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Semiannual Report June 30, 1999
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O P P E N H E I M E R
Strategic Bond Fund/VA
A Series of Oppenheimer Variable Account Funds
[graphic of chess pieces]
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OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
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Oppenheimer Variable Account Funds--Oppenheimer Strategic Bond Fund/VA
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Objective
Oppenheimer Strategic Bond Fund/VA, a series of Oppenheimer Variable Account
Funds, primarily seeks a high level of current income from debt securities. The
fund primarily invests in three sectors: foreign fixed-income securities, U.S.
government securities and lower rated high-yield domestic corporate bonds
(commonly known as "junk bonds.") Investing in foreign securities entails
additional expenses and risks including foreign currency fluctuations while
investing in junk bonds carries a greater risk of default.
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Narrative by Art Steinmetz, Co-Portfolio Manager
During the six-month period that ended June 30, 1999, Oppenheimer Strategic Bond
Fund/VA generated a cumulative total return of 0.14%.(1) The Fund's diversified,
multi-sector approach provided competitive levels of current income and helped
cushion the brunt of an extremely volatile bond market. In fact, the past six
months have been particularly difficult for the markets in which the Fund
invests, including U.S. government securities.
Since January 1999, U.S. government securities have continued to
retrace all of the gains they achieved during last summer's "flight to quality"
when the prices of U.S. Treasury bonds rallied to levels not seen in over 30
years. In the wake of these remarkable gains, investors became concerned that
stronger-than-expected U.S. economic growth might rekindle an acceleration of
inflation, and that the Federal Reserve (the Fed) might raise key interest
rates.
On the other hand, the foreign and high-yield corporate sectors have
failed to recoup much of the declines they experienced last summer. As we noted
in our annual report, the differences in yields between these sectors and U.S.
Treasury bonds had reached historically wide levels by October 1998. Although
these differences have narrowed somewhat since then, most of the movement came
not from the recovery of foreign and high-yield bonds, but from the
deterioration in the prices of U.S. government securities.
Early this year, we made a number of changes to the portfolio, which
were designed to take advantage of what we perceived as attractive values in
weak markets. For example, we saw some excellent values in emerging markets,
which were particularly hard hit last summer. Therefore, we increased our
exposure to these securities. We focused primarily on Asian bonds because we
believe there is the potential for real recovery in that region.(2)
We concurrently decreased our exposure of bonds from developed overseas
markets, which represented approximately 15% of the portfolio as of June 30,
1999. We sold a number of bonds from Europe because of our expectation for
higher interest rates and weaker currencies. And we continued to avoid Japanese
bonds for the most part because of persistent economic and banking problems
affecting the world's second largest economy.
While we did not significantly alter our exposure to U.S. government
securities over the past six months, we lowered the average duration of this
sector. This means that we effectively reduced the sensitivity of the Fund's
portfolio to rising interest rates.
This may prove a prudent decision, as it seems possible that the Fed
could move to raise interest rates again during 1999. We do not believe,
however, that this will be a repeat of 1994 when the Fed had to act multiple
times to slow an economy straining against its limits. Today's situation is
quite different, as even a slight rate increase could tame the U.S. economy.
The Fund's performance may from time to time be subject to substantial
short-term changes, particularly during periods of market or interest rate
volatility. For updates on the Fund's performance, please contact your financial
advisor, call us at 1-800-525-7048 or visit our website,
www.oppenheimerfunds.com.
1. Includes changes in net asset value per share and does not include the
charges associated with the separate account products, which offer this Fund.
Such performance is not annualized and would have been lower if such charges
were taken into account.
2. The Fund's portfolio (and duration) is subject to change.
3. Investing in lower rated high-yield domestic corporate bonds (commonly known
as "junk bonds") carries a greater risk of default.
2 Oppenheimer Strategic Bond Fund/VA
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Oppenheimer Variable Account Funds--Oppenheimer Strategic Bond Fund/VA
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In the high-yield corporate bond market, we have increased our holdings in the
media/entertainment/ telecommunications sectors. In our opinion, these
industries will continue to benefit from consolidation, both domestically and
globally, as the lines blur between local and long distance telephone service,
wireless telephony, cable TV and Internet access.(3)
Looking forward, we believe that the market sectors in which we invest
are poised for better returns. With continuing economic strength in the United
States, a federal budget surplus, a potential for recovery in Asia and low
inflation around the world, conditions appear to favor stability in U.S.
government securities, foreign securities and high-yield bonds.
In the meantime, we intend to maintain the broadly diversified
investment approach that helped us weather heightened volatility over the past
six months. In our view, maintaining a disciplined long-term approach despite
short-term setbacks is part of what makes OppenheimerFunds The Right Way to
Invest.
Oppenheimer Strategic Bond Fund/VA 3
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Statement of Investments June 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
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<S> <C> <C>
Mortgage-Backed Obligations--17.1%
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Government Agency--12.8%
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FHLMC/FNMA/Sponsored--5.3%
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, Series 151, Cl. F, 9%, 5/15/21 $ 976,055 $ 1,019,061
Interest-Only Stripped Mtg.-Backed Security, Series 177, C1. B, 6.954%, 7/1/26(2) 4,296,496 1,228,530
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Federal National Mortgage Assn.:
6.50%, 4/1/29 1,593,237 1,537,538
6.50%, 7/1/28(3) 3,200,000 3,087,008
7%, 7/25/27 6,200,000 6,128,328
7.50%, 8/1/25 450,725 455,512
Interest-Only Stripped Mtg.-Backed Security, Trust 276, Cl. 2, 8.885%, 10/1/24(2) 3,031,587 865,897
Principal-Only Stripped Mtg.-Backed Security, Trust 277-C1, 6.602%, 4/1/27(4) 606,612 450,505
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14,772,379
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GNMA/Guaranteed--7.5%
Government National Mortgage Assn.:
7%, 11/20/25-7/15/28 16,047,991 15,851,696
7.50%, 2/15/27 2,647,231 2,675,239
8%, 11/15/25-5/15/26 2,500,046 2,573,806
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21,100,741
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Private--4.3%
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Commercial--3.0%
AMRESCO Commercial Mortgage Funding I Corp., Multiclass Mtg.
Pass-Through Certificates, Series 1997-C1, Cl. G, 7%, 6/17/29(5) 100,000 78,750
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Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1997-D4, Cl. B1, 7.525%, 4/14/29(6) 375,000 289,395
Series 1997-D5, Cl. B1, 6.93%, 2/14/41 300,000 219,469
Series 1997-D5, Cl. B2, 6.93%, 2/14/41 1,250,000 880,273
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CRIMMI MAE Trust I, Collateralized Mtg. Obligations,
Series 1996-C1, Cl. A2, 7.56%, 8/30/05(7) 100,000 95,391
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FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Series 1994-C1, Cl. 2-G, 8.70%, 9/25/25(5) 153,594 149,034
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General Motors Acceptance Corp., Collateralized Mtg. Obligations:
Series 1997-C1, Cl. G, 7.414%, 11/15/11 440,000 319,137
Series 1997-C2, Cl. F, 6.75%, 4/16/29 250,000 164,062
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General Motors Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security,
Series 1997-C1, Cl. X, 8.901%, 7/15/27(2) 4,088,512 344,968
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Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates,
Series 1995-C2, Cl. D, 7.945%, 6/15/21(6) 258,099 257,373
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Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates:
Series 1996-C1, Cl. F, 7.426%, 2/15/28(5)(6) 162,744 121,600
Series 1997-HF1, Cl. F, 6.86%, 2/15/10(5) 150,000 113,438
Series 1997-RR, Cl. D, 7.671%, 4/30/39(5) 450,000 345,234
Series 1997-RR, Cl. E, 7.727%, 4/30/39(5)(6) 300,000 205,781
Series 1997-RR, Cl. F, 7.649%, 4/30/39(5) 600,000 329,438
Series 1997-XL1, Cl. G, 7.695%, 10/3/30(5)(6) 390,000 312,853
4 Oppenheimer Strategic Bond Fund/VA
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Statement of Investments (Unaudited) (Continued)
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Principal Market Value
Amount(1) Note 1
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Commercial (continued)
NationsCommercial Corp., NB Commercial Mtg. Pass-Through Certificates,
Series DMC, Cl. C, 8.921%, 8/12/11(5) $ 200,000 $ 199,563
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NC Finance Trust, Collateralized Mtg. Obligations,
Series 1999-I, Cl. ECFD, 8.75%, 7/25/02(5) 517,913 510,468
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Northwest Asset Securities Corp., Series 1998-12, Cl. A3, 6.75%, 6/25/28 762,874 761,204
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Nykredit AS, 7% Cv. Bonds, 10/1/29(DKK) 7,106,000 996,274
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Option One Mortgage Trust, Collateralized Mtg. Obligations,
Series 1999-1A, 10.06%, 3/1/29(5) 319,276 319,277
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Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1993-C1, Cl. D, 9.45%, 5/25/24 91,000 90,311
Series 1994-C2, Cl. E, 8%, 4/25/25 987,720 971,284
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Structured Asset Securities Corp., Commercial Mtg. Pass-Through Certificates:
Series 1995-C4, Cl. E, 8.712%, 6/25/26(5)(6) 46,290 43,585
Series 1997-LLI, Cl. F, 7.30%, 4/12/12(5) 200,000 151,063
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8,269,225
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Multi-Family--0.5%
Mortgage Capital Funding, Inc.:
Commercial Mtg. Pass-Through Certificates, Series 1997-MC1, Cl. F, 7.452%, 5/20/07(5) 63,720 50,976
Multifamily Mtg. Pass-Through Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(7) 800,000 633,250
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Salomon Brothers Mortgage Securities VII, Series 1996-CL, Cl. F, 9.102%, 1/20/06(6) 1,000,000 777,500
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1,461,726
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Residential--0.8%
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates:
Series 1997-CHL1, 8.054%, 5/25/08(5)(6) 350,000 287,000
Series 1997-CHL1, 8.055%, 2/25/11(5)(6) 600,000 429,000
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Residential Asset Securitization Trust, Collateralized Mtg. Obligations,
Non-Accelerated Security, Series 1997-A2, Cl. A8, 7.75%, 4/25/27 1,000,000 1,012,188
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Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 6.581%, 4/25/26(5) 382,932 270,446
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Salomon, Inc., Commercial Mtg. Pass-Through Certificates, Series 1998-A1, 5%, 12/25/00(5) 245,483 237,198
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2,235,832
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Total Mortgage-Backed Obligations (Cost $49,695,286) 47,839,903
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U.S. Government Obligations--29.4%
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U.S. Treasury Bonds:
6.125%, 11/15/27(8)(9) 905,000 896,799
