,400
- --------------------------------------------------------------------------
Wella AG 2,150 1,471,608
- --------------------------------------------------------------------------
Wella AG, Preference 200 168,115
---------------
4,089,123
- --------------------------------------------------------------------------
TOBACCO - 1.1%
Imperial Tobacco Group plc 225,400 2,406,714
- --------------------------------------------------------------------------
Philip Morris Cos., Inc.(1) 87,000 4,654,500
---------------
7,061,214
- --------------------------------------------------------------------------
ENERGY - 2.2%
- --------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.9%
Baker Hughes, Inc. 33,750 596,953
- --------------------------------------------------------------------------
Input/Output, Inc.(2) 193,000 1,411,312
- --------------------------------------------------------------------------
Santa Fe International Corp. 99,000 1,447,875
- --------------------------------------------------------------------------
Schlumberger Ltd. 25,000 1,153,125
- --------------------------------------------------------------------------
Transocean Offshore, Inc. 44,000 1,179,750
---------------
5,789,015
- --------------------------------------------------------------------------
OIL - DOMESTIC - 0.6%
Comstock Resources, Inc.(2) 175,000 535,937
- --------------------------------------------------------------------------
Kerr-McGee Corp. 35,000 1,338,750
- --------------------------------------------------------------------------
Unocal Corp. 65,000 1,897,187
---------------
3,771,874
- --------------------------------------------------------------------------
OIL - INTERNATIONAL - 0.7%
Petroleo Brasileiro SA, Preference 3,330,000 377,595
- --------------------------------------------------------------------------
Talisman Energy, Inc.(2) 95,510 1,680,702
- --------------------------------------------------------------------------
Total SA, Sponsored ADR 17,501 870,675
- --------------------------------------------------------------------------
YPF SA, Cl. D, ADR 50,000 1,396,875
---------------
4,325,847
</TABLE>
62
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL - 11.1%
- --------------------------------------------------------------------------
BANKS - 6.3%
ABN Amro Holding NV 62,700 $ 1,319,707
- --------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA 95,000 675,109
- --------------------------------------------------------------------------
Bank One Corp. 36,000 1,838,250
- --------------------------------------------------------------------------
BankAmerica Corp. (New)(1) 167,500 10,070,937
- --------------------------------------------------------------------------
Chase Manhattan Corp. (New) 165,000 11,230,312
- --------------------------------------------------------------------------
Credit Suisse Group 5,225 817,595
- --------------------------------------------------------------------------
Credito Italiano SpA 460,700 2,736,720
- --------------------------------------------------------------------------
J.P. Morgan & Co., Inc.(1) 18,500 1,943,656
- --------------------------------------------------------------------------
Societe Generale 26,200 4,244,714
- --------------------------------------------------------------------------
UBS AG 4,175 1,282,278
- --------------------------------------------------------------------------
Wells Fargo Co. 70,000 2,795,625
---------------
38,954,903
- --------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 1.5%
American Express Co.(1) 20,000 2,045,000
- --------------------------------------------------------------------------
Avalonbay Communities, Inc. 30,732 1,052,571
- --------------------------------------------------------------------------
ICICI Ltd., GDR(4) 35,500 236,963
- --------------------------------------------------------------------------
Merrill Lynch & Co., Inc.(1) 31,000 2,069,250
- --------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.(1) 40,000 2,840,000
- --------------------------------------------------------------------------
Simon Property Group, Inc. (New) 37,500 1,068,750
---------------
9,312,534
- --------------------------------------------------------------------------
INSURANCE - 1.1%
Everest Reinsurance Holdings, Inc. 56,000 2,180,500
- --------------------------------------------------------------------------
Skandia Forsakrings AB 162,000 2,478,305
- --------------------------------------------------------------------------
UNUM Corp. 40,000 2,335,000
---------------
6,993,805
- --------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 2.2%
Archstone Communities Trust 52,000 1,053,000
- --------------------------------------------------------------------------
Brandywine Realty Trust 56,000 1,001,000
- --------------------------------------------------------------------------
Camden Property Trust 40,000 1,040,000
- --------------------------------------------------------------------------
CarrAmerica Realty Corp. 48,000 1,152,000
- --------------------------------------------------------------------------
Chastain Capital Corp. 134,000 603,000
- --------------------------------------------------------------------------
Chelsea GCA Realty, Inc. 32,000 1,140,000
- --------------------------------------------------------------------------
Cornerstone Properties, Inc. 68,000 1,062,500
- --------------------------------------------------------------------------
CRIIMI MAE, Inc. 115,000 402,500
- --------------------------------------------------------------------------
Developers Diversified Realty Corp. 62,000 1,100,500
- --------------------------------------------------------------------------
JDN Realty Corp. 60,000 1,293,750
- --------------------------------------------------------------------------
Manufactured Home Communities, Inc. 44,000 1,102,750
- --------------------------------------------------------------------------
Post Properties, Inc. 28,000 1,076,250
- --------------------------------------------------------------------------
Shurgard Storage Centers, Inc. 44,000 1,135,750
</TABLE>
63
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS
(CONTINUED)
Sunstone Hotel Investors, Inc. 80,000 $ 755,000
---------------
13,918,000
- --------------------------------------------------------------------------
HEALTHCARE - 4.1%
- --------------------------------------------------------------------------
HEALTHCARE/DRUGS - 3.4%
Abbott Laboratories 42,000 2,058,000
- --------------------------------------------------------------------------
American Home Products Corp. 56,000 3,153,500
- --------------------------------------------------------------------------
Astra AB Free, Series A 120,000 2,450,176
- --------------------------------------------------------------------------
Centocor, Inc.(1)(2) 60,500 2,730,063
- --------------------------------------------------------------------------
Johnson & Johnson 21,000 1,761,375
- --------------------------------------------------------------------------
Mylan Laboratories, Inc.(1) 69,500 2,189,250
- --------------------------------------------------------------------------
Novartis AG 2,000 3,930,131
- --------------------------------------------------------------------------
SmithKline Beecham plc, Cl. A.,
Sponsored ADR 38,000 2,641,000
---------------
20,913,495
- --------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 0.7%
Acuson Corp.(2) 104,000 1,547,000
- --------------------------------------------------------------------------
Biomet, Inc. 20,000 805,000
- --------------------------------------------------------------------------
Innovasive Devices, Inc.(2) 110,000 371,250
- --------------------------------------------------------------------------
Pliva d.d., Sponsored GDR(4) 20,000 332,000
- --------------------------------------------------------------------------
United Healthcare Corp. 32,800 1,412,450
---------------
4,467,700
- --------------------------------------------------------------------------
TECHNOLOGY - 10.8%
- --------------------------------------------------------------------------
COMPUTER HARDWARE - 3.4%
3Com Corp.(2) 33,000 1,478,813
- --------------------------------------------------------------------------
Canon, Inc. 50,000 1,066,225
- --------------------------------------------------------------------------
Cisco Systems, Inc.(1)(2) 45,000 4,176,563
- --------------------------------------------------------------------------
Compaq Computer Corp. 17,500 733,906
- --------------------------------------------------------------------------
Hewlett-Packard Co. 39,000 2,664,188
- --------------------------------------------------------------------------
International Business Machines Corp.(1) 60,000 11,085,000
---------------
21,204,695
- --------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 3.4%
America Online, Inc.(1) 34,200 4,950,450
- --------------------------------------------------------------------------
Computer Associates International,
Inc.(1) 62,999 2,685,354
- --------------------------------------------------------------------------
Electronic Arts, Inc.(1)(2) 25,000 1,403,125
- --------------------------------------------------------------------------
First Data Corp. 80,000 2,535,000
- --------------------------------------------------------------------------
Novell, Inc.(1)(2) 126,000 2,283,750
- --------------------------------------------------------------------------
PLATINUM Technology, Inc.(2) 70,000 1,338,750
- --------------------------------------------------------------------------
Rational Software Corp.(1)(2) 128,000 3,392,000
- --------------------------------------------------------------------------
Sabre Group Holdings, Inc.(1)(2) 60,000 2,670,000
- --------------------------------------------------------------------------
SELECT Software Tools Ltd., ADR(2) 100,000 106,250
</TABLE>
64
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES (CONTINUED)
Structural Dynamics Research Corp.(2) 167 $ 3,319
---------------
21,367,998
- --------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.2%
Tellabs, Inc.(1)(2) 17,500 1,199,844
- --------------------------------------------------------------------------
ELECTRONICS - 3.3%
Analog Devices, Inc.(1)(2) 69,000 2,164,875
- --------------------------------------------------------------------------
General Motors Corp., Cl. H(1)(2) 40,200 1,595,438
- --------------------------------------------------------------------------
Intel Corp.(1) 86,000 10,196,375
- --------------------------------------------------------------------------
Keyence Corp. 9,000 1,104,636
- --------------------------------------------------------------------------
Methode Electronics, Inc., Cl. A 105,000 1,640,625
- --------------------------------------------------------------------------
STMicroelectronics NV, NY Shares(1)(2) 17,500 1,366,094
- --------------------------------------------------------------------------
Teradyne, Inc.(1)(2) 29,000 1,228,875
- --------------------------------------------------------------------------
Xilinx, Inc.(1)(2) 21,000 1,367,625
---------------
20,664,543
- --------------------------------------------------------------------------
PHOTOGRAPHY - 0.5%
Xerox Corp.(1) 24,000 2,832,000
- --------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.8%
- --------------------------------------------------------------------------
TELEPHONE UTILITIES - 0.4%
SBC Communications, Inc. 44,000 2,359,500
- --------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA 8,100,000 670
---------------
2,360,170
- --------------------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY - 1.4%
Airtouch Communications, Inc.(1)(2) 35,000 2,524,375
- --------------------------------------------------------------------------
Embratel Participacoes SA(2) 8,100,000 70,394
- --------------------------------------------------------------------------
MCI WorldCom, Inc.(1)(2) 62,195 4,462,491
- --------------------------------------------------------------------------
Qwest Communications International,
Inc.(2) 25,000 1,250,000
- --------------------------------------------------------------------------
Tele Celular Sul Participacoes SA(2) 8,100,000 7,509
- --------------------------------------------------------------------------
Tele Centro Oeste Celular Participacoes
SA(2) 8,100,000 6,369
- --------------------------------------------------------------------------
Tele Centro Sul Participacoes SA(2) 8,100,000 53,634
- --------------------------------------------------------------------------
Tele Leste Celular Participacoes SA(2) 8,100,000 3,218
- --------------------------------------------------------------------------
Tele Nordeste Celular Participacoes
SA(2) 8,100,000 4,090
- --------------------------------------------------------------------------
Tele Norte Celular Participacoes SA(2) 8,100,000 2,615
- --------------------------------------------------------------------------
Tele Norte Leste Participacoes SA(2) 8,100,000 66,372
- --------------------------------------------------------------------------
Tele Sudeste Celular Participacoes SA(2) 8,100,000 22,794
- --------------------------------------------------------------------------
Telemig Celular Participacoes SA(2) 8,100,000 5,699
- --------------------------------------------------------------------------
Telesp Celular Participacoes SA(2) 8,100,000 34,862
- --------------------------------------------------------------------------
Telesp Participacoes SA(2) 8,100,000 103,915
---------------
8,618,337
</TABLE>
65
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- --------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 1.2%
- --------------------------------------------------------------------------
AIR TRANSPORTATION - 0.6%
Alaska Air Group, Inc.(1)(2) 29,500 $ 1,305,375
- --------------------------------------------------------------------------
AMR Corp.(1)(2) 40,000 2,375,000
---------------
3,680,375
- --------------------------------------------------------------------------
RAILROADS & TRUCKERS - 0.4%
Burlington Northern Santa Fe Corp. 74,000 2,497,500
- --------------------------------------------------------------------------
SHIPPING - 0.2%
Stolt-Nielsen SA 73,000 739,125
- --------------------------------------------------------------------------
Stolt-Nielsen SA, Sponsored ADR 17,650 180,913
- --------------------------------------------------------------------------
Transportacion Maritima Mexicana SA de
CV, Sponsored ADR, L Shares(2) 75,700 406,888
---------------
1,326,926
- --------------------------------------------------------------------------
UTILITIES - 1.2%
- --------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.0%
Allegheny Energy, Inc. 48,000 1,656,000
- --------------------------------------------------------------------------
Houston Industries, Inc. 76,000 2,441,500
- --------------------------------------------------------------------------
Southern Co. 75,000 2,179,688
---------------
6,277,188
- --------------------------------------------------------------------------
GAS UTILITIES - 0.2%
Enron Corp. 25,600 1,460,800
---------------
Total Common Stocks (Cost $218,199,678) 300,464,173
- --------------------------------------------------------------------------
PREFERRED STOCKS - 0.9%
- --------------------------------------------------------------------------
Budget Group, Inc., 6.25% Cv.(4) 20,000 775,000
- --------------------------------------------------------------------------
IGG Communications, Inc., 6.75% Cv.
Preferred Stock 45,000 2,356,875
- --------------------------------------------------------------------------
Intermedia Communications, Inc.:
7% Cv. Preferred Securities(4) 5,000 71,250
Depositary Shares Representing one
one-hundredth 7% Cum. Cv. Jr. Preferred
Stock, Series D, Non-Vtg. 30,000 750,000
- --------------------------------------------------------------------------
Monsanto Co., 6.50% Cv.(2) 35,000 1,715,000
---------------
Total Preferred Stocks (Cost $6,872,031) 5,668,125
UNITS
- --------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES - 0.0%
- --------------------------------------------------------------------------
American Telecasting, Inc. Wts., Exp.
6/99(3) 6,000 60
- --------------------------------------------------------------------------
Covergent Communications, Inc. Wts.,
Exp. 4/08(3) 2,000 2,500
- --------------------------------------------------------------------------
Gaylord Container Corp. Wts., Exp. 11/02 9,232 50,776
- --------------------------------------------------------------------------
IHF Capital, Inc. Series I Wts., Exp.
11/99(3) 1,000 10
- --------------------------------------------------------------------------
Perkin-Elmer Corp. Wts., Exp. 9/03 249 1,992
- --------------------------------------------------------------------------
Terex Corp. Rts., Exp. 5/02(3) 4,000 56,500
---------------
Total Rights, Warrants and Certificates
(Cost $20,772) 111,838
</TABLE>
66
<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 - 1.4%
- --------------------------------------------------------------------------
Federal National Mortgage Assn., 6.50%,
11/1/27-12/1/27 $ 4,672,379 $ 4,704,386
- --------------------------------------------------------------------------
Government National Mortgage Assn., 8%,
7/15/22-4/15/23 2,948,105 3,074,413
- --------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg.
Pass-Through Certificates,
Series 1994-C2, Cl. E, 8%, 4/25/25 651,810 649,060
---------------
Total Mortgage-Backed Obligations (Cost
$8,273,574) 8,427,859
- --------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 11.0%
- --------------------------------------------------------------------------
U.S. Treasury Bonds:
8.875%, 8/15/17 2,900,000 4,089,908
STRIPS, 7.26%, 11/15/18(6) 10,000,000 3,332,330
STRIPS, 7.10%, 11/15/18(6) 16,000,000 5,311,200
STRIPS, 7.30%, 8/15/19(6) 18,000,000 5,730,606
- --------------------------------------------------------------------------
U.S. Treasury Nts.:
5.875%, 9/30/02 15,000,000 15,600,000
6.125%, 9/30/00 15,000,000 15,375,000
6.25%, 2/15/07 8,800,000 9,655,254
6.375%, 8/15/02 5,000,000 5,275,000
6.50%, 10/15/06 3,710,000 4,119,261
---------------
Total U.S. Government Obligations (Cost
$62,146,404) 68,488,559
- --------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS - 22.4%
- --------------------------------------------------------------------------
ARGENTINA - 6.2%
Argentina (Republic of) Bonds, Bonos de
Consolidacion de Deudas,
Series I, 5.010%, 4/1/01(7) 1,473,768 1,363,501
- --------------------------------------------------------------------------
Argentina (Republic of) Bonds, Series L,
6.188%, 3/31/05(7) 8,648,000 7,372,420
- --------------------------------------------------------------------------
Argentina (Republic of) Nts., 14.25%,
11/30/02(7) 13,125,000 12,895,312
- --------------------------------------------------------------------------
Argentina (Republic of) Par Bonds,
5.75%, 3/31/23(8) 23,750,000 17,129,687
---------------
38,760,920
- --------------------------------------------------------------------------
AUSTRALIA - 0.5%
New South Wales Treasury Corp. Gtd.
Bonds, 7%, 4/1/04(AUD) 3,160,000 2,098,810
- --------------------------------------------------------------------------
Queensland Treasury Corp. Exchangeable
Gtd. Nts., 10.50%, 5/15/03(AUD) 1,800,000 1,338,833
---------------
3,437,643
- --------------------------------------------------------------------------
BRAZIL - 3.7%
Brazil (Federal Republic of)
Capitalization Bonds, 8%, 4/15/14 21,079,398 12,594,940
- --------------------------------------------------------------------------
Brazil (Federal Republic of) Eligible
Interest Bonds, 6.125%, 4/15/06(7) 15,792,000 10,185,840
---------------
22,780,780
- --------------------------------------------------------------------------
CANADA - 2.8%
Canada (Government of) Bonds:
8.50%, 4/1/02(CAD) 1,500,000 1,089,060
8.75%, 12/1/05(CAD) 12,200,000 9,782,863
9.75%, 12/1/01(CAD) 3,000,000 2,220,607
9.75%, 6/1/01(CAD) 2,000,000 1,452,419
Series WL43, 5.75%, 6/1/29(CAD) 3,670,000 2,618,341
---------------
17,163,290
</TABLE>
67
<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>
DENMARK - 1.0%
Denmark (Kingdom of) Bonds, 8%,
3/15/06(DKK) 32,100,000 $ 6,219,920
- --------------------------------------------------------------------------
GREAT BRITAIN - 1.3%
United Kingdom Treasury Bonds, 6.75%,
11/26/04(GBP) 2,680,000 4,983,321
- --------------------------------------------------------------------------
United Kingdom Treasury Nts., 13%,
7/14/00(GBP) 1,590,000 2,939,123
---------------
7,922,444
- --------------------------------------------------------------------------
IRELAND - 0.3%
Ireland (Government of) Bonds, 9.25%,
7/11/03(IEP) 1,110,000 2,057,171
- --------------------------------------------------------------------------
MEXICO - 0.6%
United Mexican States Collateralized
Fixed Rate Par Bonds, Series W-A, 6.25%,
12/31/19 4,450,000 3,476,562
- --------------------------------------------------------------------------
NEW ZEALAND - 4.9%
New Zealand (Government of) Bonds:
10%, 3/15/02(NZD) 16,800,000 10,045,321
8%, 2/15/01(NZD) 19,440,000 10,793,288
- --------------------------------------------------------------------------
New Zealand (Government of) Nts., 6.50%,
2/15/00(NZD) 18,600,000 9,937,733
---------------
30,776,342
- --------------------------------------------------------------------------
PHILIPPINES - 0.4%
Philippines (Republic of) Bonds, 8.60%,
6/15/27 1,500,000 1,265,625
- --------------------------------------------------------------------------
Philippines (Republic of) Par Bonds,
Series B, 6.50%, 12/1/17 (3)(8) 1,675,000 1,461,437
---------------
2,727,062
- --------------------------------------------------------------------------
POLAND - 0.4%
Poland (Republic of) Bonds, 15%,
10/12/99(PLZ) 9,000,000 2,589,805
- --------------------------------------------------------------------------
SOUTH AFRICA - 0.3%
Eskom Depositary Receipts, Series E168,
11%, 6/1/08(ZAR) 12,570,000 1,591,691
---------------
Total Foreign Government Obligations
(Cost $140,372,132) 139,503,630
</TABLE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND
NOTES - 6.2%
- --------------------------------------------------------------------------
BASIC MATERIALS - 0.9%
- --------------------------------------------------------------------------
CHEMICALS - 0.2%
Laroche Industries, Inc., 9.50% Sr. Sub.
Nts., Series B, 9/15/07 500,000 402,500
- --------------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr. Sec.
Nts., 10/15/03 85,000 90,737
- --------------------------------------------------------------------------
Sterling Chemicals, Inc., 11.75% Sr.
Unsec. Sub. Nts., 8/15/06 535,000 462,775
---------------
956,012
- --------------------------------------------------------------------------
METALS - 0.4%
AK Steel Corp., 9.125% Sr. Nts.,
12/15/06 1,015,000 1,060,675
- --------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 12.75%
Sr. Sub. Nts., 2/1/03 1,000,000 985,000
- --------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07 450,000 420,750
---------------
2,466,425
</TABLE>
68
<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>
PAPER - 0.3%
Aracruz Celulose SA, 10.375% Debs.,
1/31/02(3) $ 430,000 $ 363,350
- --------------------------------------------------------------------------
Riverwood International Corp., 10.625%
Sr. Unsec. Nts., 8/1/07 500,000 497,500
- --------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., Series
B, 12/15/04 750,000 820,312
---------------
1,681,162
- --------------------------------------------------------------------------
CAPITAL GOODS - 0.3%
- --------------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.1%
Amtran, Inc., 10.50% Sr. Nts., 8/1/04 500,000 522,500
- --------------------------------------------------------------------------
MANUFACTURING - 0.2%
International Wire Group, Inc., 11.75%
Sr. Sub. Nts., Series B, 6/1/05 500,000 528,750
- --------------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub. Nts.,
7/1/07 500,000 497,500
---------------
1,026,250
- --------------------------------------------------------------------------
CONSUMER CYCLICALS - 2.2%
- --------------------------------------------------------------------------
AUTOS & HOUSING - 0.5%
American Standard Cos., Inc., 10.875%
Sr. Nts., 5/15/99 500,000 502,500
- --------------------------------------------------------------------------
Building Materials Corp. of America,
8.625% Sr. Nts., Series B, 12/15/06 100,000 102,250
- --------------------------------------------------------------------------
Cambridge Industries, Inc., 10.25% Sr.
Sub. Nts., Series B, 7/15/07 500,000 432,500
- --------------------------------------------------------------------------
Chrysler Financial LLC, 13.25% Debs.,
10/15/99 500,000 529,524
- --------------------------------------------------------------------------
Hayes Wheels International, Inc., 11%
Sr. Sub. Nts., 7/15/06 500,000 557,500
- --------------------------------------------------------------------------
Icon Health & Fitness, Inc., 13% Sr.
Sub. Nts., Series B, 7/15/02 610,000 369,050
- --------------------------------------------------------------------------
Kaufman & Broad Home Corp., 7.75% Sr.
Nts., 10/15/04 400,000 404,000
---------------
2,897,324
- --------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 0.3%
Casino America, Inc., 12.50% Sr. Nts.,
8/1/03 250,000 278,125
- --------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% First Mtg.
Sec. Nts., 12/1/03 460,000 503,700
- --------------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr. Sub.
Nts., 4/1/05 500,000 502,500
- --------------------------------------------------------------------------
Rio Hotel & Casino, Inc., 9.50% Sr. Sub.
Nts., 4/15/07 750,000 832,500
---------------
2,116,825
- --------------------------------------------------------------------------
MEDIA - 1.4%
American Telecasting, Inc., 0%/14.50%
Sr. Disc. Nts., 6/15/04(9) 129,908 20,136
- --------------------------------------------------------------------------
Capstar Broadcasting Partners, Inc.,
9.25% Sr. Sub. Nts., 7/1/07 400,000 416,000
- --------------------------------------------------------------------------
Chancellor Media Corp., 8.75% Sr. Unsec.
Sub. Nts., Series B, 6/15/07 1,000,000 1,030,000
- --------------------------------------------------------------------------
CSC Holdings, Inc., 9.875% Sr. Sub.
Nts., 5/15/06 250,000 273,750
- --------------------------------------------------------------------------
EchoStar Communications Corp.,
0%/12.875% Sr. Disc. Nts., 6/1/04(9) 540,000 556,200
- --------------------------------------------------------------------------
Falcon Holding Group LP, 0%/9.285% Sr.
Disc. Debs., Series B, 4/15/10(9) 600,000 414,000
- --------------------------------------------------------------------------
Helicon Group LP/Helicon Capital Corp.,
11% Sr. Sec. Nts., Series B, 11/1/03(7) 550,000 574,750
- --------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Second
Priority Sr. Sec. Debs., 12/1/07 1,000,000 1,125,000
- --------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8.75% Sr. Sub. Nts., 12/15/07 500,000 507,500
9% Sr. Unsec. Sub. Nts., 7/15/07 375,000 384,375
- --------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 10.15%
Sr. Nts., 5/1/12 500,000 675,355
- --------------------------------------------------------------------------
Time Warner, Inc., 9.125% Debs., 1/15/13 500,000 634,470
</TABLE>
69
<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>
MEDIA (CONTINUED)
TKR Cable I, Inc., 10.50% Sr. Debs.,
10/30/07 $ 1,000,000 $ 1,088,796
- --------------------------------------------------------------------------
Young Broadcasting, Inc., 8.75% Sr. Sub.
Debs., 6/15/07 900,000 918,000
---------------
8,618,332
- --------------------------------------------------------------------------
CONSUMER STAPLES - 0.5%
- --------------------------------------------------------------------------
CONSUMER SERVICES - 0.1%
Intermedia Communications, Inc., 8.50%
Sr. Nts., Series B, 1/15/08 500,000 477,500
- --------------------------------------------------------------------------
Lamar Advertising Co., 9.625% Sr. Sub.
Nts., 12/1/06 150,000 161,250
---------------
638,750
- --------------------------------------------------------------------------
FOOD - 0.1%
RJR Nabisco, Inc., 8.625% Medium-Term
Nts., 12/1/02 500,000 509,414
- --------------------------------------------------------------------------
FOOD & DRUG RETAILERS - 0.2%
Fleming Cos., Inc.:
10.50% Sr. Sub. Nts., Series B, 12/1/04 300,000 285,000
10.625% Sr. Sub. Nts., Series B, 7/31/07 560,000 525,000
- --------------------------------------------------------------------------
Randall's Food Markets, Inc., 9.375% Sr.
Sub. Nts., Series B, 7/1/07 500,000 543,750
---------------
1,353,750
- --------------------------------------------------------------------------
HOUSEHOLD GOODS - 0.1%
Revlon Consumer Products Corp., 8.625%
Sr. Unsec. Sub. Nts., 2/1/08 500,000 457,500
- --------------------------------------------------------------------------
Revlon Worldwide Corp., Zero Coupon Sr.
Sec. Disc. Nts., Series B, 10.09%,
3/15/01(6) 465,000 267,375
---------------
724,875
- --------------------------------------------------------------------------
ENERGY - 0.1%
- --------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.1%
Gothic Production Corp., 11.125% Sr.
Sec. Nts., Series B, 5/1/05(4) 950,000 745,750
- --------------------------------------------------------------------------
FINANCIAL - 0.1%
- --------------------------------------------------------------------------
BANKS - 0.1%
First Chicago Corp.:
11.25% Sub. Nts., 2/20/01 250,000 278,226
9% Sub. Nts., 6/15/99 250,000 253,806
---------------
532,032
- --------------------------------------------------------------------------
HEALTHCARE - 0.1%
- --------------------------------------------------------------------------
HEALTHCARE/DRUGS - 0.0%
Integrated Health Services, Inc., 9.50%
Sr. Sub. Nts., 9/15/07 170,000 162,350
- --------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 0.1%
Sun Healthcare Group, Inc., 9.375% Sr.
Sub. Nts., 5/1/08(4) 1,000,000 805,000
- --------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.3%
- --------------------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY - 1.3%
Convergent Communications, Inc., 13% Sr.
Nts., 4/1/08 500,000 242,500
- --------------------------------------------------------------------------
FaciliCom International, Inc., 10.50%
Sr. Nts., Series B, 1/15/08 245,000 197,225
- --------------------------------------------------------------------------
Global Crossing Holdings Ltd., 9.625%
Sr. Nts., 5/15/08 750,000 798,750
- --------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr. Disc.
Nts., 12/15/05(9) 415,000 299,838
- --------------------------------------------------------------------------
ICG Holdings, Inc., 0%/13.50% Sr. Disc.