6.50%, 11/15/26 7,000,000 7,247,191
6.625%, 2/15/27 1,610,000 1,695,531
8.125%, 8/15/21 1,415,000 1,721,878
9.375%, 2/15/06 4,700,000 5,581,250
10.75%, 8/15/05 2,490,000 3,096,937
11.875%, 11/15/03 4,950,000 6,086,956
STRIPS, 5.34%, 5/15/17(10) 6,000,000 1,942,800
STRIPS, 5.76%, 2/15/19(10) 6,500,000 1,891,578
Oppenheimer Strategic Bond Fund/VA 5
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Statement of Investments (Unaudited) (Continued)
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Principal Market Value
Amount(1) Note 1
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U.S. Government Obligations (continued)
U.S. Treasury Nts.:
4.625%, 12/31/00 $ 1,800,000 $ 1,778,625
5.375%, 6/30/00 2,600,000 2,602,439
5.625%, 11/30/00 9,905,000 9,929,763
6.50%, 10/15/06 17,870,000 18,445,200
6.625%, 5/15/07 3,550,000 3,698,656
6.875%, 5/15/06 14,570,000 15,344,031
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Total U.S. Government Obligations (Cost $85,081,934) 81,959,634
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Foreign Government Obligations--17.5%
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Argentina--1.5%
Argentina (Republic of) Bonds, Bonos de Consolidacion de Deudas,
Series I, 2.815%, 4/1/07(6)(ARP) 1,856,441 1,155,954
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Argentina (Republic of) Nts.:
11%, 12/4/05 1,375,000 1,265,000
Series REGS, 11.75%, 2/12/07(ARP) 390,000 309,602
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Argentina (Republic of) Unsec. Unsub. Medium-Term Nts., 8.75%, 7/10/02(ARP) 970,000 793,076
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Banco Hipotecario Nacional (Argentina) Medium-Term Unsec. Nts.,
Series 3, 10.625%, 8/7/06 400,000 398,000
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City of Buenos Aires Bonds, Series 3, 10.50%, 5/28/04(ARP) 160,000 130,817
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4,052,449
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Australia--0.1%
Queensland Treasury Corp. Bonds, Series 07, 8%, 9/14/07(AUD) 360,000 260,217
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Brazil--2.9%
Brazil (Federal Republic of) Bonds:
11.625%, 4/15/04 675,000 627,750
Series RG, 5.938%, 4/15/12(6) 1,000,000 603,750
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Brazil (Federal Republic of) Capitalization Bonds, 8%, 4/15/14 6,978,044 4,544,452
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Brazil (Federal Republic of) Debt Conversion Bonds, 5.938%, 4/15/12(6) 340,000 205,275
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Brazil (Federal Republic of) Gtd. Disc. Bonds, 6.125%, 4/15/24(6) 1,400,000 892,500
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Brazil (Federal Republic of) Interest Due & Unpaid Bonds, 6.063%, 1/1/01(6) 1,353,000 1,293,806
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8,167,533
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Bulgaria--0.9%
Bulgaria (Republic of) Disc. Bonds, Tranche A, 5.875%, 7/28/24(6) 1,640,000 1,115,200
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Bulgaria (Republic of) Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.50%, 7/28/12 (11) 2,025,000 1,220,062
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Bulgaria (Republic of) Interest Arrears Bonds, 5.875%, 7/28/11(6) 160,000 108,800
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2,444,062
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Colombia--0.3%
Columbia (Republic of) Nts., 7.25%, 2/23/04 640,000 492,800
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Colombia (Republic of) Unsec. Bonds, 10.875%, 3/9/04 110,000 105,325
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Financiera Energetica Nacional SA Nts., 9.375%, 6/15/06 150,000 126,000
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724,125
6 Oppenheimer Strategic Bond Fund/VA
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Statement of Investments (Unaudited) (Continued)
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Principal Market Value
Amount(1) Note 1
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Ecuador--0.2%
Ecuador (Republic of) Debs., 4.422%, 2/27/15(6) $ 621,523 $ 197,334
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Ecuador (Republic of) Disc. Bonds, 6%, 2/28/25(6) 50,000 23,000
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Ecuador (Republic of) Past Due Interest Bonds, 4.422%, 2/27/15(4) 851,717 270,420
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490,754
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Finland--0.2%
Finland (Republic of) Bonds, 9.50%, 3/15/04(EUR) 504,563 640,038
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France--0.4%
France (Government of) Bonds:
Obligations Assimilables du Tresor Coupon Strip,
Series OC25, Zero Coupon, 5.30%, 10/25/25(10)(EUR) 2,480,000 580,310
Obligations Assimilables du Tresor, 5.50%, 10/25/07(EUR) 566,906 625,033
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1,205,343
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Germany--1.0%
Germany (Republic of) Treasury Bills, Zero Coupon, 2.52%, 10/15/99(10)(EUR) 2,000,000 2,047,531
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Treuhan-Obligationen (German Federal Government) Gtd. Bonds, 7%, 11/25/99(EUR) 730,000 765,270
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2,812,801
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Great Britain--1.0%
United Kingdom Treasury Nts., 8%, 6/10/03(GBP) 1,565,000 2,677,830
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Indonesia--0.0%
PT Bank Negara Indonesia Sr. Unsec. Nts., 7.625%, 2/15/07 57,000 41,182
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Italy--1.0%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali:
6%, 11/1/07(EUR) 455,000 511,366
8.50%, 1/1/04(EUR) 964,481 1,174,675
8.75%, 7/1/06(EUR) 766,330 991,979
10.50%, 4/1/05(EUR) 90,379 122,305
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2,800,325
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Ivory Coast-- 0.1%
Ivory Coast (Government of) Past Due Interest Bonds, 2%, 3/29/18(7)(11) 572,325 201,745
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Japan--0.5%
Japan (Government of) Bonds, Series 138, 6.40%, 3/20/01(JPY) 155,000,000 1,411,871
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Jordan--0.0%
Hashemite (Kingdom of Jordan) Bonds, Series DEF, 5.50%, 12/23/23(11) 60,000 37,650
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Hashemite (Kingdom of Jordan) Disc. Bonds, 6.188%, 12/23/23(6) 150,000 91,875
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129,525
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Mexico--2.3%
United Mexican States Bonds:
6.63%, 12/31/19(FRF) 7,500,000 907,926
10.375%, 2/17/09 570,000 576,042
11.375%, 9/15/16 1,350,000 1,420,875
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United Mexican States Collateralized Fixed Rate Par Bonds:
Series B, 6.25%, 12/31/19 1,700,000 1,241,000
Series W-A, 6.25%, 12/31/19 1,300,000 949,000
Series W-B, 6.25%, 12/31/19 700,000 511,000
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United Mexican States Treasury Bills, Zero Coupon, 21.61%, 10/14/99(10)(MXP) 8,193,420 816,790
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6,422,633
Oppenheimer Strategic Bond Fund/VA 7
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Statement of Investments (Unaudited) (Continued)
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Principal Market Value
Amount(1) Note 1
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New Zealand--0.5%
New Zealand (Government of) Bonds, 10%, 3/15/02(NZD) 2,170,000 $1,272,109
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Nigeria--0.3%
Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%, 11/15/20 250,000 154,375
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Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 1,054,623 639,952
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794,327
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Norway--0.4%
Norway (Government of) Bonds, 9.50%, 10/31/02(NOK) 8,240,000 1,169,706
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Panama--0.3%
Panama (Republic of) Bonds, 9.375%, 4/1/29 110,000 103,950
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Panama (Republic of) Nts., 8.25%, 4/22/08 605,000 527,862
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Panama (Republic of) Past Due Interest Debs., 5.41%, 7/17/16(6) 235,246 173,200
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805,012
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Peru--0.6%
Peru (Republic of) Past Due Interest Bonds, Series 20 yr., 4%, 3/7/17(11) 600,000 364,500
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Peru (Republic of) Sr. Nts., Zero Coupon, 4.86%, 2/28/16(10) 3,266,009 1,406,344
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1,770,844
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Poland-0.7%
Poland (Republic of) Bonds:
12%, 10/12/03(PLZ) 1,010,000 268,244
Series 2 yr., 14%, 2/12/00(PLZ) 1,000,000 255,775
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Poland (Republic of) Past Due Interest Bonds:
5%, 10/27/14(11) 785,000 696,688
5%, 10/27/14(11) 370,000 328,375
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Poland (Republic of) Treasury Bills, Series 52, Zero Coupon:
14.86%, 10/13/99(10)(PLZ) 770,000 189,275
15.12%, 8/11/99(10)(PLZ) 450,000 113,111
-----------
1,851,468
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Russia--0.5%
Russia (Government of) Debs., 12/15/15(12) 24,195 3,841
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Russia (Government of) Federal Loan Bonds:
Series 27010, 30%, 9/17/03(11)(RUR) 3,590,420 70,908
Series 5022, 15%, 2/23/00(5)(12)(RUR) 5,417,000 80,582
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Russia (Government of) Principal Loan Debs., Series 24 yr., 12/15/20(12) 5,190,000 635,775
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Russia (Government of) Unsec. Bonds, 11%, 7/24/18 270,000 132,638
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Russian Federation Unsec. Unsub. Nts., 8.75%, 7/24/05 1,180,000 587,050
-----------
1,510,794
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South Africa--0.4%
South Africa (Republic of) Bonds, Series 153, 13%, 8/31/10(ZAR) 8,242,000 1,205,446
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Spain--0.2%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado:
0%/4.50%, 7/30/04(13)(EUR) 390,786 410,229
6%, 1/31/08(EUR) 73,323 82,532
-----------
492,761
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Sweden-0.3%
Sweden (Kingdom of) Bonds, Series 1033, 10.25%, 5/5/03(SEK) 6,700,000 948,149
8 Oppenheimer Strategic Bond Fund/VA
<PAGE>
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Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
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Turkey--0.5%
Turkey (Republic of) Treasury Bills, Series 6B, Zero Coupon, 78.18%, 9/15/99(10)(TRL) 658,000,000,000 $ 1,329,311
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Venezuela--0.4%
Venezuela (Republic of) Bonds, 9.25%, 9/15/27 535,000 346,948
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Venezuela (Republic of) Disc. Bonds, Series W-A, 5.875%, 3/31/20(6) 380,000 253,650
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Venezuela (Republic of) Front-Loaded Interest Reduction Bonds, Series B, 6%, 3/31/07(6) 190,475 144,523
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Venezuela (Republic of) New Money Bonds, Series A, 6.437%, 12/18/05(6) 382,352 302,776
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Venezuela (Republic of) Unsec. Bonds, 13.625%, 8/15/18 150,000 135,375
-----------
1,183,272
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Vietnam--0.0%
Vietnam (Government of) Bonds, 3%, 3/12/28(6) 54,000 15,998
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Total Foreign Government Obligations (Cost $52,276,901) 48,831,630
================================================================================================================================
Loan Participations--0.5%
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Central Bank of Indonesia Gtd. Nts., Series 4, 8.625%, 8/25/02(5)(6) 300,000 257,250
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Jamaica (Government of) 1990 Refinancing Agreement Nts., Tranche A, 5.812%, 10/16/00(5)(6) 18,750 17,625
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Morocco (Kingdom of) Loan Participation Agreement, Tranche A, 5.906%, 1/1/09(5)(6) 704,761 569,095