Nts., 9/15/05(9) 765,000 634,950
- --------------------------------------------------------------------------
Millicom International Cellular SA,
0%/13.50% Sr. Disc. Nts., 6/1/06(9) 750,000 534,375
</TABLE>
70
<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>
TELECOMMUNICATIONS/TECHNOLOGY
(CONTINUED)
NTL, Inc., 0%/9.75% Sr. Deferred Coupon
Nts., 4/1/08(4)(9) $ 500,000 $ 312,500
- --------------------------------------------------------------------------
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 590,000 413,000
11.625% Sr. Nts., Series A, 8/15/06 110,000 77,000
- --------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital Corp.,
14% Sr. Nts., 8/15/04 200,000 207,000
- --------------------------------------------------------------------------
PSINet, Inc., 10% Sr. Unsec. Nts.,
Series B, 2/15/05 1,250,000 1,243,750
- --------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr. Sub.
Nts., Series B, 5/15/08 750,000 755,625
- --------------------------------------------------------------------------
TeleWest Communications plc:
0%/11% Sr. Disc. Debs., 10/1/07(9) 1,000,000 840,000
9.625% Sr. Debs., 10/1/06 500,000 517,500
- --------------------------------------------------------------------------
USA Mobile Communications, Inc. II,
9.50% Sr. Nts., 2/1/04 1,000,000 905,000
---------------
7,979,013
- --------------------------------------------------------------------------
TRANSPORTATION - 0.2%
- --------------------------------------------------------------------------
AIR TRANSPORTATION - 0.1%
Trans World Airlines, Inc., 11.50% Sr.
Sec. Nts., 12/15/04 1,000,000 845,000
- --------------------------------------------------------------------------
SHIPPING - 0.1%
Navigator Gas Transport plc, 10.50%
First Priority Ship Mtg. Nts.,
6/30/07(4) 500,000 442,500
- --------------------------------------------------------------------------
UTILITIES - 0.5%
- --------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.3%
California Energy, Inc., 10.25% Sr.
Disc. Nts., 1/15/04 750,000 788,438
- --------------------------------------------------------------------------
Calpine Corp.:
10.50% Sr. Nts., 5/15/06 800,000 886,000
8.75% Sr. Nts., 7/15/07 400,000 406,000
---------------
2,080,438
- --------------------------------------------------------------------------
GAS UTILITIES - 0.2%
Beaver Valley II Funding Corp., 9%
Second Lease Obligation Bonds, 6/1/17 989,000 1,117,570
---------------
Total Non-Convertible Corporate Bonds
and Notes (Cost $39,457,840) 38,221,272
- --------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 10.1%
- --------------------------------------------------------------------------
Repurchase agreement with First Chicago
Capital Markets, 4.75%, dated 12/31/98,
to be repurchased at $63,033,250 on
1/4/99, collateralized by U.S. Treasury
Nts., 4% - 8.875%, 2/15/99 - 7/15/06,
with a value of $64,285,454 (Cost
$63,000,000) 63,000,000 63,000,000
- --------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$538,342,432) 100.3% 623,885,456
- --------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3) (1,552,155 )
--------------- ---------------
NET ASSETS 100.0% $ 622,333,301
--------------- ---------------
--------------- ---------------
</TABLE>
71
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1. 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>
Airtouch Communications, Inc. 10,500 4/99 $ 65.00 $ 41,684 $122,063
Alaska Air Group, Inc. 14,500 4/99 45.00 32,189 68,875
America Online, Inc. 16,000 1/99 52.50 119,756 1,516,000
America Online, Inc. 18,200 1/99 72.50 63,425 1,319,500
American Express Co. 6,000 4/99 105.00 18,569 49,500
AMR Corp. 12,000 2/99 75.00 25,889 3,750
Analog Devices, Inc. 20,000 3/99 30.00 20,649 90,000
ASM Lithography Holding NV 27,000 4/99 30.00 72,517 111,375
AutoZone, Inc. 14,000 3/99 30.00 27,579 54,250
BankAmerica Corp. (New) 24,000 5/99 75.00 54,778 40,500
CBS Corp. 22,500 1/99 40.00 33,074 1,406
CBS Corp. 33,000 4/99 32.50 56,758 107,250
Centocor, Inc. 11,000 4/99 60.00 40,919 15,125
Cisco Systems, Inc. 22,000 4/99 70.00 114,836 583,000
Computer Associates International, Inc. 19,000 2/99 50.00 25,554 19,000
Electronic Arts, Inc. 5,000 3/99 55.00 14,225 27,500
Federated Department Stores, Inc. 13,500 5/99 45.00 43,469 47,250
General Motors Corp., Cl. H 10,000 3/99 40.00 39,699 35,000
Intel Corp. 17,000 4/99 105.00 69,613 333,625
International Business Machines Corp. 2,000 4/99 180.00 9,940 33,500
J.P. Morgan & Co. 5,500 3/99 110.00 25,959 41,938
MCI WorldCom, Inc. 13,000 6/99 65.00 51,608 160,875
Merrill Lynch & Co., Inc. 7,000 4/99 95.00 22,539 7,875
Morgan Stanley Dean Witter & Co. 9,000 1/99 90.00 28,979 1,125
Morgan Stanley Dean Witter & Co. 9,000 4/99 80.00 41,354 45,000
Mylan Laboratories, Inc. 19,000 4/99 40.00 40,338 15,438
Novell, Inc. 37,000 5/99 20.00 77,512 67,063
Philip Morris Cos., Inc. 16,000 3/99 60.00 20,519 19,000
Potash Corp. of Saskatchewan, Inc. 5,500 1/99 75.00 10,835 344
Rational Software Corp. 37,000 4/99 22.50 113,224 208,125
Rational Software Corp. 37,000 4/99 30.00 100,637 90,188
Sabre Group Holdings, Inc. 2,100 2/99 45.00 3,218 3,938
STMicroelectronics NV 2,500 1/99 85.00 7,112 2,813
STMicroelectronics NV 1,800 4/99 85.00 10,746 11,250
Tellabs, Inc. 17,500 3/99 75.00 45,411 74,375
Teradyne, Inc. 15,000 4/99 35.00 67,048 146,250
Whitman Corp. 17,000 3/99 25.00 19,677 32,938
Xerox Corp. 4,000 4/99 105.00 26,879 70,000
Xilinx, Inc. 10,000 1/99 55.00 19,699 102,500
Xilinx, Inc. 5,000 3/99 55.00 27,971 61,246
--------------- ---------------
$ 1,686,387 $5,740,750
--------------- ---------------
--------------- ---------------
</TABLE>
2. Non-income producing security.
3. Identifies issues considered to be illiquid or restricted - See applicable
note of Notes to Financial Statements.
72
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES 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 $3,720,963 or 0.60% of the Fund's net
assets as of December 31, 1998.
5. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
AUD - Australian Dollar
CAD - Canadian Dollar
DKK - Danish Krone
GBP - British Pound Sterling
IEP - Irish Punt
NZD - New Zealand Dollar
PLZ - Polish Zloty
ZAR - South African Rand
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Represents the current interest rate for a variable rate security.
8. Represents the current interest rate for an increasing rate security.
9. 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.
73
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.5%
- ---------------------------------------------------------------
BASIC MATERIALS - 1.5%
- ---------------------------------------------------------------
CHEMICALS - 1.4%
Cresud SA, Sponsored ADR 475,171 $ 5,702,052
- ---------------------------------------------------------------
International Flavors & Fragrances,
Inc. 144,200 6,371,837
- ---------------------------------------------------------------
Minerals Technologies, Inc. 100,000 4,093,750
-------------
16,167,639
- ---------------------------------------------------------------
METALS - 0.1%
Cia de Minas Buenaventura SA,
Sponsored ADR, B Shares 46,000 598,000
- ---------------------------------------------------------------
CAPITAL GOODS - 7.9%
- ---------------------------------------------------------------
AEROSPACE/DEFENSE - 1.3%
Rolls-Royce plc 3,502,838 14,461,194
- ---------------------------------------------------------------
INDUSTRIAL SERVICES - 4.9%
Adecco SA 10,303 4,701,587
- ---------------------------------------------------------------
Coflexip SA, Sponsored ADR 43,800 1,407,075
- ---------------------------------------------------------------
Grupo Elektra SA de CV 3,159,000 1,590,726
- ---------------------------------------------------------------
McDermott International, Inc. 240,000 5,925,000
- ---------------------------------------------------------------
Rentokil Initial plc 2,950,000 22,107,783
- ---------------------------------------------------------------
Service Corp. International 186,400 7,094,850
- ---------------------------------------------------------------
WPP Group plc 2,000,000 12,302,366
-------------
55,129,387
- ---------------------------------------------------------------
MANUFACTURING - 1.7%
Bombardier, Inc., Cl. B 506,000 7,268,691
- ---------------------------------------------------------------
Societe BIC SA 224,032 12,432,838
-------------
19,701,529
- ---------------------------------------------------------------
CONSUMER CYCLICALS - 26.5%
- ---------------------------------------------------------------
AUTOS & HOUSING - 12.0%
Autoliv, Inc. SDR 170,000 6,103,232
- ---------------------------------------------------------------
Brazil Realty SA, GDR(1) 260,000 3,250,000
- ---------------------------------------------------------------
Brisa-Auto Estradas de Portugal SA 70,300 4,138,276
- ---------------------------------------------------------------
Granada Group plc 482,100 8,492,798
- ---------------------------------------------------------------
Hanson plc 1,608,400 12,726,962
- ---------------------------------------------------------------
Hasbro, Inc. 300,000 10,837,500
- ---------------------------------------------------------------
International Game Technology 494,000 12,010,375
- ---------------------------------------------------------------
IRSA Inversiones y Representaciones
SA 1,796,108 4,925,779
- ---------------------------------------------------------------
Nintendo Co. Ltd. 64,000 6,188,079
- ---------------------------------------------------------------
Porsche AG, Preference 14,700 33,803,756
- ---------------------------------------------------------------
Solidere, GDR(2) 110,000 1,119,250
- ---------------------------------------------------------------
Volkswagen AG 400,000 32,374,176
-------------
135,970,183
</TABLE>
74
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
MEDIA - 11.2%
Canal Plus 170,000 $ 46,410,611
- ---------------------------------------------------------------
Carlton Communications plc 2,747,300 25,212,067
- ---------------------------------------------------------------
Grupo Televisa SA, Sponsored
GDR(2)(3) 349,200 8,620,875
- ---------------------------------------------------------------
Prosieben Media AG, Preferred 54,000 2,587,292
- ---------------------------------------------------------------
Publicis SA 28,000 5,012,525
- ---------------------------------------------------------------
Reed International plc 200,000 1,636,447
- ---------------------------------------------------------------
Singapore Press Holdings Ltd. 560,000 6,075,310
- ---------------------------------------------------------------
Television Broadcasts Ltd. 1,200,000 3,097,964
- ---------------------------------------------------------------
Television Francaise 1 50,000 8,906,183
- ---------------------------------------------------------------
TeleWest Communications plc(3) 6,999,970 19,991,260
-------------
127,550,534
- ---------------------------------------------------------------
RETAIL: GENERAL - 1.1%
Sonae Investimentos 260,000 12,640,071
- ---------------------------------------------------------------
RETAIL: SPECIALTY - 2.2%
Best Buy Co., Inc.(3) 50,200 3,081,025
- ---------------------------------------------------------------
Circuit City Stores-Circuit City
Group 207,800 10,377,013
- ---------------------------------------------------------------
Dixons Group plc 800,000 11,247,878
-------------
24,705,916
- ---------------------------------------------------------------
CONSUMER STAPLES - 6.7%
- ---------------------------------------------------------------
BEVERAGES - 2.5%
Cadbury Schweppes plc 1,500,000 25,491,763
- ---------------------------------------------------------------
Cia Cervejaria Brahma, Preference 7,335,000 3,156,933
-------------
28,648,696
- ---------------------------------------------------------------
ENTERTAINMENT - 0.3%
Corporacion Interamericana de
Entretenimiento SA(3) 140,101 290,410
- ---------------------------------------------------------------
Corporacion Interamericana de
Entretenimiento SA, Cl. B(3) 1,050,764 2,868,702
- ---------------------------------------------------------------
Resorts World Berhad(1) 563,000 519,145
-------------
3,678,257
- ---------------------------------------------------------------
FOOD - 0.2%
Raisio Group plc 249,400 2,758,366
- ---------------------------------------------------------------
FOOD & DRUG RETAILERS - 1.7%
Carrefour Supermarche SA 12,000 9,063,361
- ---------------------------------------------------------------
Dairy Farm International Holdings
Ltd. 9,080,216 10,442,248
-------------
19,505,609
- ---------------------------------------------------------------
HOUSEHOLD GOODS - 1.5%
Wella AG, Preference 20,000 16,811,516
- ---------------------------------------------------------------
TOBACCO - 0.5%
Cie Financiere Richemont AG, A
Units 4,000 5,653,566
- ---------------------------------------------------------------
ENERGY - 0.7%
- ---------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.3%
Transocean Offshore, Inc. 120,818 3,239,433
</TABLE>
75
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
OIL - INTERNATIONAL - 0.4%
British Petroleum Co. plc, ADR 46,894 $ 4,202,875
- ---------------------------------------------------------------
FINANCIAL - 14.1%
- ---------------------------------------------------------------
BANKS - 6.9%
Banco Bradesco SA, Preference 983,276,747 5,452,711
- ---------------------------------------------------------------
Banco Espirito Santo e Comercial de
Lisboa SA 180,000 5,586,818
- ---------------------------------------------------------------
Banco Frances del Rio de la Plata
SA, Sponsored ADR 317,250 6,582,938
- ---------------------------------------------------------------
Banco Latinoamericano de
Exportaciones SA, Cl. E 146,200 2,430,575
- ---------------------------------------------------------------
Credito Italiano SpA 2,291,900 13,614,690
- ---------------------------------------------------------------
Istituto Mobiliare Italiano 671,000 11,882,643
- ---------------------------------------------------------------
National Westminster Bank plc 618,070 11,866,728
- ---------------------------------------------------------------
UBS AG 50,000 15,356,623
- ---------------------------------------------------------------
Unibanco-Uniao de Bancos
Brasileiros SA, Sponsored GDR 390,000 5,630,625
-------------
78,404,351
- ---------------------------------------------------------------
DIVERSIFIED FINANCIAL - 5.4%
American Express Co. 99,000 10,122,750
- ---------------------------------------------------------------
Associates First Capital Corp., Cl.
A 320,000 13,560,000
- ---------------------------------------------------------------
Credit Saison Co. Ltd. 390,000 9,590,728
- ---------------------------------------------------------------
Fannie Mae 190,000 14,060,000
- ---------------------------------------------------------------
Housing Development Finance Corp.
Ltd. 22,290 1,142,693
- ---------------------------------------------------------------
ICICI Ltd., GDR(2) 405,300 2,705,378
- ---------------------------------------------------------------
ICICI Ltd., GDR 6,000 40,050
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 19,400 1,294,950
- ---------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 15,300 1,086,300
- ---------------------------------------------------------------
Nichiei Co. Ltd. 98,000 7,788,079
-------------
61,390,928
- ---------------------------------------------------------------
INSURANCE - 1.8%
Allianz AG 20,000 7,445,100
- ---------------------------------------------------------------
American International Group, Inc. 45,550 4,401,269
- ---------------------------------------------------------------
Chubb Corp. 140,000 9,082,500
-------------
20,928,869
- ---------------------------------------------------------------
HEALTHCARE - 11.2%
- ---------------------------------------------------------------
HEALTHCARE/DRUGS - 7.8%
Agouron Pharmaceuticals, Inc.(3) 68,600 4,030,250
- ---------------------------------------------------------------
Amgen, Inc.(3) 85,000 8,887,813
- ---------------------------------------------------------------
BioChem Pharma, Inc.(3) 161,000 4,608,625
- ---------------------------------------------------------------
Elan Corp. plc, ADR(3) 80,000 5,565,000
- ---------------------------------------------------------------
Fresenius AG, Preference 90,000 18,912,955
- ---------------------------------------------------------------
Genzyme Corp. (General Division)(3) 240,000 11,940,000
- ---------------------------------------------------------------
Gilead Sciences, Inc.(3) 172,700 7,091,494
- ---------------------------------------------------------------
Glaxo Wellcome plc, Sponsored ADR 140,000 9,730,000
</TABLE>
76
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/DRUGS (CONTINUED)
Incyte Pharmaceuticals, Inc.(3) 83,250 $ 3,111,469
- ---------------------------------------------------------------
Millennium Pharmaceuticals, Inc.(3) 123,000 3,182,625
- ---------------------------------------------------------------
Pfizer, Inc. 90,000 11,289,375
-------------
88,349,606
- ---------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES -
3.4%
Fresenius Medical Care AG 179,600 12,508,728
- ---------------------------------------------------------------
Pliva d.d., Sponsored GDR(2) 800,000 13,280,000
- ---------------------------------------------------------------
Quintiles Transnational Corp.(3) 250,000 13,343,750
-------------
39,132,478
- ---------------------------------------------------------------
TECHNOLOGY - 17.3%
- ---------------------------------------------------------------
COMPUTER HARDWARE - 4.7%
Ascend Communications, Inc.(3) 10,000 657,500
- ---------------------------------------------------------------
Cisco Systems, Inc.(3) 132,475 12,295,336
- ---------------------------------------------------------------
International Business Machines
Corp. 100,000 18,475,000
- ---------------------------------------------------------------
Sun Microsystems, Inc.(3) 250,000 21,406,250
-------------
52,834,086
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 4.3%
Cap Gemini SA 150,000 24,086,973
- ---------------------------------------------------------------
Lernout & Hauspie Speech Products
NV(3) 250,100 8,159,513
- ---------------------------------------------------------------
Microsoft Corp.(3) 66,000 9,153,375
- ---------------------------------------------------------------
SAP AG, Preference 15,000 7,200,432
-------------
48,600,293
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 5.0%
General Instrument Corp.(3) 600,000 20,362,500
- ---------------------------------------------------------------
Lucent Technologies, Inc. 20,000 2,200,000
- ---------------------------------------------------------------
QUALCOMM, Inc.(3) 240,000 12,435,000
- ---------------------------------------------------------------
Scientific-Atlanta, Inc. 934,200 21,311,438
-------------
56,308,938
- ---------------------------------------------------------------
ELECTRONICS - 3.3%
Advanced Micro Devices, Inc.(3) 500,000 14,468,750
- ---------------------------------------------------------------
National Semiconductor Corp.(3) 1,000,000 13,500,000
- ---------------------------------------------------------------
Royal Philips Electronics NV 100,000 6,714,031
- ---------------------------------------------------------------
STMicroelectronics NV, NY Shares(3) 34,000 2,654,125
-------------
37,336,906
- ---------------------------------------------------------------
TELECOMMUNICATIONS - 11.7%
- ---------------------------------------------------------------
TELEPHONE UTILITIES - 7.3%
Cable & Wireless Communications
plc(3) 380,000 3,462,072
- ---------------------------------------------------------------
Energis plc(3) 620,000 13,826,069
- ---------------------------------------------------------------
Hellenic Telecommunication
Organization SA 488,888 13,005,978
- ---------------------------------------------------------------
Olivetti SpA(3) 5,000,000 17,435,946
</TABLE>
77
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ---------------------------------------------------------------
<S> <C> <C>
TELEPHONE UTILITIES (CONTINUED)
SK Telecom Co. Ltd. 8,710 $ 6,384,602
- ---------------------------------------------------------------
Telecom Italia Mobile SpA 2,500,000 18,497,264
- ---------------------------------------------------------------
Telecomunicacoes de Sao Paulo SA,
Preference 41,995,329 5,724,749
- ---------------------------------------------------------------
Telesp Celular SA, Cl. B(3) 35,902,000 1,634,343
- ---------------------------------------------------------------
Videsh Sanchar Nigam Ltd., GDR(2) 250,000 3,093,750
-------------
83,064,773
- ---------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY -
4.4%
AT&T Corp. 200,000 15,050,000
- ---------------------------------------------------------------
Ericsson LM, B Shares 295,200 7,028,969
- ---------------------------------------------------------------
Kinnevik Investments AB Free,
Series B 150,000 3,516,113
- ---------------------------------------------------------------
MCI WorldCom, Inc.(3) 326,200 23,404,850
- ---------------------------------------------------------------
Societe Europeene de Communication
SA, A Shares, Sponsored ADR(3) 6,000 111,750
- ---------------------------------------------------------------
Societe Europeene de Communication
SA, B Shares, Sponsored ADR(3) 54,000 985,500
-------------
50,097,182
- ---------------------------------------------------------------
UTILITIES - 0.9%
- ---------------------------------------------------------------
ELECTRIC UTILITIES - 0.9%
Vivendi (Ex-Generale des Eaux) 40,000 10,383,088
-------------
Total Common Stocks (Cost
$915,181,348) 1,118,254,269
UNITS
- ---------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES -
0.0%
- ---------------------------------------------------------------
American Satellite Network, Inc.
Wts., Exp. 6/99 6,250 --
- ---------------------------------------------------------------
Banco Bradesco SA Rts., Exp. 2/99 40,755,977 --
- ---------------------------------------------------------------
Industrial Finance Corp. of
Thailand (The) Rts., Exp. 6/99 528,500 --
- ---------------------------------------------------------------
PT Pan Indonesia Bank Wts., Exp.
6/00 423,810 3,708
-------------
Total Rights, Warrants and
Certificates (Cost $0) 3,708
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL
AMOUNT
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS - 2.5%
- ----------------------------------------------------------------
Repurchase agreement with First
Chicago Capital Markets, 4.75%,
dated 12/31/98,
to be repurchased at $27,914,725 on
1/4/99, collateralized by U.S.
Treasury Nts.,
4%-8.875%, 2/15/99-7/15/06, with a
value of $28,469,272 (Cost
$27,900,000) $27,900,000 27,900,000
- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$943,081,348) 101.0% 1,146,157,977
- ----------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (1.0) (11,128,843)
----------- --------------
NET ASSETS 100.0% $1,135,029,134
----------- --------------
----------- --------------
</TABLE>
1. Identifies issues considered to be illiquid or restricted - See applicable
note of Notes to Financial Statements.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $28,819,253 or 2.54% of the Fund's net
assets as of December 31, 1998.
3. Non-income producing security.
78
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Distribution of investments by a country of issue, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
COUNTRY MARKET VALUE PERCENT
- ----------------------------------------------------------
<S> <C> <C>
United States $ 392,135,325 34.1%
- ----------------------------------------------------------
Great Britain 196,758,262 17.1
- ----------------------------------------------------------
Germany 131,643,956 11.5
- ----------------------------------------------------------
France 120,356,779 10.5
- ----------------------------------------------------------
Italy 61,430,543 5.4
- ----------------------------------------------------------
Switzerland 25,711,777 2.2
- ----------------------------------------------------------
Brazil 24,849,361 2.2
- ----------------------------------------------------------
Japan 23,566,887 2.1
- ----------------------------------------------------------
Portugal 22,365,165 2.0
- ----------------------------------------------------------
Argentina 17,210,768 1.5
- ----------------------------------------------------------
Sweden 16,648,315 1.5
- ----------------------------------------------------------
Singapore 16,517,558 1.4
- ----------------------------------------------------------
Mexico 13,370,713 1.2
- ----------------------------------------------------------
Croatia 13,280,000 1.2
- ----------------------------------------------------------
Greece 13,005,978 1.1
- ----------------------------------------------------------
Canada 11,877,316 1.0
- ----------------------------------------------------------
Belgium 8,159,513 0.7
- ----------------------------------------------------------
India 6,981,871 0.6
- ----------------------------------------------------------
The Netherlands 6,714,031 0.6
- ----------------------------------------------------------
Korea, Republic of (South) 6,384,602 0.6
- ----------------------------------------------------------
Ireland 5,565,000 0.5
- ----------------------------------------------------------
Other 11,624,257 1.0
-------------- -----
Total $1,146,157,977 100.0%
-------------- -----
-------------- -----
See accompanying Notes to Financial
Statements.
</TABLE>
79
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET VALUE
AMOUNT(1) NOTE 1
- -----------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE-BACKED OBLIGATIONS - 13.9%
- -----------------------------------------------------------------------
GOVERNMENT AGENCY - 10.2%
- -----------------------------------------------------------------------
FHLMC/FNMA/SPONSORED - 1.6%
Federal Home Loan Mortgage Corp.,
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation
Certificates, Series 151, Cl. F,
9%, 5/15/21 $ 1,299,790 $ 1,369,238
- -----------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped
Mtg.-Backed Security, Series 177,
Cl. B, 0.62%, 7/1/26(2) 4,943,848 947,056
- -----------------------------------------------------------------------
Federal National Mortgage Assn.,
7.50%, 8/1/25 625,857 643,062
- -----------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security, Trust 276,
Cl. 2, 4.43%, 10/1/24(2) 3,292,524 722,298
- -----------------------------------------------------------------------
Federal National Mortgage Assn.,
Principal-Only Stripped
Mtg.-Backed Security, Trust 277-C1,
10.59%, 4/1/27(3) 803,069 705,446
---------------
4,387,100
- -----------------------------------------------------------------------
GUARANTEED - 8.6%
Government National Mortgage Assn.:
7%, 11/20/25 - 7/15/28 17,119,028 17,521,752
7.50%, 2/15/27 3,316,976 3,420,035
8%, 11/15/25 - 5/15/26 3,076,718 3,197,849
---------------
24,139,636
- -----------------------------------------------------------------------
PRIVATE - 3.7%
- -----------------------------------------------------------------------
COMMERCIAL - 2.5%
AMRESCO Commercial Mortgage Funding
I Corp., Multiclass Mtg.
Pass-Through Certificates, Series
1997-C1, Cl. G, 7%, 6/17/29(4) 100,000 79,844
- -----------------------------------------------------------------------
Asset Securitization Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-D4, Cl. B1, 7.525%,
4/14/29(5) 375,000 300,703
Series 1997-D5, Cl. B1, 6.93%,
2/14/41 300,000 225,891
Series 1997-D5, Cl. B2, 6.93%,
2/14/41 1,250,000 903,906
- -----------------------------------------------------------------------
CRIMMI MAE Trust I, Collateralized
Mtg. Obligations, Series 1996-C1,
Cl. A2, 8/30/05(6) 100,000 98,095
- -----------------------------------------------------------------------
CS First Boston Mortgage Securities
Corp., Mtg. Pass-Through
Certificates, Series 1997-C2, Cl.
F, 7.46%, 5/17/14 150,000 127,078
- -----------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, Series 1994-C1, Cl.
2-G, 8.70%, 9/25/25(4) 153,594 158,490
- -----------------------------------------------------------------------
General Motors Acceptance Corp.,
Collateralized Mtg. Obligations:
Series 1997-C1, Cl. G, 7.414%,
11/15/11 440,000 334,262
Series 1997-C2, Cl. F, 6.75%,
4/16/29 250,000 170,234
- -----------------------------------------------------------------------
General Motors Acceptance Corp.,
Interest-Only Stripped
Mtg.-Backed Security, Series
1997-C1, Cl. X, 8.80%, 7/15/27(2) 4,157,596 371,585
- -----------------------------------------------------------------------
Merrill Lynch Mortgage Investors,
Inc., Mtg. Pass-Through
Certificates, Series 1995-C2, Cl.
D, 7.863%, 6/15/21(5) 289,584 295,240
</TABLE>
80
<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)
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. F, 7.436%,
2/15/28(4)(5) $ 162,744 $ 139,350
Series 1997-HF1, Cl. F, 6.86%,
2/15/10(4) 150,000 134,625
Series 1997-RR, Cl. D, 7.67%,
4/30/39(4) 450,000 424,406
Series 1997-RR, Cl. E, 7.762%,
4/30/39(4)(5) 300,000 271,875
Series 1997-RR, Cl. F, 7.79%,
4/30/39(4) 600,000 435,750
Series 1997-XL1, Cl. G, 7.695%,
10/3/30(4)(5) 390,000 373,425
- -----------------------------------------------------------------------
NationsCommercial Corp., NB
Commercial Mtg. Pass-Through
Certificates, Series-DMC, Cl. C,
8.921%, 8/12/11(4) 200,000 210,000
- -----------------------------------------------------------------------
Nykredit AS, 8% Cv. Bonds,
10/1/26(DKK) 3,474,000 562,229
- -----------------------------------------------------------------------
Resolution Trust Corp., Commercial
Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%,
12/25/20 64,223 63,953
Series 1993-C1, Cl. D, 9.45%,
5/25/24 91,000 90,147
Series 1994-C2, Cl. E, 8%, 4/25/25 998,084 993,874
- -----------------------------------------------------------------------
Structured Asset Securities Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1997-LLI, Cl.
F, 7.30%, 4/12/12(4) 200,000 160,188
- -----------------------------------------------------------------------
Structured Asset Securities Corp.,
Multiclass Pass-Through
Certificates, Series 1995-C4, Cl.
E, 8.559%, 6/25/26(4)(5) 46,290 43,744
---------------
6,968,894
- -----------------------------------------------------------------------
MULTI-FAMILY - 0.6%
Mortgage Capital Funding, Inc.,
Commercial Mtg. Pass-Through
Certificates, Series 1997-MC1, Cl.
F, 7.452%, 5/20/07(4) 63,720 52,940
- -----------------------------------------------------------------------
Mortgage Capital Funding, Inc.,
Multifamily Mtg. Pass-Through
Certificates, Series 1996-MC1, Cl.
G, 7.15%, 6/15/06(6) 800,000 659,375
- -----------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Series 1996-CL, Cl.
F, 9.175%, 1/20/06(5) 1,000,000 840,000
---------------
1,552,315
- -----------------------------------------------------------------------
RESIDENTIAL - 0.6%
CS First Boston Mortgage Securities
Corp., Mtg. Pass-Through
Certificates:
Series 1997-C1, Cl. F, 7.50%,
6/20/13(4) 100,000 77,969
Series 1997-C1, Cl. G, 7.50%,
6/20/14(4) 100,000 71,594
Series 1997-C1, Cl. H, 7.50%,
8/20/14(4) 60,000 41,175
Series 1997-C2, Cl. H, 7.46%,
1/17/35 100,000 68,000
- -----------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1,
8.098%, 5/25/08 - 2/25/11(4)(5) 950,000 766,985
- -----------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Series 1996-B, Cl.
1, 7.132%, 4/25/26(4) 387,444 285,982
- -----------------------------------------------------------------------
Salomon, Inc., Commercial Mtg.
Pass-Through Certificates, Series
1998-A1, 5%, 12/25/00(4) 340,798 327,166
---------------
1,638,871
---------------
Total Mortgage-Backed Obligations
(Cost $39,666,758) 38,686,816
</TABLE>
81
<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 - 25.5%
- -----------------------------------------------------------------------
U.S. Treasury Bonds:
6%, 2/15/26(7) $ 1,730,000 $ 1,888,404
6.125%, 11/15/27(8)(9) 2,500,000 2,800,782
6.50%, 11/15/26 7,000,000 8,148,441
8%, 11/15/21 300,000 402,000
8.125%, 8/15/19 500,000 668,750
9.375%, 2/15/06 4,700,000 6,005,721
10.75%, 8/15/05 3,260,000 4,347,008
11.875%, 11/15/03 4,950,000 6,459,750
STRIPS, 5.75%, 2/15/19(10) 6,500,000 2,131,805
STRIPS, 5.30%, 5/15/17(10) 6,000,000 2,180,208
- -----------------------------------------------------------------------
U.S. Treasury Nts.:
5.375%, 6/30/00 3,600,000 3,638,250
6.50%, 5/15/05 - 10/15/06 25,420,000 28,145,263
6.875%, 5/15/06 3,900,000 4,409,438
---------------
Total U.S. Government Obligations
(Cost $68,599,709) 71,225,820
- -----------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS -
20.2%
- -----------------------------------------------------------------------
ARGENTINA - 3.7%
Argentina (Republic of) Bonds, 5%,
12/20/02(JPY) 60,000,000 467,259
- -----------------------------------------------------------------------
Argentina (Republic of) Bonds,
Bonos de Consolidacion de Deudas,
Series I:
3.011%, 4/1/07(5)(ARP) 3,474,104 2,239,458
5.010%, 4/1/01(5) 100,836 93,292
- -----------------------------------------------------------------------
Argentina (Republic of) Bonds,
Series L, 6.188%, 3/31/05(5) 1,297,200 1,105,863
- -----------------------------------------------------------------------
Argentina (Republic of) Global
Unsec. Unsub. Bonds., Series BGL5,
11.375%, 1/30/17 2,380,000 2,380,000
- -----------------------------------------------------------------------
Argentina (Republic of) Nts:
11%, 12/4/05 1,065,000 1,065,000
Series REGS, 11.75%, 2/12/07(ARP) 450,000 379,467
- -----------------------------------------------------------------------
Argentina (Republic of) Sr. Unsec.
Unsub. Bonds, 11%, 10/9/06 50,000 49,125
- -----------------------------------------------------------------------
Argentina (Republic of) Unsec.
Unsub. Medium-Term Nts.:
5.50%, 3/27/01(4)(JPY) 170,000,000 1,445,354
8.75%, 7/10/02(ARP) 660,000 541,689
- -----------------------------------------------------------------------
Banco Hipotecario Nacional
(Argentina) Medium-Term Unsec.
Nts., Series 3, 10.625%, 8/7/06 400,000 388,000
- -----------------------------------------------------------------------
City of Buenos Aires Bonds, Series
3, 10.50%, 5/28/04(ARP) 160,000 124,913
---------------
10,279,420
- -----------------------------------------------------------------------
AUSTRALIA - 0.3%
Australia (Government of) Bonds,
Series 904, 9%, 9/15/04(AUD) 1,335,000 986,654
- -----------------------------------------------------------------------
BRAZIL - 1.5%
Brazil (Federal Republic of) Bonds,
Series RG, 6.188%, 4/15/12(5) 1,000,000 502,500
- -----------------------------------------------------------------------
Brazil (Federal Republic of)
Capitalization Bonds, 8%, 4/15/14 1,731,101 1,034,333
- -----------------------------------------------------------------------
Brazil (Federal Republic of) Debt
Conversion Bonds, 6.188%,
4/15/12(5) 2,660,000 1,336,650
- -----------------------------------------------------------------------
Brazil (Federal Republic of)
Eligible Interest Bonds, 6.125%,
4/15/12(5) 672,000 433,440
</TABLE>
82
<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) Gtd.
Disc. Bonds, 6.125%, 4/15/24(5) $ 1,400,000 $ 822,500
---------------
4,129,423
- -----------------------------------------------------------------------
BULGARIA - 0.4%
Bulgaria (Republic of) Disc. Bonds,
Tranche A, 6.688%, 7/28/24(5) 690,000 484,725
- -----------------------------------------------------------------------
Bulgaria (Republic of) Front-Loaded
Interest Reduction Bearer Bonds,
Tranche A, 2.50%, 7/28/12(11) 1,080,000 618,300
- -----------------------------------------------------------------------
Bulgaria (Republic of) Interest
Arrears Bonds, 6.688%, 7/28/11(5) 160,000 107,600
---------------
1,210,625
- -----------------------------------------------------------------------
DENMARK - 0.5%
Denmark (Kingdom of) Bonds:
7%, 11/10/24(DKK) 1,190,000 239,333
8%, 5/15/03(DKK) 5,740,000 1,046,294
- -----------------------------------------------------------------------
Denmark (Kingdom of) Bullet Bonds,
7%, 11/15/07(DKK) 1,190,000 224,506
---------------
1,510,133
- -----------------------------------------------------------------------
ECUADOR - 0.1%
Ecuador (Republic of) Debs.,
6.625%, 2/27/15(5) 441,347 178,746
- -----------------------------------------------------------------------
Ecuador (Republic of) Disc. Bonds,
6.625%, 2/28/25(5) 50,000 25,125
- -----------------------------------------------------------------------
Ecuador (Republic of) Past Due
Interest Bonds, 6.625%, 2/27/15(5) 56,578 22,914
---------------
226,785
- -----------------------------------------------------------------------
FINLAND - 0.3%
Finland (Republic of) Bonds, 9.50%,
3/15/04(FIM) 3,000,000 756,285
- -----------------------------------------------------------------------
FRANCE - 2.2%
France (Government of) Bonds:
Obligations Assimilables du Tresor,
5.25%, 4/25/08(FRF) 23,780,000 4,704,484
Obligations Assimilables du Tresor,
5.50%, 10/25/07(FRF) 7,720,000 1,543,583
---------------
6,248,067
- -----------------------------------------------------------------------
GERMANY - 1.2%
Germany (Republic of) Bonds, 4.50%,
2/18/03(DEM) 1,070,000 670,258
- -----------------------------------------------------------------------
Germany (Republic of) Nts., Series
98, 4%, 3/17/00(DEM) 4,390,000 2,662,954
---------------
3,333,212
- -----------------------------------------------------------------------
GREAT BRITAIN - 0.7%
United Kingdom Treasury Bonds:
8.50%, 12/7/05(GBP) 880,000 1,810,378
9%, 8/6/12(GBP) 40,000 96,462
---------------
1,906,840
- -----------------------------------------------------------------------
GREECE - 0.2%
Hellenic Republic Government Bonds,
8.90%, 4/1/03(GRD) 158,200,000 587,513
- -----------------------------------------------------------------------
HUNGARY - 0.3%
Hungary (Government of) Bonds:
Series 00/G, 16%, 11/24/00(HUF) 60,900,000 290,858
Series 03/I, 13%, 7/24/03(HUF) 61,190,000 289,011
</TABLE>
83
<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>
HUNGARY (CONTINUED)
Hungary (Government of) Bonds:
(Continued)
Series 99-G, 16.50%, 7/24/99(HUF) 44,000,000 $ 204,949
---------------
784,818
- -----------------------------------------------------------------------
INDONESIA - 0.1%
PT Bank Negara Indonesia Sr. Nts.,
7.625%, 2/15/07 317,000 175,142
- -----------------------------------------------------------------------
ITALY - 1.8%
Italy (Republic of) Treasury Bonds,
Buoni del Tesoro Poliennali:
8.50%, 1/1/04(ITL) 2,855,000,000 2,112,388
8.75%, 7/1/06(ITL) 3,575,000,000 2,823,979
10.50%, 4/1/05(ITL) 175,000,000 144,392
---------------
5,080,759
- -----------------------------------------------------------------------
IVORY COAST - 0.1%
Ivory Coast (Government of) Past
Due Interest Bonds, 2%,
3/29/18(6)(11) 579,662 169,551
- -----------------------------------------------------------------------
JORDAN - 0.0%
Hashemite (Kingdom of Jordan)
Bonds, Series DEF, 5%, 12/23/23(11) 210,000 120,225
- -----------------------------------------------------------------------
KOREA, REPUBLIC OF (SOUTH) - 0.4%
Export-Import Bank of Korea Unsec.
Nts., 7.10%, 3/15/07 300,000 267,750
- -----------------------------------------------------------------------
Korea (Republic of) Nts., 7.813%,
4/8/00(4)(5) 580,000 537,225
- -----------------------------------------------------------------------
Korea Electric Power Unsec. Unsub.
Nts., 6.375%, 12/1/03 300,000 255,509
---------------
1,060,484
- -----------------------------------------------------------------------
MEXICO - 2.9%
United Mexican States Bills, Zero
Coupon, 32.91%, 5/6/99(10)(MXP) 13,850,000 1,262,555
- -----------------------------------------------------------------------
United Mexican States Bonds:
6.63%, 12/31/19(FRF) 7,500,000 1,087,539
8.125%, 9/10/04(11)(DEM) 750,000 461,791
10.375%, 1/29/03(DEM) 725,000 466,857
11.50%, 5/15/26 1,920,000 2,040,000
16.50%, 9/1/08(4)(GBP) 20,000 39,792
- -----------------------------------------------------------------------
United Mexican States
Collateralized Fixed Rate Par
Bonds:
Series B, 6.25%, 12/31/19 600,000 468,750
Series W-A, 6.25%, 12/31/19 550,000 429,687
Series W-B, 6.25%, 12/31/19 2,100,000 1,640,625
- -----------------------------------------------------------------------
United Mexican States Petroleos
Mexicanos Unsec. Unsub. Nts.,
7.875%, 3/2/99(CAD) 200,000 130,101
---------------
8,027,697
- -----------------------------------------------------------------------
NIGERIA - 0.0%
Nigeria (Federal Republic of)
Promissory Nts., Series RC, 5.092%,
1/5/10 68,192 43,288
- -----------------------------------------------------------------------
PANAMA - 0.1%
Panama (Government of) Past Due
Interest Debs., 6.688%, 7/17/16(5) 232,025 172,279
</TABLE>
84
<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>
PERU - 0.6%
Peru (Republic of) Past Due
Interest Bonds, Series 20 yr., 4%,
3/7/17(11) $ 600,000 $ 378,000
- -----------------------------------------------------------------------
Peru (Republic of) Sr. Nts., Zero
Coupon, 4.50%, 2/28/16(10) 3,305,417 1,422,982
---------------
1,800,982
- -----------------------------------------------------------------------
POLAND - 0.7%
Poland (Republic of) Bonds, 12%,
10/12/03(PLZ) 1,010,000 300,921
- -----------------------------------------------------------------------
Poland (Republic of) Bonds, Series
2 yr., 14%, 2/12/00(PLZ) 1,000,000 289,181
- -----------------------------------------------------------------------
Poland (Republic of) Past Due
Interest Bonds, 5%, 10/27/14(11) 1,155,000 1,081,369
- -----------------------------------------------------------------------
Poland (Republic of) Treasury
Bills, Series 52, Zero Coupon,
14.86%, 10/13/99(10)(PLZ) 770,000 199,244
- -----------------------------------------------------------------------
Poland (Republic of) Treasury
Bills, Series 52, Zero Coupon,
15.13%, 8/11/99(10)(PLZ) 450,000 119,013
---------------
1,989,728
- -----------------------------------------------------------------------
RUSSIA - 0.1%
City of St. Petersburg Sr. Unsub.
Nts., 9.50%, 6/18/02(4) 180,000 43,650
- -----------------------------------------------------------------------
Russia (Government of) Bonds:
18.29%, 4/28/99(4)(12)(RUR) 860,000 9,091
29.80%, 7/14/99(4)(12)(RUR) 1,500,000 19,031
Series 2, 29.80%,
7/14/99(4)(12)(RUR) 745,000 9,452
Series 3, 18.29%,
4/28/99(4)(12)(RUR) 790,000 8,351
- -----------------------------------------------------------------------
Russia (Government of) Debs.,
5.969%, 12/15/15(5) 24,195 2,677
- -----------------------------------------------------------------------
Russia (Government of) Federal Loan
Bonds, Series 5022, 15%,
2/23/00(4)(12)(RUR) 5,417,000 98,866
- -----------------------------------------------------------------------
Russia (Government of) Principal
Loan Debs., Series 24 yr., 5.969%,
12/15/20(5) 1,730,000 107,066
---------------
298,184
- -----------------------------------------------------------------------
SPAIN - 1.5%
Spain (Kingdom of) Gtd. Bonds,
Bonos y Obligacion del Estado:
4.50%, 7/30/04(ESP) 271,340,000 1,969,251
5.25%, 1/31/03(ESP) 273,920,000 2,073,278
6%, 1/31/08(ESP) 12,200,000 98,609
---------------
4,141,138
- -----------------------------------------------------------------------
THAILAND - 0.1%
Industrial Finance Corp. of
Thailand (The) Sr. Nts., 6.875%,
4/1/03(6) 200,000 174,373
- -----------------------------------------------------------------------
TURKEY - 0.2%
Turkey (Republic of) Treasury
Bills, Zero Coupon, 85.01%,
1/27/99(10)(TRL) 20,300,000,000 641,495
- -----------------------------------------------------------------------
VENEZUELA - 0.2%
Venezuela (Republic of) Bonds,
9.25%, 9/15/27 380,000 224,200
- -----------------------------------------------------------------------
Venezuela (Republic of) Disc.
Bonds, Series DL, 5.938%,
12/18/07(5) 214,285 136,339
</TABLE>
85
<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>
VENEZUELA (CONTINUED)
Venezuela (Republic of)
Front-Loaded Interest Reduction
Bonds, Series B, 6.75%, 3/31/07(5) $ 202,380 $ 126,361
- -----------------------------------------------------------------------
Venezuela (Republic of) New Money
Bonds, Series A, 6.063%,
12/18/05(5) 205,883 128,548
---------------
615,448
- -----------------------------------------------------------------------
VIETNAM - 0.0%
Vietnam (Government of) Bonds, 3%,
3/12/28(5) 54,000 13,770
---------------
Total Foreign Government
Obligations (Cost $58,599,197) 56,484,318
- -----------------------------------------------------------------------
LOAN PARTICIPATIONS - 0.2%
- -----------------------------------------------------------------------
Jamaica (Government of) 1990
Refinancing Agreement Nts., Tranche
A, 6.188%, 10/16/00(4)(5) 25,000 21,625
- -----------------------------------------------------------------------
Morocco (Kingdom of) Loan
Participation Agreement, Tranche A,
6.312%, 1/1/09(4)(5) 740,000 586,450
---------------
Total Loan Participations (Cost
$680,509) 608,075
- -----------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 27.2%
- -----------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.9%
America West Airlines, Inc., 10.75%
Sr. Nts., 9/1/05 450,000 470,250
- -----------------------------------------------------------------------
Amtran, Inc.:
9.625% Nts., 12/15/05 100,000 100,500
10.50% Sr. Nts., 8/1/04 150,000 156,750
- -----------------------------------------------------------------------
Atlas Air, Inc.:
9.25% Sr. Nts., 4/15/08(4) 300,000 300,750
9.375% Sr. Nts., 11/15/06(6) 300,000 307,500
10.75% Sr. Nts., 8/1/05 125,000 131,875
12.25% Pass-Through Certificates,
12/1/02 350,000 378,000
- -----------------------------------------------------------------------
Constellation Finance LLC, 9.80%
Airline Receivable Asset-Backed
Nts., Series 1997-1, 1/1/01(4) 175,000 171,500
- -----------------------------------------------------------------------
Greater Toronto Airport, 5.40%
Debs., 12/3/02(CAD) 240,000 158,014
- -----------------------------------------------------------------------
Pegasus Aircraft Lease
Securitization Trust, 11.76% Sr.
Nts., Series 1997-A, Cl. B,
6/15/04(4) 90,586 96,601
- -----------------------------------------------------------------------
SC International Services, Inc.,
9.25% Sr. Sub. Nts., Series B,
9/1/07 200,000 201,000
---------------
2,472,740
- -----------------------------------------------------------------------
CHEMICALS - 0.5%
ClimaChem, Inc., 10.75% Sr. Unsec.
Nts., Series B, 12/1/07 150,000 151,500
- -----------------------------------------------------------------------
ICO, Inc., 10.375% Sr. Nts., 6/1/07 50,000 46,750
- -----------------------------------------------------------------------
Laroche Industries, Inc., 9.50% Sr.
Sub. Nts., Series B, 9/15/07 150,000 120,750
- -----------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr.
Sec. Nts., 10/15/03 140,000 149,450
- -----------------------------------------------------------------------
PCI Chemicals Canada, Inc., 9.25%
Sec. Nts., 10/15/07 175,000 135,625
- -----------------------------------------------------------------------
Pioneer Americas Acquisition Corp.,
9.25% Sr. Nts., 6/15/07 150,000 120,750
- -----------------------------------------------------------------------
Polytama International Finance BV,
11.25% Sec. Nts., 6/15/07 125,047 27,823
- -----------------------------------------------------------------------
Sovereign Specialty Chemicals,
Inc., 9.50% Sr. Unsec. Sub. Nts.,
Series B, 8/1/07 425,000 433,500
</TABLE>
86
<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)
Sterling Chemicals, Inc.:
11.25% Sr. Sub. Nts., 4/1/07 $ 50,000 $ 42,250
11.75% Sr. Unsec. Sub. Nts.,
8/15/06 190,000 164,350
---------------
1,392,748
- -----------------------------------------------------------------------
CONSUMER DURABLES - 0.1%
Holmes Products Corp., 9.875% Sr.
Unsec. Sub. Nts., Series B,
11/15/07 200,000 190,000
- -----------------------------------------------------------------------
Icon Health & Fitness, Inc., 13%
Sr. Sub. Nts., Series B, 7/15/02 125,000 75,625
- -----------------------------------------------------------------------
TAG Heuer International SA, 12% Sr.
Sub. Nts., 12/15/05(4) 100,000 116,101
---------------
381,726
- -----------------------------------------------------------------------
CONSUMER NON-DURABLES - 0.7%
AKI Holdings, Inc.:
0%/13.50% Sr. Disc. Debs.,
7/1/09(6)(13) 150,000 59,250
10.50% Sr. Nts., 7/1/08(6) 100,000 95,500
- -----------------------------------------------------------------------
American Pad & Paper Co., 13% Sr.
Sub. Nts., Series B, 11/15/05 295,000 169,625
- -----------------------------------------------------------------------
Bell Sports, Inc., 11% Sr. Sub.
Nts., 8/15/08(6) 305,000 311,100
- -----------------------------------------------------------------------
Chattem, Inc., 8.875% Sr. Unsec.
Sub. Nts., Series B, 4/1/08 100,000 103,000
- -----------------------------------------------------------------------
Globe Manufacturing, Inc., 10% Sr.
Sub. Nts., 8/1/08(6) 315,000 286,650
- -----------------------------------------------------------------------
Indorayon International Finance Co.
BV, 10% Gtd. Unsec. Unsub. Nts.,
3/29/01(4) 100,000 29,000
- -----------------------------------------------------------------------
Phillips-Van Heusen Corp., 9.50%
Sr. Unsec. Sub. Nts., 5/1/08 200,000 201,000
- -----------------------------------------------------------------------
Revlon Consumer Products Corp.:
8.625% Sr. Unsec. Sub. Nts., 2/1/08 100,000 91,500
9% Sr. Nts., 11/1/06(6) 100,000 100,000
- -----------------------------------------------------------------------
Revlon Worldwide Corp., Zero Coupon
Sr. Sec. Disc. Nts., Series B,
9.89%, 3/15/01(10) 220,000 126,500
- -----------------------------------------------------------------------
Styling Technology Corp., 10.875%
Sr. Sub. Nts., 7/1/08 70,000 66,850
- -----------------------------------------------------------------------
William Carter Co., 10.375% Sr.
Sub. Nts., Series A, 12/1/06 135,000 143,100
- -----------------------------------------------------------------------
Williams (J. B.) Holdings, Inc.,
12% Sr. Nts., 3/1/04 100,000 105,500
---------------
1,888,575
- -----------------------------------------------------------------------
ENERGY - 1.9%
AEI Resources, Inc., 11.50% Sr.
Sub. Nts., 12/15/06(6) 250,000 248,125
- -----------------------------------------------------------------------
Chesapeake Energy Corp.:
9.125% Sr. Unsec. Nts., 4/15/06 100,000 75,500
9.625% Sr. Unsec. Nts., Series B,
5/1/05 155,000 117,025
- -----------------------------------------------------------------------
Clark Refinancing & Marketing,
Inc., 8.875% Sr. Sub. Nts.,
11/15/07 245,000 219,275
- -----------------------------------------------------------------------
Clark USA, Inc., 10.875% Sr. Nts.,
Series B, 12/1/05 125,000 115,625
- -----------------------------------------------------------------------
Dailey International, Inc., 9.50%
Sr. Unsec. Nts., Series B, 2/15/08 400,000 178,000
- -----------------------------------------------------------------------
Denbury Management, Inc., 9% Sr.
Sub. Nts., 3/1/08 400,000 338,000
- -----------------------------------------------------------------------
Empresa Electric Del Norte, 10.50%
Sr. Debs., 6/15/05(6) 100,000 68,500
- -----------------------------------------------------------------------
Forcenergy, Inc.:
8.50% Sr. Sub. Nts., Series B,
2/15/07 90,000 67,050
</TABLE>
87
<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)
Forcenergy, Inc.: (Continued)
9.50% Sr. Sub. Nts., 11/1/06 $ 400,000 $ 310,000
- -----------------------------------------------------------------------
Gothic Energy Corp., 0%/14.125% Sr.
Disc. Nts., 5/1/06(13) 275,000 90,750
- -----------------------------------------------------------------------
Gothic Production Corp., 11.125%
Sr. Sec. Nts., Series B, 5/1/05(6) 200,000 157,000
- -----------------------------------------------------------------------
Grant Geophysical, Inc., 9.75% Sr.
Unsec. Nts., Series B, 2/15/08 560,000 383,600
- -----------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr.
Sec. Nts., 6/1/08 250,000 201,250
- -----------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr.
Sub. Nts., Series B, 5/15/08 600,000 609,000
- -----------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.,
9.375% Sr. Sub. Debs., 2/1/06 425,000 399,500
- -----------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub.
Nts., 5/15/07 370,000 344,100
- -----------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec.
Nts., 2/15/08 630,000 444,150
- -----------------------------------------------------------------------
Statia Terminals
International/Statia Terminals
(Canada), Inc., 11.75% First Mtg.
Nts., Series B, 11/15/03 175,000 175,875
- -----------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub.
Nts., 9/15/07 270,000 261,900
- -----------------------------------------------------------------------
Universal Compression Holdings,
Inc.:
0%/9.875% Sr. Disc. Nts.,
2/15/08(13) 500,000 302,500
0%/11.375% Sr. Disc. Nts.,
2/15/09(13) 400,000 240,000
---------------
5,346,725
- -----------------------------------------------------------------------
FINANCIAL - 3.6%
AMRESCO, Inc.:
9.875% Sr. Sub. Nts., Series 98-A,
3/15/05 300,000 205,500
10% Sr. Sub. Nts., Series 97-A,
3/15/04 100,000 71,250
- -----------------------------------------------------------------------
Bakrie Investindo, Zero Coupon
Promissory Nts.,
7/10/98(4)(12)(IDR) 1,000,000,000 31,250
- -----------------------------------------------------------------------
Banco Nacional de Mexico SA, 11%
Sub. Exchangeable Capital Debs.,
7/15/03(4) 130,000 113,750
- -----------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts.,
7/18/07 7,000 5,635
- -----------------------------------------------------------------------
Bayerische Vereinsbank AG, 5% Sec.
Nts., Series 661, 7/28/04(DEM) 4,055,000 2,584,400
- -----------------------------------------------------------------------
CB Richard Ellis Services, Inc.,
8.875% Sr. Unsec. Sub. Nts., 6/1/06 250,000 246,250
- -----------------------------------------------------------------------
Deutsche Pfandbrief & Hypobank,
4.75% Sec. Nts., Series 452,
3/20/03(DEM) 2,800,000 1,755,458
- -----------------------------------------------------------------------
Emergent Group, Inc., 10.75% Sr.
Nts., Series B, 9/15/04 80,000 40,400
- -----------------------------------------------------------------------
Federal Home Loan Bank, 5.625%,
6/10/03(GBP) 115,000 193,244
- -----------------------------------------------------------------------
Federal National Mortgage Assn.,
6.875% Sr. Unsec. Nts., 6/7/02(GBP) 325,000 566,803
- -----------------------------------------------------------------------
Ford Motor Credit Co., 5.25% Bonds,
6/16/08(DEM) 1,350,000 840,444
- -----------------------------------------------------------------------
Hypothekenbank in Essen AG:
4.50% Sec. Nts., Series 478,
5/2/03(DEM) 575,000 357,044
- -----------------------------------------------------------------------
5.25% Sec. Nts., Series 502,
1/22/08(DEM) 890,000 571,772
- -----------------------------------------------------------------------
5.50% Sec. Nts., Series 459,
2/20/07(DEM) 830,000 544,936
- -----------------------------------------------------------------------
Industrial Bank of Japan Preferred
Capital Co. (The) LLC, 8.79% Bonds,
12/29/49(5)(6) 400,000 344,624
- -----------------------------------------------------------------------
Kreditanstalt fuer Wiederaufbau, 5%
Bonds, 1/4/09(DEM) 650,000 416,610
- -----------------------------------------------------------------------
Local Financial Corp., 11% Sr.