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PT Bank Ekspor Impor Indonesia Nts., Series 4 yr., 8.625%, 8/25/02(5)(6) 300,000 257,250
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PT Lippo Bank Nts., 8.625%, 8/25/02(5)(6) 250,000 214,375
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Total Loan Participations (Cost $1,177,085) 1,315,595
================================================================================================================================
Corporate Bonds and Notes--31.2%
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Aerospace/Defense--0.9%
America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 450,000 461,250
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Amtran, Inc.:
9.625% Nts., 12/15/05 100,000 98,125
10.50% Sr. Nts., 8/1/04 150,000 150,750
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Atlas Air, Inc.:
9.25% Sr. Nts., 4/15/08(5) 300,000 286,500
9.375% Sr. Unsec. Nts., 11/15/06 300,000 286,500
10.75% Sr. Nts., 8/1/05 125,000 128,125
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Constellation Finance LLC, 9.80% Airline Receivable Asset-Backed Nts., Series 1997-1, 1/1/01(5) 175,000 167,562
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Fairchild Corp., 10.75% Sr. Sub. Gtd. Nts., 4/15/09(7) 450,000 443,250
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Greater Toronto Airport Authority, 5.40% Debs., 12/3/02(CAD) 240,000 160,676
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Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts., Series 1997-A, Cl. B, 6/15/04(5) 86,596 90,094
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SC International Services, Inc., 9.25% Sr. Sub. Nts., Series B, 9/1/07 200,000 204,000
-----------
2,476,832
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Chemicals--1.2%
ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 150,000 144,187
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Huntsman Corp./ICI Chemical Co. plc, 10.125% Sr. Unsec. Sub. Nts., 7/1/09(7) 600,000 609,000
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Huntsman Corp./ICI Chemical Co. plc, 10.125% Sr. Unsec. Sub. Nts., 7/1/09(EUR) 300,000 314,023
- --------------------------------------------------------------------------------------------------------------------------------
Lyondell Chemical Co., 10.875% Sr. Sub. Nts. 5/1/09(7) 1,000,000 1,045,000
- --------------------------------------------------------------------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 140,000 147,700
- --------------------------------------------------------------------------------------------------------------------------------
PCI Chemicals Canada, Inc., 9.25% Sec. Nts., 10/15/07 175,000 142,625
- --------------------------------------------------------------------------------------------------------------------------------
Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07 150,000 123,750
- --------------------------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07 100,000 97,500
Oppenheimer Strategic Bond Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Chemicals (continued)
Polytama International Finance BV, 11.25% Sec. Nts., 6/15/07 $136,248 $ 25,547
- --------------------------------------------------------------------------------------------------------------------------------
Reliance Industries Ltd., 10.50% Bonds, 8/6/46 250,000 212,455
- --------------------------------------------------------------------------------------------------------------------------------
Sovereign Specialty Chemicals, Inc., 9.50% Sr. Unsec. Sub. Nts., Series B, 8/1/07 425,000 428,187
- --------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc.:
11.25% Sr. Sub. Nts., 4/1/07 50,000 37,250
11.75% Sr. Unsec. Sub. Nts., 8/15/06 190,000 145,350
-----------
3,472,574
- --------------------------------------------------------------------------------------------------------------------------------
Consumer Durables--0.1%
Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07 200,000 194,500
- --------------------------------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc., 13% Sr. Sub. Nts., Series B, 7/15/02 125,000 94,375
- --------------------------------------------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(5) 100,000 112,499
-----------
401,374
- --------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--0.8%
AKI Holdings, Inc.:
0%/13.50% Sr. Disc. Debs., 7/1/09(13) 150,000 57,750
10.50% Sr. Unsec. Nts., 7/1/08 100,000 97,500
- --------------------------------------------------------------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05 150,000 95,625
- --------------------------------------------------------------------------------------------------------------------------------
Bell Sports, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 8/15/08 405,000 405,000
- --------------------------------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., 8.875% Sr. Unsec. Nts., 4/15/06(7) 600,000 519,000
- --------------------------------------------------------------------------------------------------------------------------------
Globe Manufacturing Corp., 10% Sr. Unsec. Sub. Nts., Series B, 8/1/08 315,000 237,825
- --------------------------------------------------------------------------------------------------------------------------------
Indorayon International Finance Co. BV, 10% Gtd. Unsec. Unsub. Nts., 3/29/01(5)(12) 100,000 32,500
- --------------------------------------------------------------------------------------------------------------------------------
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 94,000
9% Sr. Nts., 11/1/06 135,000 133,650
- --------------------------------------------------------------------------------------------------------------------------------
Revlon Worldwide Corp., Zero Coupon Sr. Sec. Disc. Nts., Series B, 9.62%, 3/15/01(10) 120,000 78,600
- --------------------------------------------------------------------------------------------------------------------------------
Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08 70,000 68,250
- --------------------------------------------------------------------------------------------------------------------------------
William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 135,000 138,037
- --------------------------------------------------------------------------------------------------------------------------------
Williams (J. B.) Holdings, Inc., 12% Sr. Nts., 3/1/04 100,000 100,500
-----------
2,259,237
- --------------------------------------------------------------------------------------------------------------------------------
Energy--1.8%
AEI Resources, Inc., 11.50% Sr. Sub. Nts., 12/15/06(7) 250,000 245,625
- --------------------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
9.125% Sr. Unsec. Nts., 4/15/06 100,000 88,500
9.625% Sr. Unsec. Nts., Series B, 5/1/05 250,000 235,000
- --------------------------------------------------------------------------------------------------------------------------------
Clark Refinancing & Marketing, Inc., 8.875% Sr. Sub. Nts., 11/15/07 245,000 216,519
- --------------------------------------------------------------------------------------------------------------------------------
Clark USA, Inc., 10.875% Sr. Nts., Series B, 12/1/05 125,000 109,531
- --------------------------------------------------------------------------------------------------------------------------------
Dailey International, Inc., 9.50% Sr. Unsec. Nts., Series B, 2/15/08 400,000 254,000
- --------------------------------------------------------------------------------------------------------------------------------
Denbury Management, Inc., 9% Sr. Sub. Nts., 3/1/08 400,000 359,000
- --------------------------------------------------------------------------------------------------------------------------------
Empresa Electric Del Norte, 10.50% Sr. Debs., 6/15/05(7) 100,000 65,500
- --------------------------------------------------------------------------------------------------------------------------------
Forcenergy, Inc., 9.50% Sr. Sub. Nts., 11/1/06(12) 100,000 64,000
- --------------------------------------------------------------------------------------------------------------------------------
Gothic Energy Corp., 0%/14.125% Sr. Disc. Nts., 5/1/06(13) 275,000 97,625
- --------------------------------------------------------------------------------------------------------------------------------
Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(7) 200,000 177,000
- --------------------------------------------------------------------------------------------------------------------------------
Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08 560,000 299,600
- --------------------------------------------------------------------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 250,000 181,250
10 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Energy (continued)
P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 $ 600,000 $ 598,500
- --------------------------------------------------------------------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub. Nts., 5/15/07 370,000 352,425
- --------------------------------------------------------------------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 630,000 333,112
- --------------------------------------------------------------------------------------------------------------------------------
RBF Finance Co., 11% Sec. Nts., 3/15/06(7) 375,000 388,125
- --------------------------------------------------------------------------------------------------------------------------------
Statia Terminals International/Statia Terminals (Canada), Inc., 11.75% First Mtg. Nts.,
Series B, 11/15/03 175,000 185,937
- --------------------------------------------------------------------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 270,000 270,000
- --------------------------------------------------------------------------------------------------------------------------------
Universal Compression Holdings, Inc.:
0%/9.875% Sr. Disc. Nts., 2/15/08(13) 500,000 315,000
0%/11.375% Sr. Disc. Nts., 2/15/09(13) 400,000 242,000
-----------
5,078,249
- --------------------------------------------------------------------------------------------------------------------------------
Financial--1.5%
AMRESCO, Inc.:
9.875% Sr. Sub. Nts., Series 98-A, 3/15/05 300,000 226,500
10% Sr. Sub. Nts., Series 97-A, 3/15/04 100,000 76,500
- --------------------------------------------------------------------------------------------------------------------------------
Bakrie Investindo, Zero Coupon Promissory Nts., 7/10/98(5)(12)(IDR) 1,000,000,000 21,787
- --------------------------------------------------------------------------------------------------------------------------------
Banco Nacional de Mexico SA, 11% Sub. Exchangeable Capital Debs., 7/15/03(5) 130,000 129,408
- --------------------------------------------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07(5) 7,000 6,099
- --------------------------------------------------------------------------------------------------------------------------------
Bayerische Vereinsbank AG, 5% Sec. Nts., Series 661, 7/28/04(EUR) 823,288 880,874
- --------------------------------------------------------------------------------------------------------------------------------
Dresdner Funding Trust II, 5.79% Sub. Nts., 6/30/11(7)(EUR) 550,000 551,432
- --------------------------------------------------------------------------------------------------------------------------------
Emergent Group, Inc., 10.75% Sr. Nts., Series B, 9/15/04 80,000 46,800
- --------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.625%, 6/10/03(GBP) 115,000 177,885
- --------------------------------------------------------------------------------------------------------------------------------
Hypothekenbank in Essen AG, 4.25% Sec. Nts., Series 533, 7/6/09(EUR) 610,000 599,007
- --------------------------------------------------------------------------------------------------------------------------------
Industrial Bank of Japan Preferred Capital Co. (The) LLC, 8.79% Bonds, 12/29/49(6)(7) 400,000 335,582
- --------------------------------------------------------------------------------------------------------------------------------
Local Financial Corp., 11% Sr. Nts., 9/8/04(7) 150,000 156,000
- --------------------------------------------------------------------------------------------------------------------------------