Nts., 9/8/04(6) 150,000 152,250
- -----------------------------------------------------------------------
Ocwen Capital Trust I, 10.875%
Capital Nts., 8/1/27 150,000 120,750
</TABLE>
88
<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>
FINANCIAL (CONTINUED)
Ocwen Financial Corp., 11.875%
Nts., 10/1/03 $ 150,000 $ 134,250
- -----------------------------------------------------------------------
Ongko International Finance Co. BV,
10.50% Gtd. Nts., 3/29/04(4)(12) 90,000 5,625
- -----------------------------------------------------------------------
PT Polysindo Eka Perkasa:
11% Nts., 6/27/01-6/18/03(4) 100,000 12,000
24% Nts., 6/27/01-6/19/03(IDR) 164,300,000 2,464
- -----------------------------------------------------------------------
Saul (B.F.) Real Estate Investment
Trust, 9.75% Sr. Sec. Nts., Series
B, 4/1/08 350,000 327,250
- -----------------------------------------------------------------------
SBS Agro Finance BV Bonds, 10.25%,
7/21/00 339,000 26,272
- -----------------------------------------------------------------------
Southern Pacific Funding Corp.,
11.50% Sr. Nts., 11/1/04(12) 100,000 27,000
- -----------------------------------------------------------------------
Veritas Capital Trust, 10% Nts.,
1/1/28 100,000 90,250
- -----------------------------------------------------------------------
Veritas Holdings, Inc., 9.625% Sr.
Nts., 12/15/03 129,000 129,000
- -----------------------------------------------------------------------
Wilshire Financial Services Group,
Inc., 13% Nts., 1/1/04 60,000 18,000
---------------
9,934,481
- -----------------------------------------------------------------------
FOOD & DRUG - 0.5%
Ameriking, Inc., 10.75% Sr. Nts.,
12/1/06(12) 125,000 130,937
- -----------------------------------------------------------------------
Fleming Cos., Inc.:
10.50% Sr. Sub. Nts., Series B,
12/1/04 50,000 47,500
10.625% Sr. Sub. Nts., Series B,
7/31/07 560,000 525,000
- -----------------------------------------------------------------------
Pathmark Stores, Inc., 0%/10.75%
Jr. Sub. Deferred Coupon Nts.,
11/1/03(13) 260,000 214,500
- -----------------------------------------------------------------------
Randall's Food Markets, Inc.,
9.375% Sr. Sub. Nts., Series B,
7/1/07 350,000 380,625
- -----------------------------------------------------------------------
Shoppers Food Warehouse Corp.,
9.75% Sr. Nts., 6/15/04 155,000 169,725
---------------
1,468,287
- -----------------------------------------------------------------------
FOOD/TOBACCO - 0.4%
Aurora Foods, Inc., 8.75% Sr. Sub.
Nts., Series B, 7/1/08 150,000 156,750
- -----------------------------------------------------------------------
Del Monte Foods Co., 0%/12.50% Sr.
Disc. Nts., Series B, 12/15/07(13) 100,000 69,000
- -----------------------------------------------------------------------
Packaged Ice, Inc., 9.75% Sr.
Unsec. Nts., Series B, 2/1/05 200,000 201,000
- -----------------------------------------------------------------------
Purina Mills, Inc., 9% Sr. Unsec.
Sub. Nts., 3/15/10 200,000 205,000
- -----------------------------------------------------------------------
SmithField Foods, Inc., 7.625% Sr.
Unsec. Sub. Nts., 2/15/08 400,000 404,000
- -----------------------------------------------------------------------
Sparkling Spring Water Group Ltd.,
11.50% Sr. Sec. Sub. Nts., 11/15/07 200,000 194,000
---------------
1,229,750
- -----------------------------------------------------------------------
FOREST PRODUCTS/CONTAINERS - 0.7%
Ball Corp.:
7.75% Sr. Nts., 8/1/06(6) 125,000 131,250
8.25% Sr. Sub. Nts., 8/1/08(6) 125,000 130,625
- -----------------------------------------------------------------------
Consumers International, Inc.,
10.25% Sr. Sec. Nts., 4/1/05 250,000 268,750
- -----------------------------------------------------------------------
Fletcher Challenge Finance U.S.A.,
Inc., 8.05% Debs., 6/15/03(NZD) 80,000 43,838
- -----------------------------------------------------------------------
Fletcher Challenge Ltd.:
10% Cv. Unsec. Sub. Nts.,
4/30/05(NZD) 60,000 34,074
14.50% Cv. Sub. Nts., 9/30/00(NZD) 60,000 34,967
</TABLE>
89
<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>
FOREST PRODUCTS/CONTAINERS
(CONTINUED)
Florida Coast Paper Co. LLC, 12.75%
First Mtg. Nts., Series B,
6/1/03(12) $ 230,000 $ 124,200
- -----------------------------------------------------------------------
Four M Corp., 12% Sr. Sec. Nts.,
Series B, 6/1/06 105,000 78,225
- -----------------------------------------------------------------------
Indah Kiat International Finance
Co. BV, 11.375% Sec. Nts., Series
A, 6/15/99(4) 205,000 182,450
- -----------------------------------------------------------------------
Riverwood International Corp.,
10.625% Sr. Unsec. Nts., 8/1/07 400,000 398,000
- -----------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts.,
Series B, 12/15/04 200,000 218,750
- -----------------------------------------------------------------------
SF Holdings Group, Inc., 0%/12.75%
Sr. Disc. Nts., 3/15/08(13) 100,000 35,500
- -----------------------------------------------------------------------
U.S. Timberlands Co. LP, 9.625% Sr.
Nts., 11/15/07 150,000 151,500
---------------
1,832,129
- -----------------------------------------------------------------------
GAMING/LEISURE - 1.6%
AP Holdings, Inc., 0%/11.25% Sr.
Disc. Nts., 3/15/08(13) 50,000 27,250
- -----------------------------------------------------------------------
Apcoa, Inc., 9.25% Sr. Unsec. Sub.
Nts., 3/15/08 100,000 92,500
- -----------------------------------------------------------------------
Capstar Hotel Co., 8.75% Sr. Sub.
Nts., 8/15/07 275,000 269,500
- -----------------------------------------------------------------------
Casino America, Inc., 12.50% Sr.
Nts., 8/1/03 50,000 55,625
- -----------------------------------------------------------------------
Casino Magic of Louisiana Corp.,
13% First Mtg. Nts., Series B,
8/15/03 120,000 136,200
- -----------------------------------------------------------------------
Empress Entertainment, Inc., 8.125%
Sr. Sub. Nts., 7/1/06 400,000 400,000
- -----------------------------------------------------------------------
Grand Casinos, Inc., 10.125% First
Mtg. Sec. Nts., 12/1/03 325,000 355,875
- -----------------------------------------------------------------------
Grupo Posadas SA de CV, 10.375%
Bonds, 2/13/02 50,000 43,312
- -----------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr.
Sub. Nts., 4/1/05 300,000 301,500
- -----------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr.
Sub. Nts., 6/15/07 425,000 440,938
- -----------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts.,
8/15/08 350,000 360,500
- -----------------------------------------------------------------------
Majestic Star Casino LLC (The),
12.75% Sr. Sec. Nts., 5/15/03 400,000 417,000
- -----------------------------------------------------------------------
Mohegan Tribal Gaming Authority
(Connecticut), 13.50% Sr. Sec.
Nts., Series B, 11/15/02 200,000 241,000
- -----------------------------------------------------------------------
Outboard Marine Corp., 10.75% Sr.
Nts., 6/1/08(6) 110,000 107,800
- -----------------------------------------------------------------------
Premier Cruise Ltd., 11% Sr. Nts.,
3/15/08(6) 250,000 126,250
- -----------------------------------------------------------------------
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts., 4/1/08(13) 200,000 136,500
9.25% Sr. Nts., 4/1/06 100,000 103,875
- -----------------------------------------------------------------------
Rio Hotel & Casino, Inc., 9.50% Sr.
Sub. Nts., 4/15/07 200,000 222,000
- -----------------------------------------------------------------------
Showboat Marina Casino
Partnership/Showboat Marina Finance
Corp., 13.50% First Mtg. Nts.,
Series B, 3/15/03 350,000 397,250
- -----------------------------------------------------------------------
Six Flags Entertainment Corp.,
8.875% Sr. Nts., 4/1/06 200,000 206,250
- -----------------------------------------------------------------------
Venetian Casino Resort LLC/Las
Vegas Sands, Inc., 10% Sr. Unsec.
Sub. Nts., 11/15/05 (11) 150,000 132,750
---------------
4,573,875
- -----------------------------------------------------------------------
HEALTHCARE - 0.8%
Fresenius Medical Care Capital
Trust II, 7.875% Nts., 2/1/08 500,000 495,000
- -----------------------------------------------------------------------
Fresenius Medical Care Capital
Trust III, 7.375% Nts., 2/1/08(DEM) 400,000 253,374
</TABLE>
90
<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>
HEALTHCARE (CONTINUED)
ICN Pharmaceutical, Inc., 8.75% Sr.
Nts., 11/15/08(6) $ 350,000 $ 355,250
- -----------------------------------------------------------------------
Integrated Health Services, Inc.:
10.25% Sr. Sub. Nts., 4/30/06 15,000 14,775
9.50% Sr. Sub. Nts., 9/15/07 115,000 109,825
- -----------------------------------------------------------------------
Kinetic Concepts, Inc., 9.625% Sr.
Unsec. Sub. Nts., Series B, 11/1/07 500,000 481,250
- -----------------------------------------------------------------------
Magellan Health Services, Inc., 9%
Sr. Sub. Nts., 2/15/08 250,000 221,250
- -----------------------------------------------------------------------
Oxford Health Plans, Inc., 11% Sr.
Nts., 5/15/05(6) 150,000 141,750
- -----------------------------------------------------------------------
Sun Healthcare Group, Inc., 9.50%
Sr. Sub. Nts., 7/1/07 250,000 203,750
---------------
2,276,224
- -----------------------------------------------------------------------
HOUSING - 0.5%
Building Materials Corp. of
America, 8.625% Sr. Nts., Series B,
12/15/06 50,000 51,125
- -----------------------------------------------------------------------
Falcon Building Products, Inc.,
9.50% Sr. Sub. Nts., 6/15/07 100,000 90,500
- -----------------------------------------------------------------------
Greystone Homes, Inc., 10.75% Sr.
Nts., 3/1/04 50,000 53,000
- -----------------------------------------------------------------------
Kaufman & Broad Home Corp., 7.75%
Sr. Nts., 10/15/04 300,000 303,000
- -----------------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Nts., Series B, 9/1/07 650,000 672,750
9.25% Sr. Nts., Series B, 3/15/07 150,000 154,500
---------------
1,324,875
- -----------------------------------------------------------------------
INFORMATION TECHNOLOGY - 0.6%
Covad Communications Group, Inc.,
0%/13.50% Sr. Disc. Nts.,
3/15/08(13) 600,000 333,000
- -----------------------------------------------------------------------
Details, Inc., 10% Sr. Sub. Nts.,
Series B, 11/15/05 250,000 238,750
- -----------------------------------------------------------------------
DII Group, Inc., 8.50% Sr. Sub.
Nts., 9/15/07 20,000 19,900
- -----------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts.,
3/1/07 350,000 351,750
- -----------------------------------------------------------------------
Iron Mountain, Inc., 8.75% Sr. Sub.
Nts., 9/30/09 150,000 155,250
- -----------------------------------------------------------------------
Unisys Corp., 11.75% Sr. Nts.,
10/15/04 150,000 174,750
- -----------------------------------------------------------------------
WAM!NET, Inc., 0%/13.25% Sr. Unsec.
Disc. Nts., Series B, 3/1/05(13) 500,000 275,000
- -----------------------------------------------------------------------
Wavetek Corp., 10.125% Sr. Sub.
Nts., 6/15/07 175,000 167,125
---------------
1,715,525
- -----------------------------------------------------------------------
MANUFACTURING - 0.8%
Axia, Inc. (New), 10.75% Sr. Sub.
Nts., 7/15/08 125,000 127,500
- -----------------------------------------------------------------------
Burke Industries, Inc., 10% Sr.
Sub. Nts., 8/15/07 150,000 146,250
- -----------------------------------------------------------------------
Cia Latino Americana de
Infraestructura & Servicios SA -
CLISA, 11.625% Sr. Unsec. Nts.,
6/1/04(4) 30,000 19,650
- -----------------------------------------------------------------------
Communications & Power Industries,
Inc., 12% Sr. Sub. Nts., Series B,
8/1/05 250,000 261,875
- -----------------------------------------------------------------------
Eagle-Picher Industries, Inc.,
9.375% Sr. Unsec. Sub. Nts., 3/1/08 300,000 283,500
- -----------------------------------------------------------------------
Grove Worldwide LLC, 9.25% Sr. Sub.
Nts., 5/1/08 100,000 90,500
- -----------------------------------------------------------------------
Hydrochem Industrial Services,
Inc., 10.375% Sr. Sub. Nts., 8/1/07 150,000 143,250
</TABLE>
91
<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>
MANUFACTURING (CONTINUED)
Insilco Corp., Units (each unit
consists of $1,000 principal amount
of 12% Sr. Sub. Nts., 8/15/07 and
one warrant to purchase 0.52 shares
of common stock)(6)(14) $ 270,000 $ 280,800
- -----------------------------------------------------------------------
International Wire Group, Inc.,
11.75% Sr. Sub. Nts., Series B,
6/1/05 125,000 132,188
- -----------------------------------------------------------------------
Mechala Group Jamaica Ltd., 12.75%
Gtd. Sr. Sec. Sub. Nts., Series B,
12/30/99 85,000 58,013
- -----------------------------------------------------------------------
MOLL Industries, Inc., 10.50% Sr.
Sub. Nts., 7/1/08(6) 200,000 197,000
- -----------------------------------------------------------------------
Paragon Corp. Holdings, Inc.,
9.625% Sr. Unsec. Nts., Series B,
4/1/08 125,000 106,563
- -----------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub.
Nts., 7/1/07 100,000 99,500
- -----------------------------------------------------------------------
Roller Bearing Co. of America,
Inc., 9.625% Sr. Sub. Nts., Series
B, 6/15/07 140,000 136,500
- -----------------------------------------------------------------------
Terex Corp., 8.875% Sr. Unsec. Sub.
Nts., 4/1/08 150,000 147,750
- -----------------------------------------------------------------------
Unifrax Investment Corp., 10.50%
Sr. Nts., 11/1/03 50,000 52,250
---------------
2,283,089
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-BROADCASTING -
1.2%
Azteca Holdings SA, 11% Sr. Sec.
Nts., 6/15/02 155,000 131,750
- -----------------------------------------------------------------------
Capstar Broadcasting Partners,
Inc., 9.25% Sr. Sub. Nts., 7/1/07 275,000 286,000
- -----------------------------------------------------------------------
CBS Radio, Inc., 11.375% Unsec.
Sub. Debs., 1/15/09(15) 75,100 89,745
- -----------------------------------------------------------------------
Chancellor Media Corp.:
8.125% Sr. Sub. Nts., Series B,
12/15/07 200,000 200,500
8.75% Sr. Unsec. Sub. Nts., Series
B, 6/15/07 400,000 412,000
10.50% Sr. Sub. Nts., Series B,
1/15/07 90,000 99,000
- -----------------------------------------------------------------------
Jacor Communications, Inc.:
8% Sr. Sub. Nts., 2/15/10 500,000 530,000
8.75% Gtd. Sr. Sub. Nts., Series B,
6/15/07 100,000 108,250
- -----------------------------------------------------------------------
Paxson Communications Corp.,
11.625% Sr. Sub. Nts., 10/1/02 95,000 97,850
- -----------------------------------------------------------------------
Radio One, Inc., 7% Sr. Sub. Nts.,
Series B, 5/15/04(11) 100,000 100,500
- -----------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8.75% Sr. Sub. Nts., 12/15/07 150,000 152,250
9% Sr. Unsec. Sub. Nts., 7/15/07 210,000 215,250
10% Sr. Sub. Nts., 9/30/05 100,000 106,500
- -----------------------------------------------------------------------
Spanish Broadcasting Systems, Inc.,
11% Sr. Nts., 3/15/04 100,000 106,500
- -----------------------------------------------------------------------
TV Azteca SA de CV:
10.125% Sr. Nts., Series A, 2/15/04 100,000 85,250
10.50% Sr. Nts., Series B, 2/15/07 150,000 123,750
- -----------------------------------------------------------------------
Young Broadcasting, Inc.:
8.75% Sr. Sub. Debs., 6/15/07 275,000 280,500
9% Sr. Sub. Nts., Series B, 1/15/06 100,000 101,500
---------------
3,227,095
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-CABLE/WIRELESS
VIDEO - 1.2%
Adelphia Communications Corp.:
8.375% Sr. Nts., Series B, 2/1/08 100,000 103,750
</TABLE>
92
<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>
MEDIA/ENTERTAINMENT-CABLE/WIRELESS
VIDEO (CONTINUED)
Adelphia Communications Corp.:
(Continued)
9.25% Sr. Nts., 10/1/02 $ 100,000 $ 106,000
10.50% Sr. Unsec. Nts., Series B,
7/15/04 70,000 78,750
- -----------------------------------------------------------------------
American Telecasting, Inc.,
0%/14.50% Sr. Disc. Nts.,
6/15/04(13) 40,545 6,284
- -----------------------------------------------------------------------
CSC Holdings, Inc.:
9.875% Sr. Sub. Debs., 4/1/23 150,000 167,625
9.875% Sr. Sub. Nts., 5/15/06 250,000 273,750
- -----------------------------------------------------------------------
EchoStar Communications Corp.,
0%/12.875% Sr. Disc. Nts.,
6/1/04(13) 40,000 41,200
- -----------------------------------------------------------------------
EchoStar DBS Corp., 12.50% Sr. Sec.
Nts., 7/1/02 250,000 288,750
- -----------------------------------------------------------------------
EchoStar I, 8.25% Bonds, 2/26/01(4) 111,983 111,983
- -----------------------------------------------------------------------
EchoStar II, 8.25% Sinking Fund
Bonds, 11/9/01(4) 114,318 114,318
- -----------------------------------------------------------------------
EchoStar Satellite Broadcasting
Corp., 0%/13.125% Sr. Sec. Disc.
Nts., 3/15/04(13) 400,000 401,000
- -----------------------------------------------------------------------
Falcon Holding Group LP, 0%/9.285%
Sr. Disc. Debs., Series B,
4/15/10(13) 350,000 241,500
- -----------------------------------------------------------------------
Helicon Group LP/Helicon Capital
Corp., 11% Sr. Sec. Nts., Series B,
11/1/03(5) 175,000 182,875
- -----------------------------------------------------------------------
Marcus Cable Operating Co.
LP/Marcus Cable Capital Corp.,
0%/13.50% Gtd. Sr. Sub. Disc. Nts.,
Series II, 8/1/04(13) 200,000 202,500
- -----------------------------------------------------------------------
Optel, Inc., 13% Sr. Nts., Series
B, 2/15/05 310,000 308,450
- -----------------------------------------------------------------------
Rogers Cablesystems Ltd., 10%
Second Priority Sr. Sec. Debs.,
12/1/07 200,000 225,000
- -----------------------------------------------------------------------
Rogers Communications, Inc., 8.75%
Sr. Nts., 7/15/07(CAD) 400,000 252,239
- -----------------------------------------------------------------------
United International Holdings,
Inc.:
0%/10.75% Sr. Disc. Nts., Series B,
2/15/08(13) 70,000 38,150
0%/14% Sr. Disc. Nts., Series B,
5/15/06(13) 400,000 210,000
---------------
3,354,124
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-DIVERSIFIED
MEDIA - 0.6%
Hollywood Theaters, Inc., 10.625%
Sr. Sub. Nts., 8/1/07 100,000 74,250
- -----------------------------------------------------------------------
IPC Magazines Group plc, 9.625%
Bonds, 3/15/08(GBP) 300,000 435,225
- -----------------------------------------------------------------------
Regal Cinemas, Inc., 8.875% Sr.
Sub. Nts., 12/15/10(6) 250,000 249,375
- -----------------------------------------------------------------------
SFX Entertainment, Inc., 9.125% Sr.
Unsec. Sub. Nts., Series B, 2/1/08 500,000 497,500
- -----------------------------------------------------------------------
Time Warner Entertainment Co. LP,
8.375% Sr. Debs., 3/15/23 300,000 367,990
---------------
1,624,340
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-TELECOMMUNICATIONS
- -4.0%
Amazon.Com, Inc., 0%/10% Sr. Unsec.
Disc. Nts., 5/1/08(13) 260,000 172,900
- -----------------------------------------------------------------------
COLT Telecom Group plc:
0%/12% Sr. Unsec. Disc. Nts.,
12/15/06(13) 200,000 169,000
7.625% Bonds, 7/31/08(DEM) 500,000 297,016
8.875% Sr. Nts., 11/30/07(DEM) 100,000 61,692
10.125% Sr. Nts., 11/30/07(GBP) 170,000 297,362
</TABLE>
93
<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>
MEDIA/ENTERTAINMENT-TELECOMMUNICATIONS
(CONTINUED)
COLT Telecom Group plc: (Continued)
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)(14) $ 200,000 $ 169,000
- -----------------------------------------------------------------------
Comcast UK Cable Partner Ltd.,
0%/11.20% Sr. Disc. Debs.,
11/15/07(13) 250,000 212,500
- -----------------------------------------------------------------------
Concentric Network Corp., 12.75%
Sr. Unsec. Nts., 12/15/07 80,000 82,000
- -----------------------------------------------------------------------
Convergent Communications, Inc.,
13% Sr. Nts., 4/1/08 250,000 121,250
- -----------------------------------------------------------------------
Diamond Cable Communications plc,
0%/11.75% Sr. Disc. Nts.,
12/15/05(13) 825,000 686,813
- -----------------------------------------------------------------------
Diamond Holdings plc, 9.125% Sr.
Nts., 2/1/08 50,000 48,000
- -----------------------------------------------------------------------
e.spire Communications, Inc.,
13.75% Sr. Nts., 7/15/07 110,000 103,125
- -----------------------------------------------------------------------
Exodus Communications, Inc., 11.25%
Sr. Nts., 7/1/08 165,000 165,825
- -----------------------------------------------------------------------
FaciliCom International, Inc.,
10.50% Sr. Nts., Series B, 1/15/08 340,000 273,700
- -----------------------------------------------------------------------
FirstWorld Communications, Inc.,
0%/13% Sr. Disc. Nts., 4/15/08(13) 190,000 57,950
- -----------------------------------------------------------------------
Focal Communications Corp.,
0%/12.125% Sr. Unsec. Disc. Nts.,
2/15/08(13) 515,000 275,525
- -----------------------------------------------------------------------
Global Crossing Holdings Ltd.,
9.625% Sr. Nts., 5/15/08 210,000 223,650
- -----------------------------------------------------------------------
Globix Corp., 13% Sr. Unsec. Nts.,
5/1/05 325,000 268,125
- -----------------------------------------------------------------------
GST Telecommunications, Inc.,
0%/13.875% Cv. Sr. Sub. Disc. Nts.,
12/15/05(6)(13) 25,000 19,844
- -----------------------------------------------------------------------
GST Telecommunications, Inc./GST
Network Funding Corp., Inc.,
0%/10.50% Sr. Disc. Nts.,
5/1/08(6)(13) 75,000 32,625
- -----------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr.
Disc. Nts., 12/15/05(13) 355,000 256,488
- -----------------------------------------------------------------------
ICG Holdings, Inc.:
0%/12.50% Sr. Sec. Disc. Nts.,
5/1/06(13) 195,000 146,250
0%/13.50% Sr. Disc. Nts.,
9/15/05(13) 120,000 99,600
- -----------------------------------------------------------------------
ICG Services, Inc., 0%/10% Sr.
Unsec. Disc. Nts., 2/15/08(13) 115,000 61,525
- -----------------------------------------------------------------------
Intermedia Communications, Inc.:
8.60% Sr. Unsec. Nts., Series B,
6/1/08 225,000 214,875
8.875% Sr. Nts., 11/1/07 200,000 194,000
- -----------------------------------------------------------------------
KMC Telecom Holdings, Inc.,
0%/12.50% Sr. Unsec. Disc. Nts.,
2/15/08(13) 725,000 351,625
- -----------------------------------------------------------------------
Level 3 Communications, Inc.,
9.125% Sr. Unsec. Nts., 5/1/08 450,000 446,625
- -----------------------------------------------------------------------
Long Distance International, Inc.,
12.25% Sr. Nts., 4/15/08(6) 200,000 167,000
- -----------------------------------------------------------------------
McLeodUSA, Inc., 9.25% Sr. Nts.,
7/15/07 75,000 78,750
- -----------------------------------------------------------------------
Netia Holdings BV:
10.25% Sr. Nts., Series B, 11/1/07 50,000 42,625
0%/11% Sr. Disc. Nts.,
11/1/07(13)(DEM) 400,000 137,494
0%/11% Sr. Disc. Nts., Series B,
11/1/07(13)(DEM) 200,000 68,747
0%/11.25% Sr. Disc. Nts., Series B,
11/1/07(13) 100,000 57,250
- -----------------------------------------------------------------------
NEXTLINK Communications, Inc.:
0%/9.45% Sr. Disc. Unsec. Nts.,
4/15/08(13) 260,000 149,500
9% Sr. Nts., 3/15/08 200,000 189,000
</TABLE>
94
<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>
MEDIA/ENTERTAINMENT-TELECOMMUNICATIONS
(CONTINUED)
- -----------------------------------------------------------------------
NEXTLINK Communications, Inc.:
(Continued)
9.625% Sr. Nts., 10/1/07 $ 350,000 $ 336,000
10.75% Sr. Nts., 11/15/08(6) 100,000 102,250
- -----------------------------------------------------------------------
NorthEast Optic Network, Inc.,
12.75% Sr. Nts., 8/15/08 200,000 197,000
- -----------------------------------------------------------------------
NTL, Inc.:
0%/9.75% Sr. Deferred Coupon Nts.,
4/1/08(6)(13) 300,000 187,500
0%/10.75% Sr. Unsec. Unsub. Nts.,
Series REGS, 4/1/08(13)(GBP) 200,000 208,079
7% Cv. Sub. Nts., 12/15/08(6) 400,000 433,000
10% Sr. Nts., Series B, 2/15/07 100,000 103,000
- -----------------------------------------------------------------------
PLD Telekom, Inc., 0%/14% Sr. Disc.
Nts., 6/1/04(13) 300,000 160,500
- -----------------------------------------------------------------------
PSINet, Inc., 10% Sr. Unsec. Nts.,
Series B, 2/15/05 750,000 746,250
- -----------------------------------------------------------------------
PTC International Finance BV,
0%/10.75% Gtd. Sr. Unsec. Sub.
Bonds, 7/1/07(4)(13) 134,000 92,795
- -----------------------------------------------------------------------
Qwest Communications International,
Inc.:
0%/8.29% Sr. Unsec. Disc. Nts.,
Series B, 2/1/08(13) 365,000 277,400
0%/9.47% Sr. Disc. Nts.,
10/15/07(13) 495,000 384,863
- -----------------------------------------------------------------------
RSL Communications plc:
0%/10% Bonds, 3/15/08(13)(DEM) 350,000 116,236
0%/10.125% Sr. Disc. Nts.,
3/1/08(13) 300,000 173,250
10.50% Sr. Nts., 11/15/08(6) 250,000 244,375
- -----------------------------------------------------------------------
Shaw Communications, Inc., 8.54%
Debs., 9/30/27(CAD) 340,000 230,225
- -----------------------------------------------------------------------
TeleWest Communications plc, 0%/11%
Sr. Disc. Debs., 10/1/07(13) 200,000 168,000
- -----------------------------------------------------------------------
Time Warner Telecom LLC, 9.75% Sr.
Nts., 7/15/08 100,000 105,500
- -----------------------------------------------------------------------
Verio, Inc.:
10.375% Sr. Unsec. Nts., 4/1/05 225,000 221,625
13.50% Sr. Unsec. Nts., 6/15/04 65,000 70,525
- -----------------------------------------------------------------------
Viatel, Inc., 11.25% Sr. Sec. Nts.,
4/15/08 300,000 308,250
---------------
11,265,879
- -----------------------------------------------------------------------
MEDIA/ENTERTAINMENT-WIRELESS
COMMUNICATIONS - 2.3%
Arch Communications, Inc., 12.75%
Sr. Nts., 7/1/07(6) 100,000 100,500
- -----------------------------------------------------------------------
Celcaribe SA, 13.50% Sr. Sec. Nts.,
3/15/04 150,000 143,250
- -----------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/14%
Sr. Disc. Nts., 10/1/07(13) 500,000 127,500
- -----------------------------------------------------------------------
Cellular Communications
International, Inc., 0%/9.50%
Bonds, 4/1/05(13)(XEU) 650,000 644,959
- -----------------------------------------------------------------------
Clearnet Communications, Inc.,
0%/14.75% Sr. Disc. Nts.,
12/15/05(13) 50,000 43,000
- -----------------------------------------------------------------------
Comunicacion Celular SA, 0%/14.125%
Sr. Unsec. Deferred Bonds,
3/1/05(4)(13) 350,000 245,000
- -----------------------------------------------------------------------
Crown Castle International Corp.,
0%/10.625% Sr. Unsec. Disc. Nts.,
11/15/07(13) 500,000 352,500
- -----------------------------------------------------------------------
CTI Holdings SA, 0%/11.50% Sr.
Deferred Coupon Nts., 4/15/08(13) 175,000 79,625
- -----------------------------------------------------------------------
Geotek Communications, Inc.:
0%/15% Sr. Sec. Disc. Nts., Series
B, 7/15/05(12)(13) 90,000 18,450
12% Cv. Sr. Sub. Nts., 2/15/01(12) 210,000 --
</TABLE>
95
<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>
MEDIA/ENTERTAINMENT-WIRELESS
COMMUNICATIONS (CONTINUED)
ICO Global Communications
(Holdings) Ltd., Units (each unit
consists of $1,000 principal amount
of 15% sr. nts., 8/1/05 and one
warrant to buy 19.85 shares of
common stock)(14) $ 100,000 $ 75,000
- -----------------------------------------------------------------------
Microcell Telecommunications, Inc.,
0%/11.125% Sr. Disc. Nts., Series
B, 10/15/07(13)(CAD) 300,000 108,227
- -----------------------------------------------------------------------
Millicom International Cellular SA,
0%/13.50% Sr. Disc. Nts.,
6/1/06(13) 210,000 149,625
- -----------------------------------------------------------------------
Nextel Communications, Inc.:
0%/9.75% Sr. Disc. Nts.,
10/31/07(13) 345,000 210,450
0%/9.95% Sr. Disc. Nts.,
2/15/08(13) 245,000 146,388
0%/10.65% Sr. Disc. Nts.,
9/15/07(13) 480,000 308,400
- -----------------------------------------------------------------------
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 365,000 255,500
11.625% Sr. Nts., Series A, 8/15/06 265,000 185,500
- -----------------------------------------------------------------------
Orange plc, 8% Sr. Nts., 8/1/08 250,000 253,750
- -----------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital
Corp., 14% Sr. Nts., 8/15/04 300,000 310,500
- -----------------------------------------------------------------------
Orion Network Systems, Inc.,
0%/12.50% Sr. Disc. Nts.,
1/15/07(13) 550,000 346,500
- -----------------------------------------------------------------------
Pinnacle Holdings, Inc., 0%/10% Sr.
Unsec. Disc. Nts., 3/15/08(13) 325,000 190,938
- -----------------------------------------------------------------------
Price Communications Cellular
Holdings, Inc., 11.25% Sr. Nts.,
8/15/08(15) 150,000 142,500
- -----------------------------------------------------------------------
Price Communications Wireless,
Inc.:
11.75% Sr. Sub. Nts., 7/15/07 275,000 291,500
9.125% Sr. Sec. Nts., 12/15/06(6) 250,000 253,750
- -----------------------------------------------------------------------
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)(6)(13)(14) 300,000 139,500
- -----------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr.
Sub. Nts., Series B, 5/15/08 300,000 302,250
- -----------------------------------------------------------------------
Satelites Mexicanos SA, 10.125% Sr.
Nts., 11/1/04 100,000 80,250
- -----------------------------------------------------------------------
SBA Communications Corp., 0%/12%
Sr. Unsec. Disc. Nts., 3/1/08(13) 700,000 406,000
- -----------------------------------------------------------------------
Spectrasite Holdings, Inc., 0%/12%
Sr. Disc. Nts., 7/15/08(6)(13) 500,000 252,500
- -----------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum
Finance Corp., 0%/12.50% Sr. Disc.
Nts., 8/15/06(13) 65,000 58,825
- -----------------------------------------------------------------------
USA Mobile Communications, Inc. II:
9.50% Sr. Nts., 2/1/04 100,000 90,500
14% Sr. Nts., 11/1/04 200,000 207,000
---------------
6,520,137
- -----------------------------------------------------------------------
METALS/MINERALS - 0.7%
AK Steel Corp., 9.125% Sr. Nts.,
12/15/06 220,000 229,900
- -----------------------------------------------------------------------
Algoma Steel, Inc., 12.375% First
Mtg. Nts., 7/15/05 45,000 34,425
- -----------------------------------------------------------------------
Bar Technologies, Inc., 13.50% Sr.
Sec. Nts., 4/1/01 45,000 48,263
- -----------------------------------------------------------------------
Centaur Mining & Exploration Ltd.,
11% Sr. Nts., 12/1/07 100,000 91,500
- -----------------------------------------------------------------------
Great Lakes Carbon Corp., 10.25%
Sr. Sub. Nts., Series B, 5/15/08 500,000 506,250
</TABLE>
96
<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>
METALS/MINERALS (CONTINUED)
International Utility Structures,
Inc., 10.75% Sr. Sub. Nts., 2/1/08 $ 50,000 $ 47,250
- -----------------------------------------------------------------------
Keystone Consolidated Industries,
Inc., 9.625% Sr. Sec. Nts., 8/1/07 200,000 192,000
- -----------------------------------------------------------------------
Metallurg Holdings, Inc., 0%/12.75%
Sr. Disc. Nts., 7/15/08(13) 250,000 86,250
- -----------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts.,
12/1/07 745,000 696,575
---------------
1,932,413
- -----------------------------------------------------------------------
RETAIL - 0.5%
Boyds Collection Ltd., 9% Sr. Sub.
Nts., 5/15/08(6) 400,000 410,000
- -----------------------------------------------------------------------
Central Termica Guemes, 12% Bonds,
11/26/01(4) 100,000 56,875
- -----------------------------------------------------------------------
Eye Care Centers of America, Inc.,
9.125% Sr. Sub. Nts., 5/1/08(6) 300,000 286,500
- -----------------------------------------------------------------------
Finlay Enterprises, Inc., 9% Debs.,
5/1/08 100,000 88,500
- -----------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375%
Sr. Nts., 5/1/08 100,000 92,500
- -----------------------------------------------------------------------
Home Interiors & Gifts, Inc.,
10.125% Sr. Sub. Nts., 6/1/08(6) 225,000 223,875
- -----------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub.
Nts., 10/15/07 200,000 210,500
---------------
1,368,750
- -----------------------------------------------------------------------
SERVICE - 0.9%
Allied Waste North America, Inc.,
7.875% Sr. Nts., 1/1/09(6) 335,000 340,863
- -----------------------------------------------------------------------
Borg-Warner Security Corp., 9.625%
Sr. Sub. Nts., 3/15/07 100,000 108,500
- -----------------------------------------------------------------------
Coinstar, Inc., 0%/13% Sr. Disc.
Nts., 10/1/06(13) 100,000 82,500
- -----------------------------------------------------------------------
Fisher Scientific International,
Inc.:
9% Sr. Sub. Nts., 2/1/08(6) 105,000 105,525
9% Sr. Unsec. Sub. Nts., 2/1/08 600,000 603,000
- -----------------------------------------------------------------------
Great Lakes Dredge & Dock Corp.,
11.25% Sr. Sub. Nts., 8/15/08(6) 375,000 382,500
- -----------------------------------------------------------------------
Intermedia Communications, Inc.,
8.50% Sr. Nts., Series B, 1/15/08 250,000 238,750
- -----------------------------------------------------------------------
Kindercare Learning Centers, Inc.,
9.50% Sr. Sub. Nts., 2/15/09 50,000 50,000
- -----------------------------------------------------------------------
Lamar Advertising Co.:
8.625% Sr. Sub. Nts., 9/15/07 150,000 158,250
9.625% Sr. Sub. Nts., 12/1/06 50,000 53,750
- -----------------------------------------------------------------------
Protection One Alarm Monitoring,
Inc., 6.75% Cv. Sr. Sub. Nts.,
9/15/03 125,000 128,281
- -----------------------------------------------------------------------
United Rentals, Inc., 9.25% Sr.
Sub. Nts., 1/15/09(6) 250,000 251,875
---------------
2,503,794
- -----------------------------------------------------------------------
TRANSPORTATION - 1.8%
Cambridge Industries, Inc., 10.25%
Sr. Sub. Nts., Series B, 7/15/07 75,000 64,875
- -----------------------------------------------------------------------
Coach USA, Inc., 9.375% Sr. Sub.
Nts., Series B, 7/1/07 80,000 82,000
- -----------------------------------------------------------------------
Collins & Aikman Products Co.,
11.50% Sr. Unsec. Sub. Nts.,
4/15/06 300,000 313,500
- -----------------------------------------------------------------------
Federal-Mogul Corp., 7.875% Nts.,
7/1/10 300,000 307,741
- -----------------------------------------------------------------------
Hayes Wheels International, Inc.:
9.125% Sr. Sub. Nts., 7/15/07 100,000 104,250
11% Sr. Sub. Nts., 7/15/06 225,000 250,875
- -----------------------------------------------------------------------
HDA Parts System, Inc., 12% Sr.
Sub. Nts., 8/1/05(6) 250,000 226,250
</TABLE>
97
<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>
TRANSPORTATION (CONTINUED)
Key Plastics, Inc., 10.25% Sr. Sub.
Nts., Series B, 3/15/07 $ 300,000 $ 282,000
- -----------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts.,
7/15/06 200,000 221,000
- -----------------------------------------------------------------------
Millenium Seacarriers, Inc., Units
(each unit consists of $1,000
principal amount of 12% first
priority ship mtg. nts., 7/15/05
and one warrant to purchase five
shares of common stock)(6)(14) 250,000 201,250
- -----------------------------------------------------------------------
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg.
Nts., 6/30/07(6) 275,000 243,375
Units (each unit consists of $1,000
principal amount of 12% second
priority ship mtg. nts., 6/30/07
and 7.66 warrants)(6)(14) 150,000 135,750
- -----------------------------------------------------------------------
Oxford Automotive, Inc.:
10.125% Sr. Sub. Nts., 6/15/07(4) 400,000 418,000
10.125% Sr. Unsec. Sub. Nts.,
6/15/07 900,000 936,000
- -----------------------------------------------------------------------
Pycsa Panama SA, 10.28% Sr. Sec.
Bonds, 12/15/12(4) 200,000 156,500
- -----------------------------------------------------------------------
TFM SA de CV, 10.25% Sr. Nts.,
6/15/07 200,000 165,000
- -----------------------------------------------------------------------
Trans World Airlines, Inc., 11.50%
Sr. Sec. Nts., 12/15/04 580,000 490,100
- -----------------------------------------------------------------------
Transtar Holdings LP/Transtar
Capital Corp., 0%/13.375% Sr. Disc.
Nts., Series B, 12/15/03(13) 300,000 289,500
- -----------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50%
Nts., Series 1993-A, 12/1/11(6) 192,214 116,770
---------------
5,004,736
- -----------------------------------------------------------------------
UTILITY - 0.4%
Beaver Valley II Funding Corp., 9%
Second Lease Obligation Bonds,
6/1/17 199,000 224,870
- -----------------------------------------------------------------------
California Energy, Inc., 10.25% Sr.
Disc. Nts., 1/15/04 150,000 157,688
- -----------------------------------------------------------------------
Calpine Corp.:
8.75% Sr. Nts., 7/15/07 230,000 233,450
10.50% Sr. Nts., 5/15/06 100,000 110,750
- -----------------------------------------------------------------------
El Paso Electric Co., 9.40% First
Mtg. Sec. Nts., Series E, 5/1/11 250,000 290,625
---------------
1,017,383
---------------
Total Corporate Bonds and Notes
(Cost $80,568,681) 75,939,400
SHARES
- -----------------------------------------------------------------------
PREFERRED STOCKS - 2.2%
- -----------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg.(15) 2,638 66,609
- -----------------------------------------------------------------------
BankUnited Capital Trust, 10.25%
Gtd. Bonds, 12/31/26 100,000 100,250
- -----------------------------------------------------------------------
CGA Group Ltd., Preferred Stock,
Series A(4)(15) 19,110 477,750
- -----------------------------------------------------------------------
Chesapeake Energy Corp., 7% Cum.
Cv.(6) 4,000 41,000
- -----------------------------------------------------------------------
Clark USA, Inc., 11.50% Cum.
Exchangeable(15) 55 46,337
- -----------------------------------------------------------------------
Concentric Network Corp., 13.50%
Preferred, Series B(15) 212 181,790
- -----------------------------------------------------------------------
CRIIMI MAE, Inc., 10.875% Cum. Cv.,
Series B, Non-Vtg. 46,000 644,000
- -----------------------------------------------------------------------
Crown American Realty Trust, 11%
Cum., Series A, Non-Vtg. 2,000 97,750
- -----------------------------------------------------------------------
Doane Products Co., 14.25%
Exchangeable, Non-Vtg.(4)(16) 5,000 191,875
- -----------------------------------------------------------------------
Dobson Communications Corp., 12.25%
Sr. Exchangeable(15) 218 194,565
</TABLE>
98
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
<S> <C> <C> <C>
- -----------------------------------------------------------------------
PREFERRED STOCKS (CONTINUED)
- -----------------------------------------------------------------------
e.spire Communications, Inc.,
12.75% Jr. Redeemable Preferred
Stock 163 $ 80,277
- -----------------------------------------------------------------------
Eagle-Picher Holdings, Inc., Cum.
Exchangeable, Series B, 3/1/08,
Non-Vtg. (16) 50 253,750
- -----------------------------------------------------------------------
Earthwatch, Inc., 12% Cum. Cv.,
Series C, Non-Vtg.(6)(15) 10,000 15,000
- -----------------------------------------------------------------------
EchoStar Communications Corp.,
12.125% Sr. Redeemable
Exchangeable, Series B,
Non-Vtg.(15) 144 167,400
- -----------------------------------------------------------------------
Fidelity Federal Bank FSB Glendale
California, l2% Non-Cum.
Exchangeable Perpetual Preferred
Stock, Series A 20 465
- -----------------------------------------------------------------------
ICG Holdings, Inc., 14.25%
Exchangeable(15) 115 126,787
- -----------------------------------------------------------------------
Intermedia Communications, Inc.,
Depositary Shares Representing one
one-hundredth 7% Cum. Cv. Jr.
Preferred Stock, Series E,
Non-Vtg.(6) 2,100 38,325
- -----------------------------------------------------------------------
International Utility Structures,
Inc.:
13% Preferred(6)(15) 3 2,588
Units (each unit consists of $1,000
principal amount of 13% sr.
exchangeable preferred stock and
one warrant to purchase 30 shares
of common stock)(4)(15) 50 43,250
- -----------------------------------------------------------------------
Kelley Oil & Gas Corp., $2.625 Cv. 1,800 16,200
- -----------------------------------------------------------------------
Nebco Evans Holdings, Inc., 11.25%
Cum. Exchangeable(15) 5,425 272,606
- -----------------------------------------------------------------------
Nextel Communications, Inc.,
11.125% Exchangeable, Series E(15) 109 98,373
- -----------------------------------------------------------------------
NEXTLINK Communications, Inc., 14%
Cum. Exchangeable, Vtg.(15) 16,584 883,098
- -----------------------------------------------------------------------
Paxson Communications Corp., 13.25%
Cum. Jr. Exchangeable, Non-Vtg.(15) 21 179,025
- -----------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.,
Jr. Cv. Preferred Stock(16) 1,434 2,510
- -----------------------------------------------------------------------
PRIMEDIA, Inc.:
8.625% Exchangeable 8,000 772,000
9.20% Exchangeable, Series F 1,000 98,500
- -----------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum.
Sr., Series B, Non-Vtg.(15) 210 195,825
- -----------------------------------------------------------------------
SD Warren Co., 14% Cum.
Exchangeable, Series B,
Non-Vtg.(16) 9,000 461,250
- -----------------------------------------------------------------------
SF Holdings Group, Inc., 13.75%
Cum. Nts., Series B, 3/15/09,
Non-Vtg.(15) 10 43,250
- -----------------------------------------------------------------------
Spanish Broadcasting Systems, Inc.,
14.25% Cum. Exchangeable,
Non-Vtg.(6)(15) 121 123,723
- -----------------------------------------------------------------------
Viatel, Inc., 10% Cv., Series A(15) 148 16,317
- -----------------------------------------------------------------------
Walden Residential Properties,
Inc.:
9.16% Cv., Series B 10,000 230,000
9.20% Preferred 1,000 21,750
---------------
Total Preferred Stocks (Cost
$8,171,525) 6,184,195
- -----------------------------------------------------------------------
COMMON STOCKS - 0.4%
- -----------------------------------------------------------------------
Celcaribe SA(6)(16) 24,390 51,829
- -----------------------------------------------------------------------
Coinstar, Inc.(16) 700 7,525
- -----------------------------------------------------------------------
Golden State Bancorp, Inc.(16) 2,404 39,966
</TABLE>
99
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- -----------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------
Horizon Group Properties, Inc.(16) 358 $ 1,387
- -----------------------------------------------------------------------
Intermedia Communications, Inc.(16) 112 1,932
- -----------------------------------------------------------------------
MCI WorldCom, Inc.(16) 6,885 493,999
- -----------------------------------------------------------------------
Optel, Inc.(16) 210 2
- -----------------------------------------------------------------------
SF Holdings Group, Inc., Cl. C(16) 570 1,140
- -----------------------------------------------------------------------
Vail Resorts, Inc.(16) 15,500 341,000
---------------
Total Common Stocks (Cost $378,715) 938,780
UNITS
- -----------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES -
0.1%
- -----------------------------------------------------------------------
American Telecasting, Inc. Wts.,
Exp. 6/99(4) 1,500 15
- -----------------------------------------------------------------------
Argentina (Republic of) Wts., Exp.
12/99 1,065 4,659
- -----------------------------------------------------------------------
Central Bank of Nigeria Wts., Exp.
11/20 250 --
- -----------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 12/49(4) 16,000 4,800
- -----------------------------------------------------------------------
Clearnet Communications, Inc. Wts.,
Exp. 9/05 165 392
- -----------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp.
11/03 200 12,025
- -----------------------------------------------------------------------
Concentric Network Corp. Wts., Exp.
12/07(4) 100 14,891
- -----------------------------------------------------------------------
Covad Communications Group, Inc.
Wts., Exp. 3/08(4) 600 30,000
- -----------------------------------------------------------------------
Covergent Communications, Inc.
Wts., Exp. 4/08(4) 1,000 1,250
- -----------------------------------------------------------------------
FirstWorld Communications, Inc.
Wts., Exp. 4/08(4) 190 1,900
- -----------------------------------------------------------------------
Geotek Communications, Inc. Wts.,
Exp. 7/05(4) 7,500 75
- -----------------------------------------------------------------------
Globix Corp. Wts., Exp. 5/05(4) 325 3,250
- -----------------------------------------------------------------------
Golden State Bancorp, Inc. Wts.,
Exp. 1/01 2,404 10,968
- -----------------------------------------------------------------------
Gothic Energy Corp. Wts.:
Exp. 1/03(6) 2,621 26
Exp. 9/04(4) 2,800 3,150
Exp. 5/05(4) 2,181 218
- -----------------------------------------------------------------------
Hyperion Telecommunications, Inc.
Wts., Exp. 4/01 60 3,687
- -----------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp.
9/05(4) 825 11,307
- -----------------------------------------------------------------------
IHF Capital, Inc. Series I Wts.,
Exp. 11/99(4) 200 2
- -----------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp.
8/02 200 --
- -----------------------------------------------------------------------
KMC Telecom Holdings, Inc. Wts.,
Exp. 4/08(4) 725 1,903
- -----------------------------------------------------------------------
Long Distance International, Inc.
Wts., 4/08(4) 200 500
- -----------------------------------------------------------------------
Mexican Value Rts., Exp. 6/03 1,100,000 --
- -----------------------------------------------------------------------
Microcell Telecommunications, Inc.
Wts., Exp. 6/06(4) 600 10,875
- -----------------------------------------------------------------------
Millenium Seacarriers, Inc. Wts.,
Exp. 7/05(4) 250 1,563
- -----------------------------------------------------------------------
Occidente y Caribe Celular SA Wts.,
Exp. 3/04(4) 800 6,100
- -----------------------------------------------------------------------
Orion Network Systems, Inc. Wts.,
Exp. 1/07(4) 150 1,875
- -----------------------------------------------------------------------
PLD Telekom, Inc. Wts., Exp.
6/06(4) 300 30
- -----------------------------------------------------------------------
Price Communications Corp. Wts.,
Exp. 8/07(4) 3,096 147,834
</TABLE>
100
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
UNITS NOTE 1
<S> <C> <C> <C>
- -----------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES
(CONTINUED)
- -----------------------------------------------------------------------
United International Holdings, Inc.
Wts., Exp. 11/99(4) 200 $ 3,025
- -----------------------------------------------------------------------
WAM!NET, Inc. Wts., Exp. 3/05(4) 1,500 12,000
---------------
Total Rights, Warrants and
Certificates (Cost $47,541) 288,320
PRINCIPAL
AMOUNT(1)
- -----------------------------------------------------------------------
STRUCTURED INSTRUMENTS - 6.1%
- -----------------------------------------------------------------------
Bankers Trust/Bear Stearns High
Yield Composite Index Linked Nts.,
8.55%, 5/4/99 $ 1,000,000 959,570
- -----------------------------------------------------------------------
Bayerische Landesbank Girozentrale
(New York Branch), Lehman High
Yield Index Nts., 8.50%, 3/8/99 1,000,000 942,500
- -----------------------------------------------------------------------
Bear Stearns High Yield Composite
Index Linked Nts.:
8.50%, 4/9/99 1,000,000 929,380
9%, 2/16/99 1,600,000 1,474,306
- -----------------------------------------------------------------------
Beta Finance Corp., Japanese Yen
Linked Nts., 2.11%, 9/10/99 1,520,000 1,639,624
- -----------------------------------------------------------------------
Credit Suisse First Boston Corp.
(New York Branch), Russian OFZ
Linked Nts., 15%,
2/23/00(4)(12)(RUR) 8,008,000 146,154
- -----------------------------------------------------------------------
Credit Suisse First Boston Corp.
(New York Branch), Turkish Lira
Currency Linked Nts., 92.556%,
2/2/99(5)(TRL) 18,302,400,000 692,571
- -----------------------------------------------------------------------
Deutsche Bank AG, Turkish Lira O/N
Rate Linked Nts., 91.727%,
2/4/99(5)(TRL) 19,564,000,000 696,165
- -----------------------------------------------------------------------
Deutsche Morgan Grenfell, Russian
Federal Loan Floating Rate Linked
Nts.:
5.20%, 10/25/00(4)(12) 240,000 2,400
5.12%, 2/23/00(4)(12) 240,000 2,400
- -----------------------------------------------------------------------
Deutsche Morgan Grenfell, Russian
OFZ Linked Nts., 14%,
9/27/00(4)(12)(RUR) 3,610,000 33,504
- -----------------------------------------------------------------------
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) 78,260 76,649
- -----------------------------------------------------------------------
J.P. Morgan & Co., Inc., The
Emerging Markets Bond Plus Index
Linked Nts., 9.50%, 7/16/99(17) 2,700,000 2,229,034
- -----------------------------------------------------------------------
Korea Development Bank, Industrial
Bank Finance Linked Nts., Zero
Coupon, 3/5/99 470,000 514,462
- -----------------------------------------------------------------------
Lehman Brothers Holdings, Inc.,
Chilean Peso/Japanese Yen Linked
Nts., 18.50%, 1/28/99 600,000 596,520
- -----------------------------------------------------------------------
Lehman Brothers Holdings, Inc.,
Greek Drachma/European Currency
Unit Linked Nts., Zero Coupon,
3/26/99 280,000 320,684
- -----------------------------------------------------------------------
Lehman Brothers Holdings, Inc.,
Greek Drachma/Swiss Franc Linked
Nts., Zero Coupon, 3/31/99 175,000 202,143
- -----------------------------------------------------------------------
Morgan Guaranty Trust Co. of New
York, The Emerging Markets Bond
Index Linked Nts.:
9.50%, 5/7/99(17) 1,300,000 1,303,719
9.50%, 8/10/99(17) 1,400,000 1,215,850
</TABLE>
101
<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)
- -----------------------------------------------------------------------
Salomon Smith Barney, Inc., Brazil
Credit Linked Nts., 6%, 4/2/03 $ 620,000 $ 317,440
- -----------------------------------------------------------------------
Salomon Smith Barney, Inc., United
Mexican States 2016 Linked Nts.,
14.076%, 3/18/99 749,000 747,247
- -----------------------------------------------------------------------
Shoshone Partners Loan Trust Sr.
Nts., 6.97%, 4/28/02 (representing
a basket of reference loans and a
total return swap between Chase
Manhattan Bank and the Trust)(4)(5) 750,000 672,606
- -----------------------------------------------------------------------
Standard Chartered Bank,
Philippines Peso/Japanese Yen
Currency Linked Nts., 16.45%,
1/21/99 116,000 126,858
- -----------------------------------------------------------------------
Standard Chartered Bank,
Philippines Peso/Japanese Yen
Linked Nts.:
20.45%, 2/9/99 240,000 237,360
21.83%, 1/19/99 270,000 219,888
- -----------------------------------------------------------------------
Standard Chartered Bank,
Philippines Peso/Singapore Dollar
Linked Nts.:
18.70%, 3/8/99 150,000 149,340
18.90%, 3/4/99 460,000 458,666
---------------
Total Structured Instruments (Cost
$19,421,140) 16,907,040
</TABLE>
<TABLE>
<CAPTION>
DATE STRIKE CONTRACTS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALL OPTIONS PURCHASED - 0.0%
- --------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.125%,
11/15/27 Call Opt.(4) (Cost
$65,234) 2/99 111.375% 2,500 52,344
- --------------------------------------------------------------------------------------
PUT OPTIONS PURCHASED - 0.0%
- --------------------------------------------------------------------------------------
Japanese Yen Put Opt. 1/99 121.00(JPY) 146,410,000 1,025
- --------------------------------------------------------------------------------------
Japanese Yen Put Opt.(4) 2/99 125(JPY) 78,000,000 1,404
- --------------------------------------------------------------------------------------
Mexican Peso Put Opt.(4) 2/99 10.75(MXP) 13,100,000 5,240
---------------
Total Put Options Purchased (Cost
$55,514) 7,669
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(1)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - 2.2%
- -----------------------------------------------------------------------
Repurchase agreement with
PaineWebber, Inc., 4.85%, dated
12/31/98, to be repurchased at
$6,203,341 on 1/4/99,
collateralized by U.S. Treasury
Nts., 4.625%--5.875%,
12/31/00--11/30/01, with a value of
$6,335,417 (Cost $6,200,000) $ 6,200,000 6,200,000
- -----------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$282,454,523) 98.0% 273,522,777
- -----------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.0 5,677,619
------------ ---------------
NET ASSETS 100.0% $ 279,200,396
------------ ---------------
------------ ---------------
</TABLE>
102
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP - Argentine Peso
AUD - Australian Dollar
CAD - Canadian Dollar
DEM - German Mark
DKK - Danish Krone
ESP - Spanish Peseta
FIM - Finnish Markka
FRF - French Franc
GBP - British Pound Sterling
GRD - Greek Drachma
HUF - Hungarian Forint
IDR - Indonesian Rupiah
ITL - Italian Lira
JPY - Japanese Yen
MXP - Mexican Peso
NZD - New Zealand Dollar
PLZ - Polish Zloty
RUR - Russian Ruble
TRL - Turkish Lira
XEU - European Currency Units
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. Identifies issues considered to be illiquid or restricted -- See applicable
note of Notes to Financial Statements.
5. Represents the current interest rate for a variable rate security.
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 $10,081,861 or 3.61% of the Fund's net
assets as of December 31, 1998.
7. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See applicable note of Notes to
Financial Statements.
8. Securities with an aggregate market value of $672,188 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See applicable note of Notes to Financial Statements.
9. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:
<TABLE>
<CAPTION>
CONTRACTS/PRINCIPAL EXPIRATION EXERCISE PREMIUM MARKET VALUE
SUBJECT TO CALL DATE PRICE RECEIVED NOTE 1
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Japanese Yen Call Option 134,503,600 1/99 111(JPY) $10,236 $10,357
- --------------------------------------------------------------------------------------------
Mexican Peso Call Option 13,100,000 2/99 10(MXP) 9,140 3,930
- --------------------------------------------------------------------------------------------
U.S. Treasury Bonds,
6.125%, 11/15/27 Call
Opt. 2,500,000 2/99 122% 5,859 1,758
------- ------
$25,235 $16,045
------- ------
------- ------
</TABLE>
10. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
11. Represents the current interest rate for an increasing rate security.
12. Non-income producing -- issuer is in default.
13. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
103
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
14. 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.
15. Interest or dividend is paid in kind.
16. Non-income producing security.
17. Security is linked to the Emerging Markets Bond Index (EMBI). The EMBI
tracks total returns for currency denominated debt instruments of the emerging
markets. Countries covered are Argentina, Brazil, Bulgaria, Ecuador, Mexico,
Morocco, Nigeria, Panama, Peru, the Philippines, Poland, Russia and Venezuela.
See accompanying Notes to Financial Statements.
104
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 91.6%
- ----------------------------------------------------------------
BASIC MATERIALS - 0.6%
- ----------------------------------------------------------------
CHEMICALS - 0.6%
Delta & Pine Land Co. 22,500 $ 832,500
- ----------------------------------------------------------------
IMC Global, Inc. 50,000 1,068,750
---------------
1,901,250
- ----------------------------------------------------------------
CAPITAL GOODS - 11.9%
- ----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.8%
CommScope, Inc.(1) 67,500 1,134,844
- ----------------------------------------------------------------
Etec Systems, Inc.(1) 2,500 100,000
- ----------------------------------------------------------------
Raychem Corp. 40,000 1,292,500
---------------
2,527,344
- ----------------------------------------------------------------
INDUSTRIAL SERVICES - 7.2%
Allied Waste Industries, Inc.
(New)(1) 235,000 5,551,875
- ----------------------------------------------------------------
Coflexip SA, Sponsored ADR 60,000 1,927,500
- ----------------------------------------------------------------
Republic Services, Inc., Cl. A(1) 185,000 3,410,937
- ----------------------------------------------------------------
United Rentals, Inc.(1) 25,000 828,125
- ----------------------------------------------------------------
Waste Management, Inc. (New) 227,500 10,607,187
---------------
22,325,624
- ----------------------------------------------------------------
MANUFACTURING - 3.9%
American Standard Cos., Inc.(1) 75,000 2,700,000
- ----------------------------------------------------------------
Halter Marine Group, Inc.(1) 360,000 1,755,000
- ----------------------------------------------------------------
MascoTech, Inc. 30,000 513,750
- ----------------------------------------------------------------
Mettler-Toledo International,
Inc.(1) 220,000 6,173,750
- ----------------------------------------------------------------
Owens-Illinois, Inc.(1) 22,500 689,062
- ----------------------------------------------------------------
Tyco International Ltd. 2,500 188,594
---------------
12,020,156
- ----------------------------------------------------------------
CONSUMER CYCLICALS - 22.8%
- ----------------------------------------------------------------
AUTOS & HOUSING - 2.5%
Champion Enterprises, Inc.(1) 32,500 889,687
- ----------------------------------------------------------------
General Motors Corp. 17,500 1,252,344
- ----------------------------------------------------------------
Lear Corp.(1) 42,500 1,636,250
- ----------------------------------------------------------------
Lennar Corp. 115,000 2,903,750
- ----------------------------------------------------------------
Owens Corning 27,500 974,531
---------------
7,656,562
- ----------------------------------------------------------------
LEISURE & ENTERTAINMENT - 1.7%
Crestline Capital Corp.(1) 8,000 123,000
- ----------------------------------------------------------------
Host Marriott Corp.(1) 80,000 1,105,000
- ----------------------------------------------------------------
Mirage Resorts, Inc.(1) 95,000 1,419,062
- ----------------------------------------------------------------
Rio Hotel & Casino, Inc.(1) 155,000 2,460,625
---------------
5,107,687
</TABLE>
105
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
MEDIA - 9.0%
Capstar Broadcasting Corp., Cl.
A(1) 210,000 $ 4,803,750
- ----------------------------------------------------------------
CBS Corp. 205,000 6,713,750
- ----------------------------------------------------------------
Emmis Communications Corp., Cl.
A(1) 77,500 3,361,562
- ----------------------------------------------------------------
Fox Entertainment Group, Inc., A
Shares(1) 171,500 4,319,656
- ----------------------------------------------------------------
Infinity Broadcasting Corp., Cl.
A(1) 70,300 1,924,462
- ----------------------------------------------------------------
Jacor Communications, Inc.(1) 37,500 2,414,062
- ----------------------------------------------------------------
RCN Corp.(1) 232,500 4,112,344
---------------
27,649,586
- ----------------------------------------------------------------
RETAIL: GENERAL - 2.0%
Federated Department Stores,
Inc.(1) 87,500 3,811,719
- ----------------------------------------------------------------
Fred Meyer, Inc.(1) 41,000 2,470,250
---------------
6,281,969
- ----------------------------------------------------------------
RETAIL: SPECIALTY - 7.6%
AutoZone, Inc.(1) 95,000 3,129,062
- ----------------------------------------------------------------
CSK Auto Corp.(1) 475,000 12,676,562
- ----------------------------------------------------------------
Republic Industries, Inc.(1) 525,000 7,743,750
---------------
23,549,374
- ----------------------------------------------------------------
CONSUMER STAPLES - 16.5%
- ----------------------------------------------------------------
BEVERAGES - 0.9%
Anheuser-Busch Cos., Inc.(2) 41,000 2,690,625
- ----------------------------------------------------------------
CONSUMER SERVICES - 2.9%
Budget Group, Inc., Cl. A(1) 225,000 3,571,875
- ----------------------------------------------------------------
Intermedia Communications, Inc.(1) 11,338 195,580
- ----------------------------------------------------------------
Intermedia Communications,
Inc.(1)(3) 292 4,030
- ----------------------------------------------------------------
United Road Services, Inc.(1) 277,500 5,099,062
---------------
8,870,547
- ----------------------------------------------------------------
ENTERTAINMENT - 8.0%
Brinker International, Inc.(1) 85,000 2,454,375
- ----------------------------------------------------------------
News Corp. Ltd., Sponsored ADR,
Preference 107,500 2,653,906
- ----------------------------------------------------------------
SFX Entertainment, Inc., Cl. A(1) 225,000 12,346,875
- ----------------------------------------------------------------
Time Warner, Inc.(2) 70,000 4,344,375
- ----------------------------------------------------------------
Viacom, Inc.(1)(2) 40,000 2,960,000
---------------
24,759,531
- ----------------------------------------------------------------
FOOD - 1.7%
RJR Nabisco Holdings Corp. 130,000 3,859,375
- ----------------------------------------------------------------
Unilever NV(2) 15,000 1,244,062
---------------
5,103,437
- ----------------------------------------------------------------
HOUSEHOLD GOODS - 0.7%
Fort James Corp. 50,000 2,000,000
- ----------------------------------------------------------------
TOBACCO - 2.3%
Philip Morris Cos., Inc. 130,000 6,955,000
</TABLE>
106
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
ENERGY - 2.1%
- ----------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 2.1%
BJ Services Co.(1) 45,000 $ 703,125
- ----------------------------------------------------------------
Cooper Cameron Corp.(1) 45,000 1,102,500
- ----------------------------------------------------------------
Marine Drilling Cos., Inc.(1) 40,000 307,500
- ----------------------------------------------------------------
Santa Fe International Corp. 80,000 1,170,000
- ----------------------------------------------------------------
Stolt Comex Seaway SA, ADR(1) 300,000 1,687,500
- ----------------------------------------------------------------
Transocean Offshore, Inc. 27,500 737,344
- ----------------------------------------------------------------
Weatherford International, Inc.
(New)(1) 35,000 678,125
---------------
6,386,094
- ----------------------------------------------------------------
FINANCIAL - 19.2%
- ----------------------------------------------------------------
BANKS - 9.2%
Bank One Corp. 42,500 2,170,156
- ----------------------------------------------------------------
BankAmerica Corp. (New) 42,500 2,555,313
- ----------------------------------------------------------------
Chase Manhattan Corp. (New) 90,000 6,125,625
- ----------------------------------------------------------------
Commercial Federal Corp. 165,000 3,825,938
- ----------------------------------------------------------------
Compass Bancshares, Inc. 37,500 1,427,344
- ----------------------------------------------------------------
First Union Corp. 72,500 4,408,906
- ----------------------------------------------------------------
Fleet Financial Group, Inc. 50,000 2,234,375
- ----------------------------------------------------------------
Hubco, Inc. 57,500 1,732,188
- ----------------------------------------------------------------
KeyCorp 20,000 640,000
- ----------------------------------------------------------------
Prosperity Bancshares, Inc.(1) 103,100 1,275,863
- ----------------------------------------------------------------
Unibanco-Uniao de Bancos
Brasileiros SA, Sponsored GDR 60,000 866,250
- ----------------------------------------------------------------
Union Planters Corp. 25,000 1,132,813
---------------
28,394,771
- ----------------------------------------------------------------
DIVERSIFIED FINANCIAL - 3.2%
American Express Co.(2) 15,000 1,533,750
- ----------------------------------------------------------------
C.I.T. Group, Inc., Cl. A 78,000 2,481,375
- ----------------------------------------------------------------
Citigroup, Inc. 57,750 2,858,625
- ----------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 20,000 1,420,000
- ----------------------------------------------------------------
UniCapital Corp.(1) 210,000 1,548,750
---------------
9,842,500
- ----------------------------------------------------------------
INSURANCE - 5.7%
Allstate Corp.(2) 80,000 3,090,000
- ----------------------------------------------------------------
Arm Financial Group, Inc., Cl. A 50,000 1,109,375
- ----------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 285,000 11,097,188
- ----------------------------------------------------------------
Scottish Annuity & Life Holdings
Ltd.(1) 155,000 2,131,250
---------------
17,427,813
- ----------------------------------------------------------------
SAVINGS & LOANS - 1.1%
Sovereign Bancorp, Inc. 150,000 2,137,500
</TABLE>
107
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
- ----------------------------------------------------------------
<S> <C> <C>
SAVINGS & LOANS (CONTINUED)
Washington Mutual, Inc. 30,000 $ 1,145,625
---------------
3,283,125
- ----------------------------------------------------------------
HEALTHCARE - 1.0%
- ----------------------------------------------------------------
HEALTHCARE/DRUGS - 1.0%
BioChem Pharma, Inc.(1) 50,000 1,431,250
- ----------------------------------------------------------------
Centocor, Inc.(1)(2) 37,500 1,692,188
---------------
3,123,438
- ----------------------------------------------------------------
TECHNOLOGY - 12.0%
- ----------------------------------------------------------------
COMPUTER HARDWARE - 1.5%
Compaq Computer Corp. 7,500 314,531
- ----------------------------------------------------------------
International Business Machines
Corp.(2) 20,000 3,695,000
- ----------------------------------------------------------------
Seagate Technology, Inc.(1)(2) 20,000 605,000
---------------
4,614,531
- ----------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 6.8%
First Data Corp. 110,000 3,485,625
- ----------------------------------------------------------------
Microsoft Corp.(1) 2,500 346,719
- ----------------------------------------------------------------
Network Associates, Inc.(1) 10,000 662,500
- ----------------------------------------------------------------
PLATINUM Technology, Inc.(1) 315,000 6,024,375
- ----------------------------------------------------------------
Structural Dynamics Research
Corp.(1) 397,500 7,900,313
- ----------------------------------------------------------------
Unigraphics Solutions, Inc.(1) 185,000 2,682,500
---------------
21,102,032
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.3%
Tellabs, Inc.(1)(2) 15,000 1,028,438
- ----------------------------------------------------------------
ELECTRONICS - 3.4%
Waters Corp.(1) 120,000 10,470,000
- ----------------------------------------------------------------
TELECOMMUNICATIONS - 4.2%
- ----------------------------------------------------------------
TELEPHONE UTILITIES - 0.0%
Embratel Participacoes SA, ADR(1) 750 10,453
- ----------------------------------------------------------------
TELECOMMUNICATIONS/TECHNOLOGY -
4.2%
MCI WorldCom, Inc.(1) 95,000 6,816,250
- ----------------------------------------------------------------
Newbridge Networks Corp.(1) 10,000 303,750
- ----------------------------------------------------------------
Qwest Communications International,
Inc.(1) 90,000 4,500,000
- ----------------------------------------------------------------
Telecomunicacoes Brasileiras SA,
Sponsored ADR(1) 19,500 1,417,406
---------------
13,037,406
- ----------------------------------------------------------------
TRANSPORTATION - 1.4%
- ----------------------------------------------------------------
AIR TRANSPORTATION - 1.4%
AMR Corp.(1) 27,500 1,632,813
- ----------------------------------------------------------------
Continental Airlines, Inc., Cl.
B(1) 25,339 848,857
- ----------------------------------------------------------------
Delta Air Lines, Inc. 35,000 1,820,000
---------------
4,301,670
---------------
Total Common Stocks (Cost
$257,894,535) 282,420,963
</TABLE>
108
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES NOTE 1
<S> <C> <C>
- ----------------------------------------------------------------
PREFERRED STOCKS - 3.5%
- ----------------------------------------------------------------
Evergreen Media Corp., 6% Cv.
Preferred(4) 20,000 $ 1,867,500
- ----------------------------------------------------------------
Host Marriott Corp., 6.75%
Preferred Stock 17,500 708,750
- ----------------------------------------------------------------
ICG Communications, Inc.:
6.75% Cv. Preferred Stock(4) 37,500 1,964,063
6.75% Cv. Preferred Stock 35,000 1,833,125
- ----------------------------------------------------------------
Intermedia Communications, Inc.:
7% Cv. Preferred Stock(4) 32,500 463,125
7% Cv. Preferred Stock(4) 40,000 1,000,000
- ----------------------------------------------------------------
Intermedia Communications, Inc.:
Depositary Shares Representing one
one-hundredth 7% Cum. Cv. Jr.
Preferred Stock, Series D, Non-Vtg. 30,000 750,000
Depositary Shares Representing one
one-hundredth 7% Cum. Cv. Jr.
Preferred Stock, Series E,
Non-Vtg.(4) 2,500 45,625
- ----------------------------------------------------------------
Monsanto Co., 6.50% Cv.(1) 25,000 1,225,000
- ----------------------------------------------------------------
Nextel Communications, Inc.,
Cv.(1)(4) 3,900 989,625
---------------
Total Preferred Stocks (Cost
$11,167,364) 10,846,813
- ----------------------------------------------------------------
OTHER SECURITIES - 3.5%
- ----------------------------------------------------------------
Automatic Commission Exchange
Security Trust II, 6.50% Cv.
Preferred (exchangeable to common
stock of Republic Industries, Inc.,
Trust Automatic Common Exchange
Securities effective 5/15/00) 125,700 1,916,925
- ----------------------------------------------------------------
Continental Airlines Finance Trust,
8.50% Cv. Trust Originated
Preferred Securities 5,000 348,125
- ----------------------------------------------------------------
Host Marriott Financial Trust,
6.75% Cv. Preferred Stock(4) 10,000 405,000
- ----------------------------------------------------------------
Houston Industries, Inc., 7%
Automatic Common Exchange
Securities, Exchangeable for Time
Warner, Inc. Common Stock, 7/1/00 25,000 2,659,375
- ----------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.25%
Structured Yield Product
Exchangeable for Stock of IMC
Global, Inc. 17,500 415,625
- ----------------------------------------------------------------
Qwest Trends Trust, $43 Cv.(1)(4) 16,700 780,725
- ----------------------------------------------------------------
United Rental Trust I, 6.50% Cv.
Quarterly Income Preferred
Securities(4) 85,000 4,090,625
---------------
Total Other Securities (Cost
$10,045,078) 10,616,400
PRINCIPAL
AMOUNT
- ----------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND
NOTES - 1.4%
- ----------------------------------------------------------------
Continental Airlines, Inc.:
6.75% Cv. Sub. Nts., 4/15/06(4) $ 350,000 426,125
6.75% Cv. Sub. Nts., 4/15/06 150,000 182,625
- ----------------------------------------------------------------
PLATINUM Technology, Inc.:
6.25% Cv. Sub. Nts., 12/15/02(4) 2,000,000 1,795,000
6.25%. Cv. Unsec. Sub. Nts.,
12/15/02 1,500,000 1,346,250
6.75% Cv. Sub. Nts., 11/15/01 500,000 683,750
---------------
Total Convertible Corporate Bonds
and Notes (Cost $4,266,795) 4,433,750
- ----------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$283,373,772) 100.0% 308,317,926
- ----------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.0 35,388
---------- ---------------
NET ASSETS 100.0% $ 308,353,314
---------- ---------------
---------- ---------------
</TABLE>
109
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1. Non-income producing security.
2. A sufficient amount of liquid assets has been designated to cover outstanding
written call and put options, as follows:
<TABLE>
<CAPTION>
SHARES
SUBJECT TO EXPIRATION EXERCISE PREMIUM MARKET VALUE
CALL DATE PRICE RECEIVED NOTE 1
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Allstate Corp. 30,000 1/99 $ 55.00 $ 49,849 $ 1,875
- -----------------------------------------------------------------------------------------------
American Express Co. 7,500 1/99 110.00 11,337 6,563
- -----------------------------------------------------------------------------------------------
American Express Co. 7,500 1/99 115.00 10,712 2,344
- -----------------------------------------------------------------------------------------------
Anheuser-Busch Cos. 7,500 1/99 65.00 11,025 12,188
- -----------------------------------------------------------------------------------------------
Centocor, Inc. 10,000 1/99 45.00 41,574 18,750
- -----------------------------------------------------------------------------------------------
International Business Machines
Corp. 5,000 4/99 160.00 88,600 155,000
- -----------------------------------------------------------------------------------------------
International Business Machines
Corp. 4,500 4/99 155.00 89,862 159,188
- -----------------------------------------------------------------------------------------------
International Business Machines
Corp. 5,500 1/99 160.00 59,646 137,500
- -----------------------------------------------------------------------------------------------
International Business Machines
Corp. 5,000 1/99 150.00 46,723 171,250
- -----------------------------------------------------------------------------------------------
Seagate Technology, Inc. 10,000 1/99 32.50 22,199 5,623
- -----------------------------------------------------------------------------------------------
Tellabs, Inc. 15,000 3/99 65.00 110,171 135,000
- -----------------------------------------------------------------------------------------------
Time Warner, Inc. 10,000 1/99 55.00 16,724 80,000
- -----------------------------------------------------------------------------------------------
Unilever NV 15,000 1/99 85.00 24,862 33,750
- -----------------------------------------------------------------------------------------------
Viacom, Inc. 10,000 1/99 70.00 28,449 48,750
$ 611,733 $967,781
</TABLE>
3. Identifies issues considered to be illiquid or restricted - See applicable
note of Notes to Financial Statements.
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 $13,827,413 or 4.48% of the Fund's net
assets as of December 31, 1998.
See accompanying Notes to Financial Statements.
110
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER SMALL CAP GROWTH FUND
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES NOTE 1
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 85.0%
- --------------------------------------------------------------------------------
BASIC MATERIALS - 1.5%
- --------------------------------------------------------------------------------
PAPER - 1.5%
Daisytek International Corp.(1) 800 $ 15,200
- --------------------------------------------------------------------------------
CAPITAL GOODS - 13.1%
- --------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 11.9%
Casella Waste Systems, Inc., Cl. A(1) 400 14,850
- --------------------------------------------------------------------------------
Eastern Environmental Services, Inc.(1) 400 11,850
- --------------------------------------------------------------------------------
Group Maintenance America Corp.(1) 500 6,062
- --------------------------------------------------------------------------------
Kendle International, Inc.(1) 400 9,350
- --------------------------------------------------------------------------------
Maximus, Inc.(1) 600 22,200
- --------------------------------------------------------------------------------
Metzler Group, Inc.(1) 400 19,475
- --------------------------------------------------------------------------------
Service Experts, Inc.(1) 200 5,850
- --------------------------------------------------------------------------------
Stericycle, Inc.(1) 400 6,450
- --------------------------------------------------------------------------------
Tetra Tech, Inc.(1) 600 16,237
- --------------------------------------------------------------------------------
United Rentals, Inc.(1) 192 6,360
--------
118,684
- --------------------------------------------------------------------------------
MANUFACTURING - 1.2%
Zebra Technologies Corp., Cl. A(1) 400 11,500
- --------------------------------------------------------------------------------
CONSUMER CYCLICALS - 13.7%
- --------------------------------------------------------------------------------
AUTOS & HOUSING - 2.3%
Fairfield Communities, Inc.(1) 1,000 11,062
- --------------------------------------------------------------------------------
Kroll-O'Gara Co. (The)(1) 300 11,831
--------
22,893
- --------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 2.8%
Handleman Co.(1) 2,000 28,125
- --------------------------------------------------------------------------------
MEDIA - 1.0%
Penton Media, Inc.(1) 500 10,125
- --------------------------------------------------------------------------------
RETAIL: GENERAL - 1.5%
Cutter & Buck, Inc.(1) 400 14,900
- --------------------------------------------------------------------------------
RETAIL: SPECIALTY - 6.1%
Chico's Fas, Inc.(1) 800 18,700
- --------------------------------------------------------------------------------
O'Reilly Automotive, Inc.(1) 400 18,900
- --------------------------------------------------------------------------------
School Specialty, Inc.(1) 1,100 23,512
--------
61,112
- --------------------------------------------------------------------------------
CONSUMER STAPLES - 18.9%
- --------------------------------------------------------------------------------
CONSUMER SERVICES - 10.0%
Applied Analytical Industries, Inc.(1) 1,200 20,850
- --------------------------------------------------------------------------------
Boron, LePore & Associates, Inc.(1) 300 10,350
- --------------------------------------------------------------------------------
Core Laboratories NV(1) 300 5,737
</TABLE>
111
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER SMALL CAP GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES NOTE 1
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Cornell Corrections, Inc.(1) 1,000 $ 19,000
- --------------------------------------------------------------------------------
CORT Business Services Corp.(1) 500 12,125
- --------------------------------------------------------------------------------
Getty Images, Inc.(1) 600 10,312
- --------------------------------------------------------------------------------
Rent-Way, Inc.(1) 200 4,862
- --------------------------------------------------------------------------------
Renters Choice, Inc.(1) 500 15,875
--------
99,111
- --------------------------------------------------------------------------------
EDUCATION - 6.3%
Career Education Corp.(1) 500 15,000
- --------------------------------------------------------------------------------
Education Management Corp.(1) 1,000 23,625
- --------------------------------------------------------------------------------
ITT Educational Services, Inc.(1) 400 13,600
- --------------------------------------------------------------------------------
Strayer Education, Inc. 300 10,575
--------
62,800
- --------------------------------------------------------------------------------
ENTERTAINMENT - 2.6%
Cinar Films, Inc., Cl. B(1) 1,000 25,375
- --------------------------------------------------------------------------------
ENERGY - 0.4%
- --------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS - 0.4%
Cross Timbers Oil Co. 500 3,750
- --------------------------------------------------------------------------------
FINANCIAL - 5.8%
- --------------------------------------------------------------------------------
BANKS - 1.2%
Investors Financial Services Corp. 200 11,925
- --------------------------------------------------------------------------------
INSURANCE - 4.6%
Advance Paradigm, Inc.(1) 300 10,500
- --------------------------------------------------------------------------------
Annuity & Life RE Holdings Ltd. 500 13,500
- --------------------------------------------------------------------------------
Medical Assurance, Inc. 660 21,821
--------
45,821
- --------------------------------------------------------------------------------
HEALTHCARE - 11.8%
- --------------------------------------------------------------------------------
HEALTHCARE/DRUGS - 3.1%
Serologicals Corp.(1) 800 24,000
- --------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(1) 300 6,488
--------
30,488
- --------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES - 8.7%
Covance, Inc.(1) 500 14,563
- --------------------------------------------------------------------------------
Hanger Orthopedic Group, Inc.(1) 700 15,750
- --------------------------------------------------------------------------------
Parexel International Corp.(1) 300 7,500
- --------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc.(1) 800 24,050
- --------------------------------------------------------------------------------
Renal Care Group, Inc.(1) 600 17,288
- --------------------------------------------------------------------------------
VWR Scientific Products Corp.(1) 400 6,950
--------
86,101
- --------------------------------------------------------------------------------
TECHNOLOGY - 19.8%
- --------------------------------------------------------------------------------
COMPUTER HARDWARE - 2.1%
SCM Microsystems, Inc.(1) 300 21,319
</TABLE>
112
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER SMALL CAP GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES NOTE 1
- --------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES - 17.0%
Aspen Technologies, Inc.(1) 300 $ 4,350
- --------------------------------------------------------------------------------
Aware, Inc.(1) 1,000 27,188
- --------------------------------------------------------------------------------
Brio Technology, Inc.(1) 1,000 17,688
- --------------------------------------------------------------------------------
Concord Communications, Inc.(1) 200 11,350
- --------------------------------------------------------------------------------
Documentum, Inc.(1) 400 21,375
- --------------------------------------------------------------------------------
Engineering Animation, Inc.(1) 100 5,400
- --------------------------------------------------------------------------------
Medical Manager Corp.(1) 400 12,550
- --------------------------------------------------------------------------------
New Era of Networks, Inc.(1) 200 8,800
- --------------------------------------------------------------------------------
Phoenix International Ltd.(1) 1,000 14,750
- --------------------------------------------------------------------------------
Segue Software, Inc.(1) 500 10,125
- --------------------------------------------------------------------------------
Software AG Systems, Inc.(1) 600 10,875
- --------------------------------------------------------------------------------
SPR, Inc.(1) 1,000 17,250
- --------------------------------------------------------------------------------
Visio Corp.(1) 200 7,313
--------
169,014
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.7%
Pittway Corp., Cl. A 200 6,613
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $739,885) 85.0% 844,856
- --------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 15.0 149,448
------- --------
NET ASSETS 100.0% $994,304
------- --------
------- --------
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
113
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER OPPENHEIMER OPPENHEIMER AGGRESSIVE OPPENHEIMER
MONEY HIGH INCOME BOND GROWTH GROWTH
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost *)
(including repurchase agreements **) -
see accompanying statements $ 151,269,014 $ 320,913,385 $ 688,013,848 $ 1,079,562,636 $ 767,477,940
- -------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward
foreign currency exchange contracts -
see applicable note -- 50,410 -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Cash 152,071 1,918,277 178,353 96,737 119,623
- -------------------------------------------------------------------------------------------------------------------------
Receivables:
Dividends, interest and principal
paydowns 445,414 6,408,876 8,526,057 226,583 298,939
Daily variation on futures contracts -
see applicable note -- 7,650 2,108 -- --
Shares of beneficial interest sold 638,924 226,088 1,613,778 748,053 3,312,716
Investments sold -- 1,426,850 5,246,858 1,182,183 469,735
- -------------------------------------------------------------------------------------------------------------------------
Other 5,225 6,817 9,388 11,926 9,025
------------- ------------- ------------- --------------- -------------
Total assets 152,510,648 330,958,353 703,590,390 1,081,828,118 771,687,978
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Options written, at value (premiums
received ***) - see accompanying
statements and notes -- -- -- 32,775 --
- -------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward
foreign exchange contracts - see
applicable note -- 2,014 14,916 -- --
- -------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Dividends 285,552 -- -- -- --
Custodian fees 1,969 9,396 11,345 12,130 8,092
Registration and filing fees 9,020 14,555 32,077 30,980 52,813
Shareholder reports 21,635 41,202 58,125 74,868 49,376
Legal and auditing fees 8,787 14,151 14,192 18,160 13,773
Investments purchased (including those
purchased on a when-issued basis****) -
see applicable note -- -- 47,434,432 -- --
Shares of beneficial interest redeemed 380,917 2,311,170 392,473 3,694,484 3,010,700
Transfer and shareholder servicing agent
fees 2,905 2,317 2,303 2,905 2,483
Other 1,063 891 87,828 1,656 1,045
------------- ------------- ------------- --------------- -------------
Total liabilities 711,848 2,395,696 48,047,691 3,867,958 3,138,282
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 151,798,800 $ 328,562,657 $ 655,542,699 $ 1,077,960,160 $ 768,549,696
------------- ------------- ------------- --------------- -------------
------------- ------------- ------------- --------------- -------------
- -------------------------------------------------------------------------------------------------------------------------
COMPOSITIONS OF NET ASSETS
Paid-in capital $ 151,805,834 $ 323,273,405 $ 616,406,705 $ 797,996,718 $ 542,115,494
- -------------------------------------------------------------------------------------------------------------------------
Undistributed (overdistributed) net
investment income 11,314 23,046,774 30,079,292 -- 2,959,139
- -------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss)
from investments and foreign currency
transactions (18,348) (4,290,927) 2,718,207 (70,261,463) 32,291,665
- -------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
denominated in foreign currencies -- (13,466,595) 6,338,495 350,224,905 191,183,398
------------- ------------- ------------- --------------- -------------
Net Assets $ 151,798,800 $ 328,562,657 $ 655,542,699 $ 1,077,960,160 $ 768,549,696
------------- ------------- ------------- --------------- -------------
------------- ------------- ------------- --------------- -------------
- -------------------------------------------------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
OUTSTANDING 151,805,855 29,806,919 53,210,003 24,043,802 20,956,201
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $ 1.00 $ 11.02 $ 12.32 $ 44.83 $ 36.67
* Cost $ 151,269,014 $ 334,412,099 $ 681,813,086 $ 729,339,720 $ 576,294,542
** Repurchase agreements $ 1,800,000 $ 5,100,000 $ 2,600,000 $ 112,500,000 $ 64,400,000
*** Premiums received $ -- $ -- $ -- $ 34,764 $ --
**** When-issued $ -- $ -- $ 47,434,432 $ -- $ --
</TABLE>
See accompanying Notes to Financial Statements.