Ocwen Capital Trust I, 10.875% Capital Nts., 8/1/27 150,000 117,750
- --------------------------------------------------------------------------------------------------------------------------------
Ocwen Financial Corp., 11.875% Nts., 10/1/03 150,000 143,250
- --------------------------------------------------------------------------------------------------------------------------------
Ongko International Finance Co. BV, 10.50% Gtd. Nts., 3/29/04(5)(12) 90,000 3,150
- --------------------------------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa:
11% Nts., 6/18/03(5)(12) 100,000 13,000
24% Nts., 6/19/03(12)(IDR) 164,300,000 3,102
- --------------------------------------------------------------------------------------------------------------------------------
PTC International Finance BV, 0%/10.75% Gtd. Sr. Unsec. Sub. Bonds, 7/1/07(5)(13) 134,000 96,480
- --------------------------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08 380,000 355,300
- --------------------------------------------------------------------------------------------------------------------------------
SBS Agro Finance BV Bonds, 10.25%, 7/21/00 339,000 27,120
- --------------------------------------------------------------------------------------------------------------------------------
Southern Pacific Funding Corp., 11.50% Sr. Nts., 11/1/04(5)(12) 80,000 36,400
- --------------------------------------------------------------------------------------------------------------------------------
Veritas Capital Trust, 10% Nts., 1/1/28 100,000 80,250
- --------------------------------------------------------------------------------------------------------------------------------
Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 129,000 127,065
- --------------------------------------------------------------------------------------------------------------------------------
Wilshire Financial Services Group, Inc., 13% Nts., 1/1/04(12) 60,000 18,300
-----------
4,229,041
- --------------------------------------------------------------------------------------------------------------------------------
Food & Drug--0.7%
AmeriKing, Inc., 10.75% Sr. Nts., 12/1/06 125,000 126,875
- --------------------------------------------------------------------------------------------------------------------------------
Family Restaurants, Inc., 9.75% Sr. Nts., 2/1/02 500,000 255,625
- --------------------------------------------------------------------------------------------------------------------------------
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., Series B, 7/31/07 560,000 522,200
Oppenheimer Strategic Bond Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Food & Drug (continued)
Pathmark Stores, Inc.:
0%/10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03(13) $260,000 $ 258,700
12.625% Sub. Nts., 6/15/02 150,000 153,000
- --------------------------------------------------------------------------------------------------------------------------------
Randall's Food Markets, Inc., 9.375% Sr. Sub. Nts., Series B, 7/1/07 350,000 369,250
- --------------------------------------------------------------------------------------------------------------------------------
Shoppers Food Warehouse Corp., 9.75% Sr. Nts., 6/15/04(5) 155,000 166,238
-----------
1,851,888
- --------------------------------------------------------------------------------------------------------------------------------
Food/Tobacco--0.6%
Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 150,000 147,750
- --------------------------------------------------------------------------------------------------------------------------------
Chiquita Brands International, Inc., 10% Sr. Nts. , 6/15/09 500,000 501,250
- --------------------------------------------------------------------------------------------------------------------------------
Del Monte Foods Co., 0%/12.50% Sr. Disc. Nts., Series B, 12/15/07(13) 71,000 52,540
- --------------------------------------------------------------------------------------------------------------------------------
Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05 200,000 197,000
- --------------------------------------------------------------------------------------------------------------------------------
Purina Mills, Inc., 9% Sr. Unsec. Sub. Nts., 3/15/10 200,000 151,000
- --------------------------------------------------------------------------------------------------------------------------------
SmithField Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08 400,000 364,000
- --------------------------------------------------------------------------------------------------------------------------------
Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 200,000 161,000
-----------
1,574,540
- --------------------------------------------------------------------------------------------------------------------------------
Forest Products/Containers--0.9%
Ball Corp.:
7.75% Sr. Unsec. Nts., 8/1/06 125,000 122,656
8.25% Sr. Unsec. Sub. Nts., 8/1/08 125,000 123,750
- --------------------------------------------------------------------------------------------------------------------------------
Consumers International, Inc., 10.25% Sr. Sec. Nts., 4/1/05 250,000 253,750
- --------------------------------------------------------------------------------------------------------------------------------
Fletcher Challenge Finance U.S.A., Inc., 8.05% Debs., 6/15/03(NZD) 80,000 43,406
- --------------------------------------------------------------------------------------------------------------------------------
Fletcher Challenge Ltd.:
10% Cv. Unsec. Sub. Nts., 4/30/05(NZD) 60,000 33,720
14.50% Cv. Sub. Nts., 9/30/00(NZD) 60,000 34,349
- --------------------------------------------------------------------------------------------------------------------------------
Gaylord Container Corp., 9.75% Sr. Nts., 6/15/07 300,000 286,500
- --------------------------------------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07 400,000 412,000
10.875% Sr. Sub. Nts., 4/1/08 250,000 244,375
- --------------------------------------------------------------------------------------------------------------------------------
SD Warren Co.:
12% Sr. Sub. Nts., Series B, 12/15/04 200,000 215,000
14% Unsec. Nts., 12/15/06(16) 417,149 478,678
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Timberlands Co. LP, 9.625% Sr. Nts., 11/15/07 150,000 150,000
-----------
2,398,184
- --------------------------------------------------------------------------------------------------------------------------------
Gaming/Leisure--2.1%
AP Holdings, Inc., 0%/11.25% Sr. Disc. Nts., 3/15/08(13) 50,000 27,500
- --------------------------------------------------------------------------------------------------------------------------------
Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 100,000 90,625
- --------------------------------------------------------------------------------------------------------------------------------
Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 275,000 258,500
- --------------------------------------------------------------------------------------------------------------------------------
Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03 120,000 136,350
- --------------------------------------------------------------------------------------------------------------------------------
Empress Entertainment, Inc., 8.125% Sr. Sub. Nts., 7/1/06 400,000 401,500
- --------------------------------------------------------------------------------------------------------------------------------
Florida Panthers Holdings, Inc., 9.875% Sr. Sub. Nts., 4/15/09 450,000 423,000
- --------------------------------------------------------------------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 300,000 284,250
- --------------------------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 8.45% Sr. Nts., Series C, 12/1/08 500,000 477,500
- --------------------------------------------------------------------------------------------------------------------------------
Hollywood Casino Corp., 11.25% Sec. Nts., 5/1/07(7) 250,000 253,125
- --------------------------------------------------------------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 425,000 434,031
- --------------------------------------------------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08 350,000 354,375
12 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Gaming/Leisure (continued)
Isle of Capri Casinos, Inc., 8.75% Sr. Sub. Nts., 4/15/09(7) $ 350,000 $ 329,875
- --------------------------------------------------------------------------------------------------------------------------------
Jupiters Ltd., 8.50% Sr. Nts., 3/1/06(7) 400,000 394,000
- --------------------------------------------------------------------------------------------------------------------------------
Meristar Hospitality Corp., 8.75% Sr. Sub. Nts., 8/15/07(7) 325,000 310,375
- --------------------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 8.125% Sr. Nts., 1/1/06 300,000 295,500
- --------------------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 8.75% Sr. Unsec. Sub. Nts., 1/1/09 700,000 696,500
- --------------------------------------------------------------------------------------------------------------------------------
Premier Cruise Ltd., 11% Sr. Nts., 3/15/08(7)(12) 250,000 63,750
- --------------------------------------------------------------------------------------------------------------------------------
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts., 4/1/08(13) 200,000 133,750
9.25% Sr. Nts., 4/1/06 100,000 99,000
9.75% Sr. Nts., 6/15/07 250,000 253,750
- --------------------------------------------------------------------------------------------------------------------------------
Six Flags Entertainment Corp., 8.875% Sr. Nts., 4/1/06 200,000 201,000
-----------
5,918,256
- --------------------------------------------------------------------------------------------------------------------------------
Healthcare--0.7%
Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 500,000 466,250
- --------------------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust III, 7.375% Nts., 2/1/08(DEM) 400,000 218,295
- --------------------------------------------------------------------------------------------------------------------------------
ICN Pharmaceuticals, Inc., 8.75% Sr. Nts., 11/15/08(7) 350,000 345,625
- --------------------------------------------------------------------------------------------------------------------------------
Integrated Health Services, Inc.:
9.50% Sr. Sub. Nts., 9/15/07 115,000 84,525
10.25% Sr. Sub. Nts., 4/30/06 15,000 11,081
- --------------------------------------------------------------------------------------------------------------------------------
Kinetic Concepts, Inc., 9.625% Sr. Unsec. Sub. Nts., Series B, 11/1/07 500,000 447,500
- --------------------------------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 9% Sr. Sub. Nts., 2/15/08 250,000 215,000
- --------------------------------------------------------------------------------------------------------------------------------
Oxford Health Plans, Inc., 11% Sr. Nts., 5/15/05(7) 150,000 155,250
-----------
1,943,526
- --------------------------------------------------------------------------------------------------------------------------------
Housing--0.8%
Building Materials Corp. of America, 8.625% Sr. Nts., Series B, 12/15/06 50,000 49,000
- --------------------------------------------------------------------------------------------------------------------------------
CB Richard Ellis Services, Inc., 8.875% Sr. Unsec. Sub. Nts., 6/1/06(5) 250,000 242,500
- --------------------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 400,000 378,000
- --------------------------------------------------------------------------------------------------------------------------------
Del Webb Corp., 10.25% Sr. Unsec. Sub. Nts., 2/15/10 300,000 298,500
- --------------------------------------------------------------------------------------------------------------------------------
Falcon Building Products, Inc., 9.50% Sr. Sub. Nts., 6/15/07 100,000 96,250
- --------------------------------------------------------------------------------------------------------------------------------
Kaufman & Broad Home Corp., 7.75% Sr. Nts., 10/15/04 300,000 292,500
- --------------------------------------------------------------------------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Nts., Series B, 9/1/07 650,000 646,750
9.25% Sr. Nts., Series B, 3/15/07 150,000 150,750
-----------
2,154,250
- --------------------------------------------------------------------------------------------------------------------------------
Information Technology--0.8%
Details, Inc., 10% Sr. Sub. Nts., Series B, 11/15/05 200,000 186,500
- --------------------------------------------------------------------------------------------------------------------------------
DII Group, Inc., 8.50% Sr. Sub. Nts., 9/15/07 20,000 19,700
- --------------------------------------------------------------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 350,000 341,250
- --------------------------------------------------------------------------------------------------------------------------------
Fairchild Semiconductor Corp., 10.375% Sr. Sub. Nts., 10/1/07(7) 500,000 493,750
- --------------------------------------------------------------------------------------------------------------------------------
Micron Technology, Inc., 6.50% Sub. Nts., 9/30/05(5) 1,000,000 790,000
- --------------------------------------------------------------------------------------------------------------------------------
Unisys Corp., 11.75% Sr. Nts., 10/15/04 150,000 167,250
- --------------------------------------------------------------------------------------------------------------------------------
Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07 175,000 155,750
-----------
2,154,200
Oppenheimer Strategic Bond Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Manufacturing--1.0%
Applied Power, Inc., 8.75% Sr. Sub. Nts., 4/1/09 $150,000 $ 146,250
- --------------------------------------------------------------------------------------------------------------------------------
Axia, Inc., 10.75% Sr. Sub. Nts., 7/15/08 125,000 123,906
- --------------------------------------------------------------------------------------------------------------------------------
Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07 150,000 115,500
- --------------------------------------------------------------------------------------------------------------------------------
Communications & Power Industries, Inc., 12% Sr. Sub. Nts., Series B, 8/1/05 250,000 257,500
- --------------------------------------------------------------------------------------------------------------------------------
Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08 300,000 286,500
- --------------------------------------------------------------------------------------------------------------------------------
Grove Worldwide LLC, 9.25% Sr. Sub. Nts., 5/1/08 100,000 73,500
- --------------------------------------------------------------------------------------------------------------------------------
Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 150,000 135,750
- --------------------------------------------------------------------------------------------------------------------------------
Insilco Corp., 12% Sr. Sub. Nts., 8/15/07 270,000 267,300
- --------------------------------------------------------------------------------------------------------------------------------
International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 125,000 130,313
- --------------------------------------------------------------------------------------------------------------------------------
Jordan Industries, Inc., 10.375% Sr. Unsec. Nts., Series D, 8/1/07 250,000 254,375
- --------------------------------------------------------------------------------------------------------------------------------
Mechala Group Jamaica Ltd., 12.75% Gtd. Sr. Sec. Sub. Nts., Series B, 12/30/99 50,000 17,688
- --------------------------------------------------------------------------------------------------------------------------------
Moll Industries, Inc., 10.50% Sr. Unsec. Sub. Nts., 7/1/08 200,000 177,000
- --------------------------------------------------------------------------------------------------------------------------------
Paragon Corp. Holdings, Inc., 9.625% Sr. Unsec. Nts., Series B, 4/1/08 125,000 73,125
- --------------------------------------------------------------------------------------------------------------------------------
Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 540,000 513,000
- --------------------------------------------------------------------------------------------------------------------------------
Terex Corp.:
8.875% Sr. Unsec. Sub. Nts., 4/1/08 150,000 144,000
8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08(7) 100,000 96,000
- --------------------------------------------------------------------------------------------------------------------------------
Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03 50,000 51,250
-----------
2,862,957
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Broadcasting--1.1%
Azteca Holdings SA, 11% Sr. Sec. Nts., 6/15/02 155,000 132,525
- --------------------------------------------------------------------------------------------------------------------------------
Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07 275,000 280,500
- --------------------------------------------------------------------------------------------------------------------------------
CBS Radio, Inc., 11.375% Unsec. Sub. Debs., 1/15/09(14) 75,100 85,520
- --------------------------------------------------------------------------------------------------------------------------------
Chancellor Media Corp.:
8.125% Sr. Sub. Nts., Series B, 12/15/07 200,000 194,000
8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 400,000 400,500
10.50% Sr. Sub. Nts., Series B, 1/15/07 90,000 94,950
- --------------------------------------------------------------------------------------------------------------------------------
Emmis Communications Corp., 8.125% Sr. Sub. Nts., 3/15/09(7) 600,000 573,750
- --------------------------------------------------------------------------------------------------------------------------------
Jacor Communications Co., 8.75% Sr. Sub. Nts., Series B, 6/15/07 100,000 107,500
- --------------------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02 95,000 99,275
- --------------------------------------------------------------------------------------------------------------------------------
Radio One, Inc., 7% Sr. Sub. Nts., Series B, 5/15/04(11) 100,000 103,500
- --------------------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8.75% Sr. Sub. Nts., 12/15/07 150,000 146,250
9% Sr. Unsec. Sub. Nts., 7/15/07 210,000 208,425
- --------------------------------------------------------------------------------------------------------------------------------
Spanish Broadcasting Systems, Inc., 11% Sr. Nts., 3/15/04 100,000 107,500
- --------------------------------------------------------------------------------------------------------------------------------
TV Azteca SA de CV:
10.125% Sr. Nts., Series A, 2/15/04 100,000 81,750
10.50% Sr. Nts., Series B, 2/15/07 150,000 112,875
- --------------------------------------------------------------------------------------------------------------------------------
Young Broadcasting, Inc.:
8.75% Sr. Sub. Debs., 6/15/07 275,000 268,125
9% Sr. Sub. Nts., Series B, 1/15/06 100,000 98,250
-----------
3,095,195
14 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Cable/Wireless Video--1.5%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 $350,000 $ 326,375
8.375% Sr. Nts., Series B, 2/1/08 100,000 96,750
9.25% Sr. Nts., 10/1/02 100,000 101,750
10.50% Sr. Unsec. Nts., Series B, 7/15/04 70,000 74,725
- --------------------------------------------------------------------------------------------------------------------------------
American Telecasting, Inc., 14.50% Sr. Disc. Nts., 6/15/04 40,545 42,775
- --------------------------------------------------------------------------------------------------------------------------------
Bresnan Communications, Inc., 0%/9.25% Sr. Disc. Nts., 2/1/09(7)(13) 250,000 163,750
- --------------------------------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.:
0%/9.92% Sr. Disc. Nts., 4/1/11(7)(13) 600,000 375,000
8.25% Sr. Nts., 4/1/07(7) 400,000 385,000
- --------------------------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 9.875% Sr. Sub. Nts., 5/15/06 250,000 266,250
- --------------------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09(7) 430,000 439,675
- --------------------------------------------------------------------------------------------------------------------------------
EchoStar I, 8.25% Bonds, 2/26/01(5) 92,015 92,016
- --------------------------------------------------------------------------------------------------------------------------------
EchoStar II, 8.25% Sinking Fund Bonds, 11/9/01(5) 96,614 96,614
- --------------------------------------------------------------------------------------------------------------------------------
Falcon Holding Group LP:
0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(13) 350,000 246,750
8.375% Sr. Unsec. Debs., Series B, 4/15/10 200,000 198,500
- --------------------------------------------------------------------------------------------------------------------------------
Helicon Group LP/Helicon Capital Corp., 11% Sr. Sec. Nts., Series B, 11/1/03(6) 175,000 183,750
- --------------------------------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec. Debs., 12/1/07 200,000 215,250
- --------------------------------------------------------------------------------------------------------------------------------
Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07(CAD) 400,000 275,667
- --------------------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts., Series B, 2/15/08(13) 770,000 510,125
-----------
4,090,722
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Diversified Media--0.5%
IPC Magazines Group plc, 9.625% Bonds, 3/15/08(GBP) 300,000 371,219
- --------------------------------------------------------------------------------------------------------------------------------
Regal Cinemas, Inc., 8.875% Sr. Unsec. Sub. Nts., 12/15/10 250,000 231,250
- --------------------------------------------------------------------------------------------------------------------------------
SFX Entertainment, Inc., 9.125% Sr. Unsec. Sub. Nts., Series B, 2/1/08 500,000 492,500
- --------------------------------------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 8.375% Sr. Debs., 3/15/23 300,000 325,520
-----------
1,420,489
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications--6.1%
Amazon.Com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08(13) 460,000 302,450
- --------------------------------------------------------------------------------------------------------------------------------
COLT Telecom Group plc:
0%/12% Sr. Unsec. Disc. Nts., 12/15/06(13) 200,000 167,000
7.625% Bonds, 7/31/08(DEM) 500,000 262,652
8.875% Sr. Nts., 11/30/07(DEM) 100,000 55,019
10.125% Sr. Nts., 11/30/07(GBP) 170,000 289,060
Units (each unit consists of $1,000 principal amount of 0%/12% sr. disc. nts., 12/15/06
and one warrant to purchase 7.8 ordinary shares)(13)(15) 200,000 167,000
- --------------------------------------------------------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs., 11/15/07(13) 250,000 229,063
- --------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07 80,000 84,200
- --------------------------------------------------------------------------------------------------------------------------------
Convergent Communications, Inc., 13% Sr. Nts., 4/1/08 250,000 219,063
- --------------------------------------------------------------------------------------------------------------------------------
Covad Communications Group, Inc.:
0%/13.50% Sr. Disc. Nts., 3/15/08(13) 700,000 388,500
12.50% Sr. Nts., 2/15/09 200,000 191,000
Oppenheimer Strategic Bond Fund/VA 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications (continued)
Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts., 12/15/05(13) $ 825,000 $746,625
- --------------------------------------------------------------------------------------------------------------------------------
Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08 50,000 50,375
- --------------------------------------------------------------------------------------------------------------------------------
e.spire Communications, Inc., 13.75% Sr. Nts., 7/15/07 110,000 86,350
- --------------------------------------------------------------------------------------------------------------------------------