114
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (CONTINUED)
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER OPPENHEIMER OPPENHEIMER OPPENHEIMER
MULTIPLE GLOBAL STRATEGIC GROWTH & SMALL CAP
STRATEGIES SECURITIES BOND INCOME GROWTH
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost *)
(including repurchase agreements **) -
see accompanying statements $ 623,885,456 $ 1,146,157,977 $ 273,522,777 $ 308,317,926 $ 844,856
- ------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward
foreign currency exchange contracts -
see applicable note -- 26,055 26,339 -- --
- ------------------------------------------------------------------------------------------------------------------------
Cash 147,269 153,505 495,588 218,017 129,322
- ------------------------------------------------------------------------------------------------------------------------
Receivables:
Dividends, interest and principal
paydowns 5,139,170 1,288,216 5,003,192 357,509 41
Daily variation on futures contracts -
see applicable note -- -- -- -- --
Shares of beneficial interest sold 17,862 245,965 213,947 640,011 18,955
Investments sold 33,387 129,251 84,219 -- --
- ------------------------------------------------------------------------------------------------------------------------
Other 8,967 12,495 6,534 5,528 1,514
------------- --------------- ------------- ------------- ------------
Total assets 629,232,111 1,148,013,464 279,352,596 309,538,991 994,688
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Options written, at value (premiums
received ***) - see accompanying
statements and notes 5,740,750 -- 16,045 967,781 --
- ------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward
foreign exchange contracts - see
applicable note -- 1,403 47,561 -- --
- ------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Dividends -- -- -- -- --
Custodian fees 20,840 145,007 11,736 757 --
Registration and filing fees -- 39,978 19,675 43,438 255
Shareholder reports 60,011 75,114 29,632 22,221 --
Legal and auditing fees 17,461 18,232 11,708 9,836 --
Investments purchased (including those
purchased on a when-issued basis****) -
see applicable note 362,598 10,966,196 -- 4,100 --
Shares of beneficial interest redeemed 695,060 1,735,012 11,646 133,103 7
Transfer and shareholder servicing agent
fees 2,062 1,832 2,496 3,122 --
Other 28 1,556 1,701 1,319 122
------------- --------------- ------------- ------------- ------------
Total liabilities 6,898,810 12,984,330 152,200 1,185,677 384
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 622,333,301 $ 1,135,029,134 $ 279,200,396 $ 308,353,314 $ 994,304
------------- --------------- ------------- ------------- ------------
------------- --------------- ------------- ------------- ------------
- ------------------------------------------------------------------------------------------------------------------------
COMPOSITIONS OF NET ASSETS
Paid-in capital $ 490,829,556 $ 885,257,467 $ 274,895,218 $ 284,367,574 $ 934,634
- ------------------------------------------------------------------------------------------------------------------------
Undistributed (overdistributed) net
investment income 20,748,181 11,592,206 15,570,425 1,425,924 --
- ------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss)
from investments and foreign currency
transactions 29,244,260 35,108,448 (2,352,642) (2,028,281) (45,301)
- ------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) on investments and
translation of assets and liabilities
denominated in foreign currencies 81,511,304 203,071,013 (8,912,605) 24,588,097 104,971
------------- --------------- ------------- ------------- ------------
Net Assets $ 622,333,301 $ 1,135,029,134 $ 279,200,396 $ 308,353,314 $ 994,304
------------- --------------- ------------- ------------- ------------
------------- --------------- ------------- ------------- ------------
- ------------------------------------------------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
OUTSTANDING 36,497,549 51,429,193 54,569,819 15,054,704 103,531
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE $ 17.05 $ 22.07 $ 5.12 $ 20.48 $ 9.60
* Cost $ 538,342,432 $ 943,081,348 $ 282,454,523 $ 283,373,782 $ 739,885
** Repurchase agreements $ 63,000,000 $ 27,900,000 $ 6,200,000 $ -- $ --
*** Premiums received $ 1,686,387 $ -- $ 25,235 $ 611,733 $ --
**** When-issued $ -- $ -- $ -- $ -- $ --
</TABLE>
See accompanying Notes to Financial Statements.
115
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER OPPENHEIMER OPPENHEIMER AGGRESSIVE OPPENHEIMER
MONEY HIGH INCOME BOND GROWTH GROWTH
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest (net of withholding taxes of *) $ 7,738,972 $ 28,358,859 $ 41,073,653 $ 3,823,383 $ 4,035,121
- ----------------------------------------------------------------------------------------------------------------------
Dividends (net of withholding taxes of
**) -- 2,076,307 284,719 1,800,986 3,555,637
------------ ------------- ------------- ------------- -------------
Total income 7,738,972 30,435,166 41,358,372 5,624,369 7,590,758
- ----------------------------------------------------------------------------------------------------------------------
EXPENSES
Custodian fees and expenses 11,399 212 5,407 37,397 21,434
- ----------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 11,188 17,697 18,655 24,922 18,225
- ----------------------------------------------------------------------------------------------------------------------
Insurance expenses 3,435 5,148 4,274 7,901 5,339
- ----------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 2,679 4,059 4,107 5,071 2,422
- ----------------------------------------------------------------------------------------------------------------------
Registration and filing fees 6,981 14,562 31,923 31,640 52,918
- ----------------------------------------------------------------------------------------------------------------------
Shareholder reports 29,826 64,833 67,408 108,886 77,895
- ----------------------------------------------------------------------------------------------------------------------
Management fees - see applicable note 619,030 2,383,008 4,218,231 6,564,650 4,369,487
- ----------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent
fees - see applicable note 1,941 4,140 4,074 3,734 4,161
- ----------------------------------------------------------------------------------------------------------------------
Other 2,461 12,124 3,259 2,753 2,628
------------ ------------- ------------- ------------- -------------
Total expenses 688,940 2,505,783 4,357,338 6,786,954 4,554,509
- ----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 7,050,032 27,929,383 37,001,034 (1,162,585) 3,036,249
- ----------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 9,101 (1,534,125) 6,485,338 (67,129,354) 32,505,999
Closing of futures contracts -- (1,309,724) (1,285,982) -- --
Closing and expiration of options
written -- (34,656) -- 18,579 --
Foreign currency transactions -- (10,862) 340,635 (14,239) 1,951
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation on:
Investments -- (24,533,407) (4,833,663) 182,808,457 99,910,949
Translation of assets and liabilities
denominated in foreign currencies -- 407,939 (369,485) 676,163 22,616
------------ ------------- ------------- ------------- -------------
Net realized and unrealized gain (loss) 9,101 (27,014,835) 336,843 116,359,606 132,441,515
- ----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 7,059,133 $ 914,548 $ 37,337,877 $ 115,197,021 $ 135,477,764
------------ ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- -------------
* Withholding taxes - interest $ -- $ -- $ 11,251 $ -- $ --
** Withholding taxes - dividends $ -- $ -- $ -- $ 926 $ 23,758
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
See accompanying Notes to Financial Statements.
116
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 (CONTINUED)
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER OPPENHEIMER OPPENHEIMER OPPENHEIMER
MULTIPLE GLOBAL STRATEGIC GROWTH & SMALL CAP
STRATEGIES SECURITIES BOND INCOME GROWTH
FUND FUND FUND FUND FUND(1)
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest (net of withholding taxes of *) $ 25,898,105 $ 8,710,561 $ 21,709,341 $ 913,537 $ 60
- --------------------------------------------------------------------------------------------------------------------
Dividends (net of withholding taxes of
**) 4,857,228 11,995,300 751,928 2,688,093 173
------------ ------------- ------------- ------------ ------------
Total income 30,755,333 20,705,861 22,461,269 3,601,630 233
- --------------------------------------------------------------------------------------------------------------------
EXPENSES
Custodian fees and expenses 110,088 434,535 40,476 14,729 --
- --------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 25,143 29,358 14,398 15,399 --
- --------------------------------------------------------------------------------------------------------------------
Insurance expenses 6,777 7,867 4,008 4,440 --
- --------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 9,595 4,854 1,185 2,501 --
- --------------------------------------------------------------------------------------------------------------------
Registration and filing fees -- 39,654 19,916 43,581 255
- --------------------------------------------------------------------------------------------------------------------
Shareholder reports 97,293 124,964 40,101 26,194 --
- --------------------------------------------------------------------------------------------------------------------
Management fees - see applicable note 4,584,184 7,167,836 1,860,227 1,742,253 2,219
- --------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent
fees - see applicable note 3,476 3,656 4,078 4,790 --
- --------------------------------------------------------------------------------------------------------------------
Other 7,682 6,003 25,063 3,135 98
------------ ------------- ------------- ------------ ------------
Total expenses 4,844,238 7,818,727 2,009,452 1,857,022 2,572
- --------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 25,911,095 12,887,134 20,451,817 1,744,608 (2,339)
- --------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 28,607,655 111,119,684 (2,977,920) (2,457,929) (45,301)
Closing of futures contracts -- (61,569,353) 2,898,440 -- --
Closing and expiration of options
written 2,262,307 -- (97,776) 434,542 --
Foreign currency transactions (1,329,735) (12,587,339) (2,519,662) 66,152 --
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation on:
Investments (15,359,667) 53,953,288 (12,558,792) 6,284,351 104,971
Translation of assets and liabilities
denominated in foreign currencies (536,206) 32,506,738 1,082,185 51,446 --
------------ ------------- ------------- ------------ ------------
Net realized and unrealized gain (loss) 13,644,354 123,423,018 (14,173,525) 4,378,562 59,670
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 39,555,449 $ 136,310,152 $ 6,278,292 $ 6,123,170 $ 57,331
------------ ------------- ------------- ------------ ------------
------------ ------------- ------------- ------------ ------------
* Withholding taxes - interest $ -- $ -- $ 68,298 $ -- $ --
** Withholding taxes - dividends $ 90,320 $ 297,465 $ -- $ 5,250 $ --
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
See accompanying Notes to Financial Statements.
117
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER
MONEY HIGH INCOME
FUND FUND
1998 1997 1998 1997
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 7,050,032 $ 6,934,054 $ 27,929,383 $ 19,861,042
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) 9,101 2,232 (2,889,367) 6,265,470
- ---------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation -- -- (24,125,468) 93,210
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations 7,059,133 6,936,286 914,548 26,219,722
- ---------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment
income (7,050,032) (6,937,040) (6,694,100) (18,546,183)
- ---------------------------------------------------------------------------------------------
Distributions from net
realized gain -- -- (8,113,249) (138,778)
- ---------------------------------------------------------------------------------------------
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net
assets resulting from
beneficial interest
transactions - see applicable
note 25,007,317 (2,935,384) 51,132,667 92,494,657
- ---------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) 25,016,418 (2,936,138) 37,239,866 100,029,418
- ---------------------------------------------------------------------------------------------
Beginning of period 126,782,382 129,718,520 291,322,791 191,293,373
------------- ------------- ------------- -------------
End of period $ 151,798,800 $ 126,782,382 $ 328,562,657 $ 291,322,791
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Undistributed
(overdistributed) net
investment income $ -- $ -- $ 23,046,774 $ 1,776,867
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER AGGRESSIVE
BOND GROWTH
FUND FUND
1998 1997 1998 1997
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 37,001,034 $ 30,219,733 $ (1,162,585) $ 2,349,366
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) 5,539,991 4,038,585 (67,125,014) 21,293,313
- -----------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation (5,203,148) 6,440,140 183,484,620 61,517,825
------------- ------------- --------------- -------------
Net increase in net assets
resulting from operations 37,337,877 40,698,458 115,197,021 85,160,504
- -----------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment
income (9,009,958) (27,908,616) (2,267,793) (1,547,409)
- -----------------------------------------------------------------------------------------------
Distributions from net
realized gain (8,154,014) (1,447,022) (23,288,487) (30,466,762)
- -----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net
assets resulting from
beneficial interest
transactions - see applicable
note 115,290,766 82,296,263 110,511,946 207,268,868
- -----------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) 135,464,671 93,639,083 200,152,687 260,415,201
- -----------------------------------------------------------------------------------------------
Beginning of period 520,078,028 426,438,945 877,807,473 617,392,272
------------- ------------- --------------- -------------
End of period $ 655,542,699 $ 520,078,028 $ 1,077,960,160 $ 877,807,473
------------- ------------- --------------- -------------
------------- ------------- --------------- -------------
Undistributed
(overdistributed) net
investment income $ 30,079,292 $ 1,857,027 $ -- $ 2,236,363
</TABLE>
See accompanying Notes to Financial Statements.
118
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (CONTINUED)
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER
OPPENHEIMER MULTIPLE GLOBAL
GROWTH STRATEGIES SECURITIES
FUND FUND FUND
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,036,249 $ 3,966,775 $ 25,911,095 $ 21,778,851 $ 12,887,134 $ 12,143,675
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 32,507,950 47,435,793 29,540,227 34,197,105 36,962,992 103,718,556
- -------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation 99,933,565 34,194,334 (15,895,873) 32,455,612 86,460,026 33,657,002
------------- ------------- ------------- ------------- --------------- -------------
Net increase in net assets
resulting from operations 135,477,764 85,596,902 39,555,449 88,431,568 136,310,152 149,519,233
- -------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment
income (3,939,379) (1,639,463) (5,964,037) (21,242,764) (21,307,082) (8,181,958)
- -------------------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gain (47,530,889) (17,220,011) (34,591,414) (18,354,349) (80,203,951) --
- -------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net
assets resulting from
beneficial interest
transactions - see applicable
note 190,636,226 141,248,396 (14,211,527) 104,424,895 141,119,795 235,692,756
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) 274,643,722 207,985,824 (15,211,529) 153,259,350 175,918,914 377,030,031
- -------------------------------------------------------------------------------------------------------------------------------
Beginning of period 493,905,974 285,920,150 637,544,830 484,285,480 959,110,220 582,080,189
------------- ------------- ------------- ------------- --------------- -------------
End of period $ 768,549,696 $ 493,905,974 $ 622,333,301 $ 637,544,830 $ 1,135,029,134 $ 959,110,220
------------- ------------- ------------- ------------- --------------- -------------
------------- ------------- ------------- ------------- --------------- -------------
Undistributed
(overdistributed) net
investment income $ 2,959,139 $ 3,896,959 $ 20,748,181 $ 1,264,870 $ 11,592,206 $ 18,148,506
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER OPPENHEIMER OPPENHEIMER
STRATEGIC GROWTH & SMALL CAP
BOND INCOME GROWTH
FUND FUND FUND(1)
1998 1997 1998 1997 1998
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 20,451,817 $ 13,156,048 $ 1,744,608 $ 1,094,913 $ (2,339)
- ------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (2,696,918) 894,858 (1,957,235) 9,837,467 (45,301)
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation or depreciation (11,476,607) (441,401) 6,335,797 15,049,196 104,971
------------- ------------- ------------- ------------- ------------
Net increase in net assets
resulting from operations 6,278,292 13,609,505 6,123,170 25,981,576 57,331
- ------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment
income (3,974,494) (12,654,390) (449,201) (976,438) --
- ------------------------------------------------------------------------------------------------------------
Distributions from net
realized gain (2,561,341) (207,080) (9,891,403) (2,670,354) --
- ------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net
assets resulting from
beneficial interest
transactions - see applicable
note 71,618,535 88,374,959 157,202,998 86,023,722 936,973
- ------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) 71,360,992 89,122,994 152,985,564 108,358,506 994,304
- ------------------------------------------------------------------------------------------------------------
Beginning of period 207,839,404 118,716,410 155,367,750 47,009,244 --
------------- ------------- ------------- ------------- ------------
End of period $ 279,200,396 $ 207,839,404 $ 308,353,314 $ 155,367,750 $ 994,304
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
Undistributed
(overdistributed) net
investment income $ 15,570,425 $ 885,276 $ 1,425,924 $ 130,085 $ --
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
See accompanying Notes to Financial Statements.
119
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MONEY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
<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 .05 .06 .04
Dividends and distributions to
shareholders (.05) (.05) (.05) (.06) (.04)
- ------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- ------------------------------------------------------------------------------------------
TOTAL RETURN(1) 5.25% 5.31% 5.13% 5.62% 4.25%
- ------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) $151,799 $126,782 $129,719 $65,386 $89,671
- ------------------------------------------------------------------------------------------
Average net assets (in thousands) $137,633 $133,707 $99,263 $75,136 $90,264
- ------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.12% 5.19% 5.01% 5.52% 4.18%
Expenses 0.50% 0.48% 0.49% 0.51% 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.
120
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of
period $11.52 $11.13 $10.63 $ 9.79 $11.02
- --------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .95 .94 .97 .98 .94
Net realized and unrealized
gain (loss) (.90) .37 .58 .94 (1.27)
- --------------------------------------------------------------------------------------------
Total income (loss) from
investment operations .05 1.31 1.55 1.92 (.33)
- --------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.25) (.91) (1.05) (1.08) (.66)
Distributions from net
realized gain (.30) (.01) -- -- (.24)
- --------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (.55) (.92) (1.05) (1.08) (.90)
- --------------------------------------------------------------------------------------------
Net asset value, end of period $11.02 $11.52 $11.13 $10.63 $ 9.79
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- --------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE(1) 0.31% 12.21% 15.26% 20.37% (3.18)%
- --------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) $328,563 $291,323 $191,293 $133,451 $ 95,698
- --------------------------------------------------------------------------------------------
Average net assets (in
thousands) $322,748 $223,617 $157,203 $115,600 $101,096
- --------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.65% 8.88% 9.18% 9.81% 9.15%
Expenses 0.78% 0.82% 0.81% 0.81% 0.67%
- --------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 161.4% 167.6% 125.0% 107.1% 110.1%
</TABLE>
1. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Total returns
are not annualized for periods of less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce the
total return figures for all periods shown.
2. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1998 were $537,018,561 and $428,828,226, respectively.
See accompanying Notes to Financial Statements.
121
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of
period $11.91 $11.63 $11.84 $10.78 $11.65
- --------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .72 .76 .69 .72 .76
Net realized and unrealized gain
(loss) .07 .28 (.15) 1.07 (.98)
- --------------------------------------------------------------------------------
Total income (loss) from investment
operations .79 1.04 .54 1.79 (.22)
- --------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.20) (.72) (.74) (.73) (.62)
Distributions from net realized
gain (.18) (.04) (.01) -- (.03)
- --------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.38) (.76) (.75) (.73) (.65)
- --------------------------------------------------------------------------------
Net asset value, end of period $12.32 $11.91 $11.63 $11.84 $10.78
------ ------ ------ ------ ------
------ ------ ------ ------ ------
- --------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 6.80% 9.25% 4.80% 17.00% (1.94)%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) $655,543 $520,078 $426,439 $211,232 $135,067
- --------------------------------------------------------------------------------
Average net assets (in thousands) $586,242 $449,760 $296,253 $170,929 $121,884
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.31% 6.72% 6.72% 6.91% 7.30%
Expenses 0.74% 0.78% 0.78% 0.80% 0.57%
- --------------------------------------------------------------------------------
Portfolio turnover rate(2) 75.8% 116.9% 82.3% 79.4% 35.1%
</TABLE>
1. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Total returns
are not annualized for periods of less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce the
total return figures for all periods shown.
2. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1998 were $523,613,491 and $403,166,088, respectively.
See accompanying Notes to Financial Statements.
122
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $40.96 $38.71 $34.21 $25.95 $31.64
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (.05) .10 .09 .11 .10
Net realized and unrealized gain (loss) 5.09 4.01 6.59 8.29 (2.22)
- ----------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations 5.04 4.11 6.68 8.40 (2.12)
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.10) (.09) (.11) (.09) (.04)
Distributions from net realized gain (1.07) (1.77) (2.07) (.05) (3.53)
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (1.17) (1.86) (2.18) (.14) (3.57)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $44.83 $40.96 $38.71 $34.21 $25.95
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 12.36% 11.67% 20.22% 32.52% (7.59)%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $1,077,960 $ 877,807 $ 617,392 $ 325,404 $ 185,774
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 954,848 $ 753,852 $ 467,080 $ 240,730 $ 153,832
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.12)% 0.31% 0.32% 0.47% 0.50%
Expenses 0.71% 0.73% 0.75% 0.78% 0.57%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 79.8% 87.6% 100.1% 125.5% 96.5%
</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, 1998 were $781,979,929 and $705,990,510, respectively.
See accompanying Notes to Financial Statements.
123
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $32.44 $27.24 $23.55 $17.68 $17.70
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .13 .25 .15 .25 .22
Net realized and unrealized gain (loss) 7.28 6.62 5.46 6.10 (.05)
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 7.41 6.87 5.61 6.35 .17
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.24) (.15) (.25) (.22) (.15)
Distributions from net realized gain (2.94) (1.52) (1.67) (.26) (.04)
- ---------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (3.18) (1.67) (1.92) (.48) (.19)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $36.67 $32.44 $27.24 $23.55 $17.68
----------- ----------- ------ ----------- -----------
----------- ----------- ------ ----------- -----------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 24.00% 26.68% 25.20% 36.65% 0.97%
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $768,550 $493,906 $285,920 $117,710 $63,283
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $609,246 $390,447 $152,466 $ 88,803 $59,953
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.50% 1.02% 1.08% 1.46% 1.38%
Expenses 0.75% 0.75% 0.81%(2) 0.79% 0.58%
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(3) 55.7% 66.0% 65.4% 58.2% 53.8%
</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, 1998 were $478,348,867 and $297,133,286, respectively.
See accompanying Notes to Financial Statements.
124
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $17.01 $15.63 $14.55 $12.91 $13.88
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .71 .62 .72 .66 .63
Net realized and unrealized gain (loss) .42 1.95 1.45 2.00 (.90)
- ----------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations 1.13 2.57 2.17 2.66 (.27)
- ----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (.16) (.61) (.74) (.65) (.60)
Distributions from net realized gain (.93) (.58) (.35) (.37) (.10)
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (1.09) (1.19) (1.09) (1.02) (.70)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.05 $17.01 $15.63 $14.55 $12.91
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 6.66% 17.22% 15.50% 21.36% (1.95)%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $622,333 $637,545 $484,285 $381,263 $292,067
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $640,131 $564,369 $428,277 $344,745 $279,949
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.05% 3.86% 4.89% 4.81% 4.90%
Expenses 0.76% 0.75% 0.77% 0.77% 0.56%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 42.5% 41.9% 40.3% 39.0% 31.4%
</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, 1998 were $235,924,766 and $252,937,156, respectively.
See accompanying Notes to Financial Statements.
125
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of
period $21.37 $17.67 $15.00 $15.09 $16.30
- -----------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .24 .25 .15 .12 .04
Net realized and unrealized gain
(loss) 2.64 3.68 2.52 .19 (.96)
- -----------------------------------------------------------------------------------------
Total income (loss) from investment
operations 2.88 3.93 2.67 .31 (.92)
- -----------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.46) (.23) -- -- (.04)
Distributions from net realized
gain (1.72) -- -- (.40) (.25)
- -----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (2.18) (.23) -- (.40) (.29)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $ 22.07 $ 21.37 $ 17.67 $ 15.00 $ 15.09
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 14.11% 22.42% 17.80% 2.24% (5.72)%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) $1,135,029 $959,110 $582,080 $360,979 $297,842
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $1,055,123 $802,389 $466,750 $332,336 $214,545
- -----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.22% 1.51% 1.09% 0.86% 0.54%
Expenses 0.74% 0.76% 0.81% 0.89% 0.91%
- -----------------------------------------------------------------------------------------
Portfolio turnover rate(2) 80.9% 67.1% 89.9% 131.3% 70.4%
</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, 1998 were $786,354,899 and $769,035,230, respectively.
See accompanying Notes to Financial Statements.
126
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER STRATEGIC BOND FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $5.12 $5.09 $4.91 $4.60 $5.12
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .39 .39 .38 .38 .35
Net realized and unrealized gain (loss) (.24) .04 .19 .30 (.54)
- ----------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations .15 .43 .57 .68 (.19)
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.09) (.39) (.39) (.37) (.32)
Distributions from net realized gain (.06) (.01) -- -- (.01)
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (.15) (.40) (.39) (.37) (.33)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.12 $5.12 $5.09 $4.91 $4.60
----- ----- ----- ----- -----
----- ----- ----- ----- -----
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 2.90% 8.71% 12.07% 15.33% (3.78)%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $279,200 $207,839 $118,716 $60,098 $20,320
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $250,227 $159,934 $82,604 $37,698 $15,389
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.17% 8.23% 8.48% 9.32% 8.36%
Expenses 0.80% 0.83% 0.85% 0.85% 0.87%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(2) 133.7% 149.7% 144.3% 87.0% 136.6%
</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, 1998 were $358,275,325 and $301,159,735, respectively.
See accompanying Notes to Financial Statements.
127
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 1996 1995(1)
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of
period $20.58 $16.37 $12.51 $10.00
- -------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .13 .19 .14 .01
Net realized and unrealized
gain .92 4.91 3.91 2.52
- -------------------------------------------------------------------------------
Total income from investment
operations 1.05 5.10 4.05 2.53
- -------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment
income (.05) (.17) (.14) (.02)
Distributions from net
realized gain (1.10) (.72) (.05) --
- -------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (1.15) (.89) (.19) (.02)
- -------------------------------------------------------------------------------
Net asset value, end of period $20.48 $20.58 $16.37 $12.51
-------- -------- -------- --------
-------- -------- -------- --------
- -------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE(2) 4.70% 32.48% 32.51% 25.25%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) $308,353 $155,368 $47,009 $4,288
- -------------------------------------------------------------------------------
Average net assets (in
thousands) $234,306 $94,906 $21,562 $1,809
- -------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.74% 1.15% 1.41% 0.50%(3)
Expenses 0.79% 0.83% 1.00% 2.07%(3)
- -------------------------------------------------------------------------------
Portfolio turnover rate(4) 85.7% 78.5% 112.6% 23.7%
</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, 1998 were $287,405,235 and $199,780,365, respectively.
See accompanying Notes to Financial Statements.