Exodus Communications, Inc., 11.25% Sr. Nts., 7/1/08 165,000 174,075
- --------------------------------------------------------------------------------------------------------------------------------
FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08(5)(13) 175,000 91,875
- --------------------------------------------------------------------------------------------------------------------------------
Focal Communications Corp., 0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08(13) 515,000 290,975
- --------------------------------------------------------------------------------------------------------------------------------
Global Crossing Ltd., 9.625% Sr. Nts., 5/15/08 210,000 215,250
- --------------------------------------------------------------------------------------------------------------------------------
Globix Corp., 13% Sr. Unsec. Nts., 5/1/05(5) 250,000 240,000
- --------------------------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(3)(7)(13) 25,000 33,906
- --------------------------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc./GST Network Funding Corp., Inc.,
0%/10.50% Sr. Disc. Nts., 5/1/08(7)(13) 225,000 128,250
- --------------------------------------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr. Disc. Nts., 12/15/05(13) 355,000 292,875
- --------------------------------------------------------------------------------------------------------------------------------
Hyperion Telecommunication, Inc., 12% Sr. Sub. Nts., 11/1/07(7) 400,000 411,000
- --------------------------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 0%/12.50% Sr. Sec. Disc. Nts., 5/1/06(13) 195,000 153,075
- --------------------------------------------------------------------------------------------------------------------------------
ICG Services, Inc., 0%/10% Sr. Exchangeable Unsec. Disc. Nts., 2/15/08(13) 115,000 66,125
- --------------------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.:
8.50% Sr. Nts., Series B, 1/15/08 250,000 230,000
8.60% Sr. Unsec. Nts., Series B, 6/1/08 225,000 208,125
8.875% Sr. Nts., 11/1/07 200,000 188,500
- --------------------------------------------------------------------------------------------------------------------------------
KMC Telecom Holdings, Inc., 0%/12.50% Sr. Unsec. Disc. Nts., 2/15/08(5)(13) 975,000 541,125
- --------------------------------------------------------------------------------------------------------------------------------
Level 3 Communications, Inc.:
0%/10.50% Sr. Disc. Nts., 12/1/08(13) 1,000,000 620,000
9.125% Sr. Unsec. Nts., 5/1/08 250,000 246,875
- --------------------------------------------------------------------------------------------------------------------------------
McLeodUSA, Inc.:
8.125% Sr. Nts., 2/15/09(7) 725,000 674,250
8.375% Sr. Nts., 3/15/08 313,000 294,220
9.25% Sr. Nts., 7/15/07 75,000 74,813
- --------------------------------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Inc., 10% Sr. Unsec. Nts., Series B, 11/15/08 400,000 413,000
- --------------------------------------------------------------------------------------------------------------------------------
Netia Holdings BV:
0%/11% Sr. Disc. Nts., 11/1/07(13)(DEM) 400,000 131,820
0%/11% Sr. Disc. Nts., Series B, 11/1/07(13)(DEM) 200,000 65,910
0%/11.25% Sr. Disc. Nts., Series B, 11/1/07(13) 100,000 62,750
10.25% Sr. Nts., Series B, 11/1/07 50,000 43,625
- --------------------------------------------------------------------------------------------------------------------------------
Netia Holdings II BV, 13.50% Sr. Nts., 6/15/09(7)(EUR) 400,000 426,947
- --------------------------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc.:
0%/9.45% Sr. Disc. Unsec. Nts., 4/15/08(13) 260,000 156,000
9% Sr. Nts., 3/15/08 200,000 189,000
9.625% Sr. Nts., 10/1/07 350,000 342,125
10.75% Sr. Unsec. Nts., 11/15/08 300,000 308,250
10.75% Sr. Unsec. Nts., 6/1/09 250,000 257,500
- --------------------------------------------------------------------------------------------------------------------------------
NorthEast Optic Network, Inc., 12.75% Sr. Nts., 8/15/08 200,000 208,000
- --------------------------------------------------------------------------------------------------------------------------------
NTL, Inc.:
0%/9.75% Sr. Deferred Coupon Nts., Series B, 4/1/08(13) 300,000 207,000
0%/9.75% Sr. Nts., 4/15/09(13)GBP 775,000 725,344
0%/10.75% Sr. Unsec. Unsub. Nts., Series B, 4/1/08(5)(13)(GBP) 115,000 119,188
0%/12.375% Sr. Unsec. Nts., Series B, 10/1/08(13) 85,000 58,438
7% Cv. Sub. Nts., 12/15/08(7) 400,000 637,500
10% Sr. Nts., Series B, 2/15/07 100,000 104,000
16 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications (continued)
Optel, Inc., 13% Sr. Nts., Series B, 2/15/05 $310,000 $ 237,150
- --------------------------------------------------------------------------------------------------------------------------------
PLD Telekom, Inc., 14% Sr. Disc. Nts., 6/1/04(5) 300,000 205,500
- --------------------------------------------------------------------------------------------------------------------------------
PSINet, Inc., 10% Sr. Unsec. Nts., Series B, 2/15/05 750,000 757,500
- --------------------------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc.:
0%/8.29% Sr. Unsec. Disc. Nts., Series B, 2/1/08(13) 365,000 271,925
0%/9.47% Sr. Disc. Nts., 10/15/07(13) 495,000 388,575
- --------------------------------------------------------------------------------------------------------------------------------
RSL Communications plc:
0%/10% Bonds, 3/15/08(13)(DEM) 100,000 32,823
10.50% Gtd. Sr. Nts., 11/15/08 250,000 248,750
- --------------------------------------------------------------------------------------------------------------------------------
Shaw Communications, Inc., 8.54% Debs., 9/30/27(CAD) 340,000 219,364
- --------------------------------------------------------------------------------------------------------------------------------
Telewest Communications plc:
0%/9.875% Sr. Nts., 4/15/09(7)(13)(GBP) 300,000 312,107
0%/11% Sr. Disc. Debs., 10/1/07(13) 200,000 179,000
- --------------------------------------------------------------------------------------------------------------------------------
Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08 100,000 103,000
- --------------------------------------------------------------------------------------------------------------------------------
Verio, Inc.:
10.375% Sr. Unsec. Nts., 4/1/05 225,000 230,063
13.50% Sr. Unsec. Nts., 6/15/04 65,000 73,125
- --------------------------------------------------------------------------------------------------------------------------------
Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08 500,000 512,500
- --------------------------------------------------------------------------------------------------------------------------------
WAM!NET, Inc., 0%/13.25% Sr. Unsec. Disc. Nts., Series B, 3/1/05(5)(13) 500,000 305,000
-----------
16,946,450
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications--2.6%
Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07 100,000 86,500
- --------------------------------------------------------------------------------------------------------------------------------
Celcaribe SA, 13.50% Sr. Sec. Nts., 3/15/04 150,000 134,625
- --------------------------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/14% Sr. Disc. Nts., 10/1/07(13) 400,000 170,000
- --------------------------------------------------------------------------------------------------------------------------------
Clearnet Communications, Inc., 0%/14.75% Sr. Disc. Nts., 12/15/05(13) 25,000 23,000
- --------------------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA, 0%/14.125% Sr. Unsec. Deferred Bonds, 3/1/05(7)(13) 350,000 212,188
- --------------------------------------------------------------------------------------------------------------------------------
Crown Castle International Corp.:
0%/10.375% Sr. Disc. Nts., 5/15/11(13) 350,000 204,750
0%/10.625% Sr. Unsec. Disc. Nts., 11/15/07(13) 500,000 350,000
- --------------------------------------------------------------------------------------------------------------------------------
CTI Holdings SA, 0%/11.50% Sr. Deferred Coupon Nts., 4/15/08(13) 175,000 85,313
- --------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp., 11.75% Sr. Nts., 4/15/07 460,000 489,900
- --------------------------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc.:
0%/15% Sr. Sec. Disc. Nts., Series B, 7/15/05(12)(13) 90,000 38,250
12% Cv. Sr. Sub. Nts., 2/15/01(12) 210,000 1,313
- --------------------------------------------------------------------------------------------------------------------------------
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)(15) 100,000 41,500
- --------------------------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 175,000 152,688
- --------------------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc.:
0%/11.125% Sr. Disc. Nts., Series B, 10/15/07(13)(CAD) 300,000 125,165
0%/14% Sr. Disc. Nts., Series B, 6/1/06(13) 300,000 243,750
- --------------------------------------------------------------------------------------------------------------------------------
Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(13) 410,000 303,400
- --------------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc.:
0%/9.75% Sr. Disc. Nts., 10/31/07(13) 85,000 59,713
0%/9.95% Sr. Disc. Nts., 2/15/08(13) 245,000 169,050
0%/10.65% Sr. Disc. Nts., 9/15/07(13) 400,000 293,000
9.75% Sr. Disc. Nts., 8/15/04 300,000 306,750
Oppenheimer Strategic Bond Fund/VA 17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications (continued)
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 $330,000 $ 338,250
11.625% Sr. Nts., Series A, 8/15/06 250,000 256,250
- --------------------------------------------------------------------------------------------------------------------------------
Orange plc:
8% Sr. Nts., 8/1/08 250,000 240,000
8.75% Sr. Unsec. Bonds, 6/1/06(7) 250,000 251,563
- --------------------------------------------------------------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 300,000 292,500
- --------------------------------------------------------------------------------------------------------------------------------
Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(13) 550,000 305,250
- --------------------------------------------------------------------------------------------------------------------------------
Pinnacle Holdings, Inc., 0%/10% Sr. Unsec. Disc. Nts., 3/15/08(13) 325,000 187,688
- --------------------------------------------------------------------------------------------------------------------------------
Price Communications Wireless, Inc.:
9.125% Sr. Sec. Nts., Series B, 12/15/06 250,000 253,750
11.75% Sr. Sub. Nts., 7/15/07 275,000 309,375
- --------------------------------------------------------------------------------------------------------------------------------
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)(5)(13)(15) 300,000 139,500
- --------------------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 300,000 303,000
- --------------------------------------------------------------------------------------------------------------------------------
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(7)(13) 500,000 317,500
- --------------------------------------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp., 0%/12.50% Sr. Disc. Nts., 8/15/06(13) 65,000 59,475
- --------------------------------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 14% Sr. Nts., 11/1/04 200,000 186,000
-----------
7,336,956
- --------------------------------------------------------------------------------------------------------------------------------
Metals/Minerals--1.2%
AK Steel Corp.:
7.875% Sr. Nts., 2/15/09(7) 500,000 482,500
9.125% Sr. Nts., 12/15/06 300,000 310,500
- --------------------------------------------------------------------------------------------------------------------------------
Bar Technologies, Inc., 13.50% Sr. Sec. Nts., 4/1/01 45,000 46,631
- --------------------------------------------------------------------------------------------------------------------------------
California Steel Industries Corp., 8.50% Sr. Nts., 4/1/09(7) 200,000 195,750
- --------------------------------------------------------------------------------------------------------------------------------
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, 5/15/08 500,000 490,000
- --------------------------------------------------------------------------------------------------------------------------------
International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08 50,000 50,375
- --------------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 250,000 256,250
- --------------------------------------------------------------------------------------------------------------------------------
Metallurg Holdings, Inc., 0%/12.75% Sr. Disc. Nts., 7/15/08(13) 250,000 96,250
- --------------------------------------------------------------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07 745,000 718,925
- --------------------------------------------------------------------------------------------------------------------------------
National Steel Corp.:
9.875% First Mtg. Bonds, Series D, 3/1/09 300,000 306,750
9.875% Nts., Series B, 3/1/09(7) 200,000 204,500
-----------
3,249,931
- --------------------------------------------------------------------------------------------------------------------------------
Retail--0.4%
Boyds Collection Ltd. (The), 9% Sr. Sub. Nts., 5/15/08(7) 236,000 234,230
- --------------------------------------------------------------------------------------------------------------------------------
Central Termica Guemes, 12% Bonds, 11/26/01(5)(12) 100,000 15,125
- --------------------------------------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 300,000 262,500
- --------------------------------------------------------------------------------------------------------------------------------
Finlay Enterprises, Inc., 9% Debs., 5/1/08 100,000 96,000
- --------------------------------------------------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 100,000 97,000
- --------------------------------------------------------------------------------------------------------------------------------
Home Interiors & Gifts, Inc., 10.125% Sr. Sub. Nts., 6/1/08 225,000 223,875
- --------------------------------------------------------------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 200,000 202,500
-----------
1,131,230
18 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Service--1.7%
Allied Waste North America, Inc., 7.875% Sr. Unsec. Nts., Series B, 1/1/09 $335,000 $ 312,388
- --------------------------------------------------------------------------------------------------------------------------------
Coinstar, Inc., 0%/13% Sr. Disc. Nts., 10/1/06(13) 100,000 102,500
- --------------------------------------------------------------------------------------------------------------------------------
Dura Operating Corp., 9% Sr. Sub. Nts., 5/1/09(7)(EUR) 400,000 397,040
- --------------------------------------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc.:
9% Sr. Unsec. Sub. Nts., 2/1/08 600,000 573,000
9% Sr. Unsec. Sub. Nts., 2/1/08 105,000 100,275
- --------------------------------------------------------------------------------------------------------------------------------
Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 375,000 388,125
- --------------------------------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 8.75% Sr. Sub. Nts., 9/30/09 150,000 146,250
- --------------------------------------------------------------------------------------------------------------------------------
IT Group, Inc., 11.25% Sr. Sub. Nts., 4/1/09(7) 200,000 193,000
- --------------------------------------------------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 50,000 47,750
- --------------------------------------------------------------------------------------------------------------------------------
Lamar Advertising Co.:
8.625% Sr. Sub. Nts., 9/15/07 150,000 147,750
9.625% Sr. Sub. Nts., 12/1/06 50,000 51,750
- --------------------------------------------------------------------------------------------------------------------------------
Pentacon, Inc., 12.25% Sr. Unsec. Nts., Series B, 4/1/09 500,000 495,000
- --------------------------------------------------------------------------------------------------------------------------------
Premier Graphics, Inc., 11.50% Sr. Unsec. Nts., 12/1/05(5) 200,000 193,000
- --------------------------------------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc., 6.75% Cv. Sr. Sub. Nts., 9/15/03 125,000 113,906
- --------------------------------------------------------------------------------------------------------------------------------
Quest Diagnostic, Inc., 9.875% Sr. Sub. Nts., 7/1/09(3)(7) 250,000 253,125
- --------------------------------------------------------------------------------------------------------------------------------
Safety-Kleen Corp., 9.25% Sr. Nts., 5/15/09(7) 400,000 404,000
- --------------------------------------------------------------------------------------------------------------------------------
United Rentals, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 1/15/09 250,000 247,500
- --------------------------------------------------------------------------------------------------------------------------------
URS Corp., 12.25% Sr. Sub. Nts., 5/1/09(7) 500,000 510,000
-----------
4,676,359
- --------------------------------------------------------------------------------------------------------------------------------
Transportation--1.8%
Budget Group, Inc., 9.125% Sr. Nts., 4/1/06(7) 500,000 467,500
- --------------------------------------------------------------------------------------------------------------------------------
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07 75,000 61,500
- --------------------------------------------------------------------------------------------------------------------------------
Coach USA, Inc., 9.375% Sr. Sub. Nts., Series B, 7/1/07 80,000 83,600
- --------------------------------------------------------------------------------------------------------------------------------
Collins & Aikman Products Co., 11.50% Sr. Unsec. Sub. Nts., 4/15/06 300,000 303,000
- --------------------------------------------------------------------------------------------------------------------------------
Federal-Mogul Corp., 7.875% Nts., 7/1/10 300,000 281,137
- --------------------------------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc.:
9.125% Sr. Sub. Nts., 7/15/07 100,000 100,750
11% Sr. Sub. Nts., 7/15/06 225,000 244,688
- --------------------------------------------------------------------------------------------------------------------------------
HDA Parts System, Inc., 12% Sr. Sub. Nts., 8/1/05(7) 250,000 253,750
- --------------------------------------------------------------------------------------------------------------------------------
Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 300,000 295,500
- --------------------------------------------------------------------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts., 7/15/06 200,000 208,000
- --------------------------------------------------------------------------------------------------------------------------------
Millenium Seacarriers, Inc., Units (each unit consists of $1,000 principal amount
of 12% first priority ship mtg. sr. sec. nts., 7/15/05 and one warrant to purchase
five shares of common stock)(5)(15) 250,000 141,250
- --------------------------------------------------------------------------------------------------------------------------------
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts., 6/30/07(7) 275,000 136,125
Units (each unit consists of $1,000 principal amount of 12% second priority ship
mtg. nts., 6/30/07 and 7.66 warrants)(7)(15) 150,000 48,750
- --------------------------------------------------------------------------------------------------------------------------------
Oxford Automotive, Inc.:
10.125% Sr. Sub. Nts., 6/15/07(7) 400,000 402,000
10.125% Sr. Unsec. Sub. Nts., 6/15/07 900,000 904,500
- --------------------------------------------------------------------------------------------------------------------------------
Pycsa Panama SA, 10.28% Sr. Sec. Bonds, 12/15/12(5) 197,900 154,857
- --------------------------------------------------------------------------------------------------------------------------------
TFM SA de CV, 10.25% Sr. Nts., 6/15/07 200,000 174,000
Oppenheimer Strategic Bond Fund/VA 19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Transportation (continued)
Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04 $430,000 $ 381,088
- --------------------------------------------------------------------------------------------------------------------------------
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(13) 300,000 298,500
- --------------------------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5) 188,587 98,065
-----------
5,038,560
- --------------------------------------------------------------------------------------------------------------------------------
Utility--0.4%
Beaver Valley II Funding Corp., 9% Second Lease Obligation Bonds, 6/1/17 199,000 207,955
- --------------------------------------------------------------------------------------------------------------------------------
Calpine Corp.:
7.75% Sr. Nts., 4/15/09 450,000 424,125
8.75% Sr. Nts., 7/15/07 230,000 227,700
10.50% Sr. Nts., 5/15/06 100,000 107,000
- --------------------------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Sec. Nts., Series E, 5/1/11 250,000 277,140
-----------
1,243,920
-----------
Total Corporate Bonds and Notes (Cost $93,562,938) 87,004,920
<CAPTION>
Shares
================================================================================================================================
Preferred Stocks--2.2%
- --------------------------------------------------------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg.(14) 2,722 60,564
- --------------------------------------------------------------------------------------------------------------------------------
BankUnited Capital Trust, 10.25% Gtd. Bonds, 12/31/26 100,000 95,250
- --------------------------------------------------------------------------------------------------------------------------------
CGA Group Ltd., Preferred Stock, Series A(5)(14) 19,767 494,175
- --------------------------------------------------------------------------------------------------------------------------------
Clark USA, Inc., 11.50% Cum. Sr. Exchangeable(14) 58 39,295
- --------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp., 13.50% Sr. Redeemable Exchangeable
Preferred Stock, Series B, Non-Vtg.(14) 227 212,812
- --------------------------------------------------------------------------------------------------------------------------------
CRIIMI MAE, Inc., 10.875% Cum. Cv., Series B, Non-Vtg. 46,000 747,500
- --------------------------------------------------------------------------------------------------------------------------------
Crown American Realty Trust, 11% Cum., Series A, Non-Vtg. 2,000 94,250
- --------------------------------------------------------------------------------------------------------------------------------
Doane Products Co., 14.25% Exchangeable, Non-Vtg.(5)(16) 5,000 221,250
- --------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp.:
12.25% Sr. Exchangeable(14) 231 218,872
13% Sr. Exchangeable(7)(14) 300 294,750
- --------------------------------------------------------------------------------------------------------------------------------
e.spire Communications, Inc., 12.75% Jr. Redeemable Preferred Stock, Non-Vtg.(14) 179 63,097
- --------------------------------------------------------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., Cum. Exchangeable, Series B, 3/1/08, Non-Vtg.(16) 5,000 261,250
- --------------------------------------------------------------------------------------------------------------------------------
Earthwatch, Inc., $8.50 Cv. Sr. Preferred, Series C, Non-Vtg.(7)(14) 4,411 6,616
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity Federal Bank FSB Glendale California, l2% Non-Cum. Exchangeable Perpetual
Preferred Stock, Series A(5)(16) 20 465
- --------------------------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.(14) 124 123,690
- --------------------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., Depositary Shares Representing one one-hundredth
7% Cum. Cv. Jr. Preferred Stock, Series E, Non-Vtg.(7) 2,100 60,375
- --------------------------------------------------------------------------------------------------------------------------------
International Utility Structures, Inc.:
13% Preferred, Non-Vtg.(7)(14) 6 5,708
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)(5)(14) 50 49,438