128
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER SMALL CAP GROWTH
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1998(1)
<S> <C>
- ------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 10.00
- ------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.02)
Net realized and unrealized gain (loss) (.38)
- ------------------------------------------------------------------------------
Total loss from investment operations (.40)
- ------------------------------------------------------------------------------
Net asset value, end of period $ 9.60
------
------
- ------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) (4.00)%
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $994
- ------------------------------------------------------------------------------
Average net assets (in thousands) $441
- ------------------------------------------------------------------------------
Ratios to average net assets:
Net investment loss (0.79)%(3)
Expenses 0.87%(3)
- ------------------------------------------------------------------------------
Portfolio turnover rate(4) 61.4%
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
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, 1998 were $1,023,289 and $242,621, respectively.
See accompanying Notes to Financial Statements.
129
<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 Aggressive Growth Fund (OAGF) operated under the
name Oppenheimer Capital Appreciation Fund through April 30, 1998, Oppenheimer
Growth Fund (OGF), Oppenheimer Multiple Strategies Fund (OMSF), Oppenheimer
Global Securities Fund (OGSF), Oppenheimer Strategic Bond Fund (OSBF),
Oppenheimer Growth & Income Fund (OGIF) and Oppenheimer Small Cap Growth Fund
(OSCGF), (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. The 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 primarily seeks a high level of current income.
Secondarily, this Fund seeks capital growth when consistent with its primary
objective. The Fund will, under normal market conditions, invest at least 65% of
its total assets in investment grade debt securities.
OPPENHEIMER AGGRESSIVE GROWTH FUND seeks to achieve capital appreciation by
investing in "growth-type" companies.
OPPENHEIMER GROWTH FUND seeks to achieve capital appreciation by investing in
securities of well-known established companies.
OPPENHEIMER MULTIPLE STRATEGIES FUND seeks a total investment return (which
includes current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
OPPENHEIMER GLOBAL SECURITIES FUND seeks long-term capital appreciation by
investing a substantial portion of its assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special institutions which are
considered to have appreciation possibilities, but which may be considered to be
speculative.
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. From time to time this Fund may focus on small to medium
capitalization common stocks, bonds and convertible securities.
OPPENHEIMER SMALL CAP GROWTH FUND seeks 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.
130
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT VALUATION. Portfolio securities of OMF are valued on the basis of
amortized cost, which approximates market value. Portfolio securities of OHIF,
OBF, OAGF, OGF, OMSF, OGSF, OSBF, OGIF and OSCGF 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 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. The Funds may invest in commodity and foreign currency-linked
structured notes whereby the market value and redemption price are linked to
commodity indices and foreign currency exchange rates. The structured notes may
be leveraged, which increase the notes' volatility relative to the face value 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, 1998, the market value of these securities comprised an
average of 8% and 5%, respectively, of the net assets of OHIF and OSBF, and
resulted in realized and unrealized gains of $4,745,329 and $3,012,491,
respectively.
- --------------------------------------------------------------------------------
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 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 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, 1998, OBF had entered into outstanding when-issued or forward commitments of
$47,434,432.
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. The aggregate market value of
securities in default as of December 31, 1998 for OHIF and OSBF are shown below:
<TABLE>
<CAPTION>
PERCENTAGE
OF
AMOUNT NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Oppenheimer High Income Fund $ 493,580 0.15%
Oppenheimer Strategic Bond Fund 666,711 0.24
</TABLE>
131
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION. The accounting records of the Funds are maintained
in U.S. dollars. Prices of securities purchased by OHIF, OBF, OAGF, 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, OAGF, 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.
- --------------------------------------------------------------------------------
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. As
of December 31, 1998, OHIF, OAGF, OSBF, OSCGF had available for federal income
tax purposes an approximate unused capital loss carryover, which expires in
2006, as follows:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER
<S> <C>
- -------------------------------------------------
Oppenheimer High Income Fund $ 3,402,000
Oppenheimer Aggressive Growth Fund 66,771,000
Oppenheimer Strategic Bond Fund 1,014,000
Oppenheimer Small Capital Growth
Fund 33,000
</TABLE>
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders of
OHIF, OBF, OAGF, OGF, OMSF, OGSF, OSBF, OGIF and OSCGF 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 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.
132
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. 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, 1998 are shown below:
<TABLE>
<CAPTION>
ADJUSTMENTS FOR THE YEAR ENDED DECEMBER
31, 1998
------------------------------------------
INCREASE
INCREASE (DECREASE)
(DECREASE) IN
IN ACCUMULATED
UNDISTRIBUTED NET REALIZED INCREASE
NET GAIN (DECREASE)
INVESTMENT ON IN PAID-IN
INCOME INVESTMENTS CAPITAL
<S> <C> <C> <C>
- ---------------------------------------------------------------------
Oppenheimer Money Fund $ 11,314 $ (11,314) $ --
Oppenheimer High Income
Fund 34,624 18,470 (16,154)
Oppenheimer Bond Fund 231,189 (231,189) --
Oppenheimer Aggressive
Growth Fund 1,194,015 32,432 (1,226,447)
Oppenheimer Growth Fund (34,690) 34,690 --
Oppenheimer Multiple
Strategies Fund (463,747) 463,747 --
Oppenheimer Global
Securities Fund 1,863,648 (1,863,648) --
Oppenheimer Strategic
Bond Fund (1,792,174) 1,817,242 (25,068)
Oppenheimer Growth &
Income Fund 432 (432) --
Oppenheimer Small Cap
Growth Fund 2,339 -- (2,339)
</TABLE>
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased by OHIF, OBF, OMSF, OGSF,
OSBF and OGIF is amortized over the life of the respective securities, in
accordance with federal income tax requirements. Realized gains and losses on
investments and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate, and a market
adjustment is made on the ex-date.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
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, 1998 DECEMBER 31, 1997
------------------------------- -------------------------------
OPPENHEIMER MONEY FUND SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 318,160,993 $ 318,160,993 390,437,217 $ 390,437,217
Dividends and distributions
reinvested 7,008,382 7,008,382 6,901,000 6,901,000
Redeemed (300,162,058) (300,162,058) (400,273,601) (400,273,601)
-------------- -------------- -------------- --------------
Net increase (decrease) 25,007,317 $ 25,007,317 (2,935,384) $ (2,935,384)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
133
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------- -------------------------------
OPPENHEIMER HIGH INCOME FUND SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 15,303,847 $171,699,925 14,372,458 $163,481,515
Dividends and distributions reinvested 1,300,031 14,807,349 1,658,451 18,684,961
Redeemed (12,094,532) (135,374,607) (7,919,351) (89,671,819)
----------- ------------ ----------- ------------
Net increase 4,509,346 $ 51,132,667 8,111,558 $ 92,494,657
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER BOND FUND
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Sold 24,245,723 $293,126,941 12,079,029 $142,326,116
Dividends and distributions reinvested 1,463,254 17,163,972 2,509,897 29,264,275
Redeemed (16,150,244) (195,000,147) (7,613,095) (89,294,128)
----------- ------------ ----------- ------------
Net increase 9,558,733 $115,290,766 6,975,831 $ 82,296,263
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER AGGRESSIVE GROWTH FUND
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Sold 13,376,589 $556,408,810 9,511,150 $368,762,665
Dividends and distributions reinvested 580,166 25,556,280 952,236 32,014,171
Redeemed (11,344,620) (471,453,144) (4,981,695) (193,507,968)
----------- ------------ ----------- ------------
Net increase 2,612,135 $110,511,946 5,481,691 $207,268,868
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER GROWTH FUND
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Sold 8,866,513 $293,095,063 10,437,357 $318,824,006
Dividends and distributions reinvested 1,565,397 51,470,268 720,274 18,842,365
Redeemed (4,699,071) (153,929,105) (6,429,313) (191,417,975)
----------- ------------ ----------- ------------
Net increase 5,732,839 $190,636,226 4,728,318 $141,248,396
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER MULTIPLE STRATEGIES FUND
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Sold 3,352,415 $ 56,547,384 6,728,904 $110,124,465
Dividends and distributions reinvested 2,387,019 40,555,451 2,517,354 39,597,113
Redeemed (6,714,957) (111,314,362) (2,765,980) (45,296,683)
----------- ------------ ----------- ------------
Net increase (decrease) (975,523) $(14,211,527) 6,480,278 $104,424,895
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER GLOBAL SECURITIES FUND
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Sold 11,735,029 $248,354,528 17,881,768 $354,780,849
Dividends and distributions reinvested 4,877,993 101,511,033 446,370 8,181,958
Redeemed (10,067,775) (208,745,766) (6,390,329) (127,270,051)
----------- ------------ ----------- ------------
Net increase 6,545,247 $141,119,795 11,937,809 $235,692,756
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER STRATEGIC BOND FUND
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Sold 21,445,910 $109,659,739 18,907,314 $ 96,727,423
Dividends and distributions reinvested 1,279,028 6,535,835 2,528,920 12,861,470
Redeemed (8,759,684) (44,577,039) (4,147,991) (21,213,934)
----------- ------------ ----------- ------------
Net increase 13,965,254 $ 71,618,535 17,288,243 $ 88,374,959
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER GROWTH & INCOME FUND
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Sold 9,181,075 $189,060,690 5,209,743 $ 95,997,604
Dividends and distributions reinvested 468,325 10,340,604 216,162 3,646,792
Redeemed (2,145,877) (42,198,296) (745,544) (13,620,674)
----------- ------------ ----------- ------------
Net increase 7,503,523 $157,202,998 4,680,361 $ 86,023,722
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
134
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1998(1)
-------------------------
OPPENHEIMER SMALL CAP GROWTH FUND SHARES AMOUNT
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Sold 114,434 $ 1,030,883
Redeemed (10,903) (93,910)
----------- ------------
Net increase 103,531 $ 936,973
----------- ------------
----------- ------------
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
- --------------------------------------------------------------------------------
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
As of December 31, 1998, net unrealized appreciation or depreciation on
investments and options written consisted of the following:
<TABLE>
<CAPTION>
OPPENHEIMER
OPPENHEIMER OPPENHEIMER MULTIPLE
HIGH INCOME OPPENHEIMER AGGRESSIVE OPPENHEIMER STRATEGIES
FUND BOND FUND GROWTH FUND GROWTH FUND FUND
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Gross appreciation $ 8,629,297 $ 13,200,055 $355,515,405 $235,480,248 $121,405,881
Gross depreciation 22,128,011 6,999,293 5,290,500 44,296,850 39,917,220
------------- ------------- ------------- ------------- -------------
Net unrealized
appreciation
(depreciation) $(13,498,714) $ 6,200,762 $350,224,905 $191,183,398 $ 81,488,661
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER
GLOBAL OPPENHEIMER OPPENHEIMER OPPENHEIMER
SECURITIES STRATEGIC GROWTH & SMALL CAP
FUND BOND FUND INCOME FUND GROWTH FUND
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Gross appreciation $255,177,315 $ 8,361,107 $ 55,571,813 $ 134,186
Gross depreciation 52,100,686 17,283,663 30,983,707 29,215
------------- ------------- ------------- -------------
Net unrealized
appreciation
(depreciation) $203,076,629 $ (8,922,556) $ 24,588,106 $ 104,971
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</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 OAGF, OGF, OMSF, OGSF, OGIF and OSCGF,
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.
For OHIF, OBF and OSBF, 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 $200 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 over $1.5 billion.
135
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
The management fee for the year ended December 31, 1998 (computed on an
annualized basis as a percentage of the average annual net assets of each of the
Funds) were as follows:
<TABLE>
<CAPTION>
FUND MANAGEMENT FEES
<S> <C>
- ------------------------------------------------------------------------------------------------------
Oppenheimer Money Fund 0.45%
Oppenheimer High Income Fund 0.74
Oppenheimer Bond Fund 0.72
Oppenheimer Aggressive Growth Fund 0.69
Oppenheimer Growth Fund 0.72
Oppenheimer Multiple Strategies Fund 0.72
Oppenheimer Global Securities Fund 0.68
Oppenheimer Strategic Bond Fund 0.74
Oppenheimer Growth & Income Fund 0.74
Oppenheimer Small Cap Growth Fund 0.75
</TABLE>
- --------------------------------------------------------------------------------
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.
136
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. FORWARD CONTRACTS (CONTINUED)
As of December 31, 1998, outstanding forward contracts were as follows:
<TABLE>
<CAPTION>
VALUATION AS OF
EXPIRATION CONTRACT DECEMBER 31, UNREALIZED UNREALIZED
OPPENHEIMER HIGH INCOME FUND DATES AMOUNT (000'S) 1998 APPRECIATION DEPRECIATION
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
British Pound Sterling (GBP) 3/15/99 1,680 GBP $2,779,282 $ 50,410 $ --
Canadian Dollar (CAD) 3/15/99 540 CAD 352,663 -- 2,014
------- ------------
Total Unrealized Appreciation and Depreciation $ 50,410 $ 2,014
------- ------------
------- ------------
OPPENHEIMER BOND FUND
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
Canadian Dollar (CAD) 3/15/99 4,000 CAD $2,612,319 $ 14,916 $ --
OPPENHEIMER GLOBAL SECURITIES FUND
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
German Mark (DEM) 1/4/99-1/5/99 8,837 DEM $5,306,742 $ 12,154 $ --
Italian Lira (ITL) 1/7/99-1/8/99 5,005,679 ITL 3,034,123 13,901 --
------- ------------
26,055 --
------- ------------
CONTRACTS TO SELL
Finnish Markka (FIM) 1/4/99-1/5/99 1,161 FIM 229,251 -- 1,403
------- ------------
Total Unrealized Appreciation and Depreciation $ 26,055 $ 1,403
------- ------------
------- ------------
OPPENHEIMER STRATEGIC BOND FUND
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Canadian Dollar (CAD) 1/27/99 650 CAD $ 424,445 $ 1,764 $ --
------- ------------
CONTRACTS TO SELL
Australian Dollar (AUD) 2/22/99 1,620 AUD 993,532 14,756 --
British Pound Sterling (GBP) 2/22/99-3/9/99 1,290 GBP 2,134,521 7,058 13,431
Canadian Dollar (CAD) 1/11/99-1/27/99 1,950 CAD 1,273,327 397 6,753
German Mark (DEM) 2/8/99 2,550 DEM 1,534,924 -- 11,672
Japanese Yen (JPY) 2/8/99 40,000 JPY 355,206 -- 15,705
New Zealand Dollar (NZD) 1/26/99 210 NZD 110,553 2,364 --
------- ------------
24,575 47,561
------- ------------
Total Unrealized Appreciation and Depreciation $ 26,339 $ 47,561
------- ------------
------- ------------
</TABLE>
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
The Funds (except OMF) may buy and sell interest rate futures contracts in order
to gain exposure to or protect against changes in interest rates. The Funds may
also buy or write put or call options on these futures contracts.
The Funds generally sell futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Funds may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Funds are required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Funds each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Funds recognize a realized gain or loss when the contract is closed
or expires.
137
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS (CONTINUED)
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.
As of December 31, 1998, outstanding futures contracts were as follows:
<TABLE>
<CAPTION>
VALUATION AS OF UNREALIZED
EXPIRATION NUMBER OF DECEMBER 31, APPRECIATION
OPPENHEIMER HIGH INCOME FUND DATE CONTRACTS 1998 (DEPRECIATION)
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Standard & Poors 500 Index 3/99 9 $2,802,375 $ 15,700
OPPENHEIMER BOND FUND
- -------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Treasury Nts., 5 yr. 3/99 335 $37,970,156 $ 147,016
U.S. Treasury Bonds, 20 yr. 3/99 127 16,228,219 10,031
--------------
157,047
--------------
CONTRACTS TO SELL
U.S. Treasury Nts., 10 yr. 3/99 37 4,408,781 (4,781)
--------------
$ 152,266
--------------
--------------
OPPENHEIMER STRATEGIC BOND FUND
- -------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
United Kingdom Long Gilt 3/99 5 $ 987,174 $ 4,410
--------------
CONTRACTS TO SELL
Canadian Government Bonds 3/99 5 420,633 1,828
U.S. Treasury Nts., 10 yr. 3/99 11 1,310,719 1,852
--------------
3,680
--------------
$ 8,090
--------------
--------------
</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.
138
<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. 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, 1998 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 as of December
31, 1997 -- $ -- -- $ --
Options written 200 45,875 6 50,220
Options closed or expired (200) (45,875) (6) (50,220)
------------ ------------ ------------- ----------
Options outstanding as of December
31, 1998 -- $ -- -- $ --
------------ ------------ ------------- ----------
------------ ------------ ------------- ----------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER MULTIPLE STRATEGIES FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 1997 6,056 $1,797,849 -- $ --
Options written 14,157 4,642,269 -- --
Options closed or expired (9,606) (3,358,067) -- --
Options exercised (4,736) (1,395,664) -- --
---------- ---------- ----------- -----------
Options outstanding as of December 31, 1998 5,871 $1,686,387 -- $ --
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER STRATEGIC BOND FUND
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Options outstanding as of December
31, 1997 400 $ 3,679 224,820,000 $ 31,046
Options written 150,816,100 50,369 565,183,580 237,481
Options closed or expired (3,210,400) (28,813) (420,932,320) (145,971)
Options exercised -- -- (369,071,260) (122,556)
------------ ------------ ------------- ---------
Options outstanding as of December
31, 1998 147,606,100 $ 25,235 -- $ --
------------ ------------ ------------- ---------
------------ ------------ ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER GROWTH & INCOME FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 1997 880 $ 61,758 -- $ --
Options written 11,965 2,578,629 200 74,397
Options closed or expired (9,495) (1,306,303) -- --
Options exercised (2,025) (763,924) (100) (32,824)
---------- ---------- ----------- -----------
Options outstanding as of December 31, 1998 1,325 $ 570,160 100 $ 41,573
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER AGGRESSIVE GROWTH FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 1997 -- $ -- -- $ --
Options written 638 53,343 -- --
Options closed or expired (500) (18,579) -- --
---------- ---------- ----------- -----------
Options outstanding as of December 31, 1998 138 $ 34,764 -- $ --
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
139
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. ILLIQUID AND RESTRICTED SECURITIES
As of December 31, 1998, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Funds intend to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
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 as of December 31, 1998 are shown below:
Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
PERCENTAGE
OF
NET
AMOUNT ASSETS
<S> <C> <C>
- ---------------------------------------------
Oppenheimer Money Fund $13,000,000 8.56%
- ---------------------------------------------
Oppenheimer High Income
Fund 19,677,807 5.99
- ---------------------------------------------
Oppenheimer Bond Fund 47,819,400 7.29
- ---------------------------------------------
Oppenheimer Multiple
Strategies Fund 2,293,795 0.37
- ---------------------------------------------
Oppenheimer Global
Securities Fund 3,769,145 0.33
- ---------------------------------------------
Oppenheimer Strategic
Bond Fund 11,110,683 3.98
- ---------------------------------------------
Oppenheimer Growth &
Income Fund 4,030 0.01
OPPENHEIMER MONEY FUND
The aggregate value of
restricted securities is
$2,000,000.
</TABLE>
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT DECEMBER 31, 1998
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
SHORT-TERM NOTES
Travelers Insurance Co., 5.034%, 1/4/99 9/16/98 100.00% 100.00%
OPPENHEIMER HIGH INCOME FUND
The aggregate value of restricted
securities is $3,362,687.
BONDS
ECM Fund, L.P.I., 14% Sub. Nts., 6/10/02 4/14/92 100.00% 100.25%
- ----------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub.
Nts., 12/15/05 12/8/95-8/13/96 100.00-105.75 116.10
- ----------------------------------------------------------------------------------------------
Trans World Airlines Lease, 14%
Equipment Trust, 7/2/08 3/19/98 101.00 99.00
STOCKS AND WARRANTS
ECM Fund, L.P.I. 4/14/92 $ 1,000.00 $ 885.00
- ----------------------------------------------------------------------------------------------
CGA Group Ltd., Preferred 6/17/97-9/28/98 25.00 25.00
- ----------------------------------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 12/49 6/17/97 -- .30
- ----------------------------------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/00 11/29/95 -- 9.31
OPPENHEIMER BOND FUND
The aggregate value of restricted
securities is $1,130,000.
Merrill Lynch & Co., Inc., Units, 9.75%,
6/15/99 5/15/95 110.05% $ 113.00
OPPENHEIMER MULTIPLE STRATEGIES FUND
The aggregate value of restricted
securities is $2,293,795.
STOCKS
Intermedia Communications, Inc. 9/29/98 $ 21.69 $ 13.80
</TABLE>
140
<PAGE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. ILLIQUID AND RESTRICTED SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT DECEMBER 31, 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPPENHEIMER STRATEGIC BOND FUND
The aggregate value of restricted
securities is $598,651.
BONDS
TAG Heuer International SA, 12% Sr. Sub.
Nts., 12/15/05 12/8/95 100.00% 116.10%
STOCKS AND WARRANTS
CGA Group Ltd., Preferred 6/17/97 $ 25.00 $ 25.00
- ----------------------------------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 12/49 6/17/97 -- .30
OPPENHEIMER GROWTH & INCOME FUND
The aggregate value of restricted
securities is $4,030.
STOCKS
Intermedia Communications, Inc. 9/29/98 $ 21.54 $ 13.80
</TABLE>
A-1
Appendix A
RATINGS DEFINITIONS
Below are summaries of the rating definitions used by the
nationally-recognized rating agencies listed below. Those ratings
represent the opinion of the agency as to the credit quality of issues
that they rate. The summaries below are based upon publicly-available
information provided by the rating organizations.
Moody's Investors Service, Inc.
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk. 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, the
changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds rated Aa are 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 with Aaa securities or
fluctuation 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 those of Aaa securities.
A: Bonds rated 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: Bonds rated Baa are considered medium grade obligations; that is,
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: Bonds rated Ba are 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: Bonds rated Caa are of poor standing and may be in default or
there may be present elements of danger with respect to principal or
interest.
Ca: Bonds rated Ca represent obligations which are speculative in a
high degree and are often in default or have other marked
shortcomings.
C: Bonds rated C are the lowest class of rated bonds and 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 Caa. The modifier "1" indicates that
the obligation ranks in the higher end of its category; the modifier
"2" indicates a mid-range ranking and the modifier "3" indicates a
ranking in the lower end of the category. Short-Term Ratings - Taxable
Debt
These ratings apply to the ability of issuers to repay punctually
senior debt obligations having an original maturity not exceeding one
year:
Prime-1: Issuer has a superior ability for repayment of senior
short-term debt obligations.
Prime-2: Issuer has a strong ability for repayment of senior
short-term debt obligations. Earnings trends and coverage, while
sound, may be subject to variation. Capitalization characteristics,
while appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior
short-term obligations. The effect of industry characteristics and
market compositions may be more pronounced. Variability in earnings
and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment
on the obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant
speculative characteristics. BB indicates the least degree of
speculation and C the highest. While such obligations will likely have
some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other
speculative issues. However, these face major uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation
rated BB, but the obligor currently has the capacity to meet its
financial commitment on the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse business, financial or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are
being continued.
D: Bonds rated D are in default. Payments on the obligation are not
being made on the date due.
The ratings from AA to CCC may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within the major
rating categories. The "r" symbol is attached to the ratings of
instruments with significant noncredit risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its
financial commitment on the obligation is strong. Within this
category, a plus (+) sign designation indicates the issuer's capacity
to meet its financial obligation is very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its
financial commitment on the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead
to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: Regarded as having significant speculative characteristics. The
obligor currently has the capacity to meet its financial commitment on
the obligation. However, it faces major ongoing uncertainties which
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation.
D: In payment default. Payments on the obligation have not been made
on the due date. The rating may also be used if a bankruptcy petition
has been filed or similar actions jeopardize payments on the
obligation.
Fitch IBCA, Inc.
International Long-Term Credit Ratings
Investment Grade: AAA: Highest Credit Quality. "AAA" ratings denote
the lowest expectation of credit risk. They are assigned only in the
case of exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low
expectation of credit risk. They indicate a very strong capacity for
timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events. A: High Credit
Quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes
in circumstances or in economic conditions than is the case for higher
ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is
currently a low expectation of credit risk. The capacity for timely
payment of financial commitments is considered adequate, but adverse
changes in circumstances and in economic conditions are more likely to
impair this capacity. This is the lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse economic
change over time. However, business or financial alternatives may be
available to allow financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit
risk is present, but a limited margin of safety remains. Financial
commitments are currently being met. However, capacity for continued
payment is contingent upon a sustained, favorable business and
economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity
for meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A "CC" rating indicates
that default of some kind appears probable. "C" ratings signal
imminent default.
DDD, DD, and D: Default. Securities are not meeting current
obligations and are extremely speculative. "DDD" designates the
highest potential for recovery of amounts outstanding on any
securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to
denote relative status within the rating category. Plus and minus
signs are not added to the "AAA" category or to categories below
"CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May
have an added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment,
but the margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate.
However, near-term adverse changes could result in a reduction to
non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus
vulnerability to near-term adverse changes in financial and economic
conditions.
C: High default risk. Default is a real possibility, Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A+, A & A-: Protection factors are average but adequate. However, risk
factors are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still
considered sufficient for prudent investment. Considerable variability
in risk during economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions. Overall quality
may move up or down frequently within the category.
B+, B & B-: Below investment grade and possessing risk that
obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for frequent
changes in the rating within this category or into a higher of lower
rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below
risk-free U.S. Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
B-1
Appendix B
Industry Classifications
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Technology
Electrical Equipment Telephone - Utility
Electronics Textile/Apparel
Energy Services & Producers Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
C-2
APPENDIX C - MAJOR SHAREHOLDERS
As of April 1, 1999, the number of shares and approximate percentage
of 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 as shown in the
tables below. The full name and address of each insurance company is
shown under "Major Shareholders" on page 40:
<TABLE>
<CAPTION>
Monarch ReliaStar GE Nationwide Aetna
<S> <C> <C> <C> <C> <C>
Money Fund/VA 25,145,916.770 9,153,762.542 * * 10,150,889.250
16.48% 6.00% 6.65%
High Income Fund/VA * 1,885,144.642 17,269,050.642 * 1,778,832.069
5.70% 52.18% 5.37%
Bond Fund/VA * * 6,066,946.035 30,957,444.228 *
10.75% 55.39%
Aggressive Growth * * 4,702,545.948 * 1,248,988.180
Fund/VA 20.00% 5.31%
Capital Appreciation
Fund/VA * * 5,577,643.166 4,845,945.654 1,288,654.479
23.52% 20.44% 5.44%
Multiple Strategies 3,057,791.713 2,460,350.504 5,231,829.734 21,096,649.563 2,206,895.128
Fund/VA 8.12% 6.53% 13.89% 56.00% 5.86%
Global Securities * * * 25,806,270.802 *
Fund/VA 49.83%
Strategic Bond Fund/VA * * * * 4,966,074.026
10.72%
Main Street
Growth & Income * * * 2,999,652.343 2,398,958.391
Fund/VA 19.04% 15.34
Small Cap Growth/VA * * * * *
</TABLE>
_______________
*Less than 5% of the outstanding shares of that Fund.
(continued)
<TABLE>
<CAPTION>
MassMutual Jefferson-Pilot CUNA American General Protective
<S> <C> <C> <C> <C> <C>
Money Fund/VA 108,169,643.695 * * * *
70.87%
High Income Fund/VA 5,681,835.175 * 4,641,289.720 * *
17.17% 14.02%
Bond Fund/VA 12,829,726.419 3,959,387.875 * * *
22.95% 7.08%
Aggressive Growth 14,964,195,124 * * * *
Fund/VA 63.64%
Capital Appreciation
Fund/VA 6,326,279.041 3,430,222.806 * * *
26.68% 14.47%
Multiple Strategies 3,555,224.212 * * * *
Fund/VA 9.44%
Global Securities 22,911,099.051 * * * *
Fund/VA 44.24%
Strategic Bond Fund/VA 44,005,016.230 * * * 4,074,940
76.45% 7.08%
Main Street
Growth & Income 8,512,628.396 * * * 1,272,918
Fund/VA 54.44% 8.14%
Small Cap Growth/VA 115,682.817 * * 36,971.693 *
75.74% 24.20%
</TABLE>
___________
*Less than 5% of the outstanding shares of that Fund.
Oppenheimer Variable Account Funds
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
1-888-470-0861
Custodian Bank
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
67890