- --------------------------------------------------------------------------------------------------------------------------------
Kelley Oil & Gas Corp., $2.625 Cv., Vtg. 1,800 8,775
- --------------------------------------------------------------------------------------------------------------------------------
Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable Exchangeable Preferred Stock, Non-Vtg.(14) 5,734 227,927
- --------------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 11.125% Preferred, Series E, Non-Vtg.(14) 115 115,288
- --------------------------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc., 14% Cum., Non-Vtg.(14) 17,765 901,574
- --------------------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg.(14) 22 192,225
20 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Preferred Stocks (continued)
PRIMEDIA, Inc.:
8.625% Exchangeable, Series H, Non-Vtg. 8,000 $ 763,000
9.20% Exchangeable, Series F, Non-Vtg. 1,000 98,125
- --------------------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum. Sr., Series B, Non-Vtg.(14) 222 224,775
- --------------------------------------------------------------------------------------------------------------------------------
SF Holdings Group, Inc.:
13.75% Cum. Nts., Series B, 3/15/09, Non-Vtg.(14) 10 22,250
13.75% Exchangeable(7)(14) 2 4,450
- --------------------------------------------------------------------------------------------------------------------------------
Spanish Broadcasting Systems, Inc., 14.25% Cum. Exchangeable, Non-Vtg.(7)(14)(16) 130 141,375
- --------------------------------------------------------------------------------------------------------------------------------
Star Gas Partners, LP, Units (representing Ltd. partnership interests)(15) 187 3,214
- --------------------------------------------------------------------------------------------------------------------------------
Walden Residential Properties, Inc.:
9.16% Cv., Series B, Non-Vtg.(16) 10,000 245,625
9.20% Preferred, Vtg.(16) 1,000 21,625
-----------
Total Preferred Stocks (Cost $7,886,103) 6,019,585
================================================================================================================================
Common Stocks--0.4%
- --------------------------------------------------------------------------------------------------------------------------------
Celcaribe SA(7)(16) 24,390 64,024
- --------------------------------------------------------------------------------------------------------------------------------
Coinstar, Inc.(16) 700 20,081
- --------------------------------------------------------------------------------------------------------------------------------
Golden State Bancorp, Inc.(16) 2,404 52,888
- --------------------------------------------------------------------------------------------------------------------------------
Horizon Group Properties, Inc.(16) 358 1,163
- --------------------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.(16) 250 7,500
- --------------------------------------------------------------------------------------------------------------------------------
MCI WorldCom, Inc.(16) 6,885 592,540
- --------------------------------------------------------------------------------------------------------------------------------
Optel, Inc.(16) 210 2
- --------------------------------------------------------------------------------------------------------------------------------
Price Communications Corp.(16) 12,934 194,010
- --------------------------------------------------------------------------------------------------------------------------------
SF Holdings Group, Inc., Cl. C(16) 370 4
- --------------------------------------------------------------------------------------------------------------------------------
Vail Resorts, Inc.(16) 15,500 271,250
- --------------------------------------------------------------------------------------------------------------------------------
Viatel, Inc.(16) 1,189 66,733
-----------
Total Common Stocks (Cost $569,390) 1,270,195
<CAPTION>
Units
================================================================================================================================
Rights, Warrants and Certificates--0.2%
- --------------------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Wts.:
Exp. 12/99 1,065 1,012
Exp. 2/00 1,315 1,710
- --------------------------------------------------------------------------------------------------------------------------------
Central Bank of Nigeria Wts., Exp. 11/20 250 ---
- --------------------------------------------------------------------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 12/49(5) 16,000 4,800
- --------------------------------------------------------------------------------------------------------------------------------
Clearnet Communications, Inc. Wts., Exp. 9/05 165 1,390
- --------------------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/03(5) 200 14,025
- --------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/07(5) 100 35,012
- --------------------------------------------------------------------------------------------------------------------------------
Covergent Communications, Inc. Wts., Exp. 4/08(5) 1,000 7,625
- --------------------------------------------------------------------------------------------------------------------------------
FirstWorld Communications, Inc. Wts., Exp. 4/08(7) 175 8,772
- --------------------------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc. Wts., Exp. 7/05(5) 7,500 75
- --------------------------------------------------------------------------------------------------------------------------------
Globix Corp. Wts., Exp. 5/05(5) 325 32,500
- --------------------------------------------------------------------------------------------------------------------------------
Golden State Bancorp, Inc. Wts., Exp. 1/01 2,404 3,155
Oppenheimer Strategic Bond Fund/VA 21
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Market Value
Units Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Rights, Warrants and Certificates (continued)
Gothic Energy Corp. Wts.:
Exp. 1/03 1,668 $ --
Exp. 1/03(5) 953 10
Exp. 5/05(5) 2,181 218
Exp. 9/04(5) 2,800 2,976
- --------------------------------------------------------------------------------------------------------------------------------
Hyperion Telecommunication, Inc. Wts., Exp. 4/01 60 4,605
- --------------------------------------------------------------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp. 9/05(5) 825 11,899
- --------------------------------------------------------------------------------------------------------------------------------
IHF Capital, Inc. Series I Wts., Exp. 11/99(5) 200 2
- --------------------------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/02 200 --
- --------------------------------------------------------------------------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/07(5) 270 --
- --------------------------------------------------------------------------------------------------------------------------------
KMC Telecom Holdings, Inc. Wts., Exp. 4/08(5) 725 1,858
- --------------------------------------------------------------------------------------------------------------------------------
Long Distance International, Inc. Wts., Exp. 4/08(5) 200 600
- --------------------------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. Wts., Exp. 1/07(5) 150 1,819
- --------------------------------------------------------------------------------------------------------------------------------
Mexican Value Rts., Exp. 6/03 1,100,000 --
- --------------------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp. 6/06(5) 600 9,150
- --------------------------------------------------------------------------------------------------------------------------------
Millenium Seacarriers, Inc. Wts., Exp. 7/05(5) 250 437
- --------------------------------------------------------------------------------------------------------------------------------
Occidente y Caribe Celular SA Wts., Exp. 3/04(5) 800 13,700
- --------------------------------------------------------------------------------------------------------------------------------
PLD Telekom, Inc. Wts., Exp. 6/06(5) 300 60
- --------------------------------------------------------------------------------------------------------------------------------
PLD Telekom, Inc., 14% Sr. Disc Nts. Wts., Exp. 3/03 300 15
- --------------------------------------------------------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp. 8/07(5) 3,096 283,284
- --------------------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc. Wts., Exp. 11/99(5) 200 46,025
- --------------------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Oil Linked Payment Obligation Wts., Exp. 4/20 2,713 --
- --------------------------------------------------------------------------------------------------------------------------------
WAM!NET, Inc. Wts., Exp. 3/05(7) 1,500 33,563
-----------
Total Rights, Warrants and Certificates (Cost $46,291) 520,297
<CAPTION>
Principal
Amount(1)
================================================================================================================================
Structured Instruments--4.4%
- --------------------------------------------------------------------------------------------------------------------------------
Beta Finance Corp., Japanese Yen Linked Nts., 2.11%, 9/10/99 $ 1,520,000 1,599,800
- --------------------------------------------------------------------------------------------------------------------------------
Citibank (New York), Mexican Linked Nts., 29%, 3/17/00(5)(MXP) 6,068,250 642,300
- --------------------------------------------------------------------------------------------------------------------------------
Citibank (New York), Turkish Lira Linked Nts., 74%, 8/11/99(6)(TRL) 297,768,000,000 705,600
- --------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston Corp. (New York Branch), Russian OFZ Linked Nts.:
15%, 2/23/00(5)(12)(RUR) 8,008,000 119,125
30%, 1/21/04(6)(RUR) 277,180 3,195
30%, 10/8/03(6)(RUR) 277,180 3,240
30%, 10/9/02(6)(RUR) 277,180 2,634
30%, 12/15/01(6)(RUR) 950,000 5,029
30%, 2/5/03(6)(RUR) 277,180 2,442
30%, 2/6/02(6)(RUR) 277,180 2,698
30%, 2/6/02(6)(RUR) 277,180 2,487
30%, 5/21/03(6)(RUR) 277,180 2,344
30%, 5/22/02(6)(RUR) 277,180 2,673
30%, 6/4/03(6)(RUR) 277,180 2,284
30%, 6/5/02(6)(RUR) 277,180 2,616
30%, 9/17/03(6)(RUR) 277,180 2,216
30%, 9/18/02(6)(RUR) 277,180 2,403
- --------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, Indonesian Rupiah Linked Nts., 13.667%, 6/30/00 475,000 448,543
22 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
Principal Market Value
Amount(1) Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Structured Instruments (continued)
Deutsche Morgan Grenfell, Russian Federal Loan Floating Rate Linked Nts.:
2/23/00(5)(12) $ 240,000 $ 2,400
10/25/00(5)(12) 240,000 2,400
- --------------------------------------------------------------------------------------------------------------------------------
Deutsche Morgan Grenfell, Russian OFZ Linked Nts., 14%, 9/27/00(5)(12)(RUR) 3,610,000 17,861
- --------------------------------------------------------------------------------------------------------------------------------
Deutshe Bank AG, New York, Philippine Peso/Japense Yen Linked Nts.,
10.55%, 5/12/00 135,000 135,932
- --------------------------------------------------------------------------------------------------------------------------------
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)(5) 52,173 51,000
- --------------------------------------------------------------------------------------------------------------------------------
J.P. Morgan & Co., Inc., The Emerging Market Bond Index Plus Linked Nts.,
9.50%, 7/16/99(17) 2,700,000 2,322,491
- --------------------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Co. of New York, The Emerging Market Bond Index Linked Nts.:
9.50%, 11/3/99(17) 1,454,251 1,430,743
9.50%, 8/10/99(17) 1,400,000 1,269,948
- --------------------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney, Inc., Brazil Credit Linked Nts.:
6%, 4/2/03(5) 310,000 203,050
Series 2, 6%, 4/2/03(5) 310,000 203,050
- --------------------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney, Inc., Turkish Lira Linked Nts., 83%, 7/22/99 350,000 320,415
- --------------------------------------------------------------------------------------------------------------------------------
Salomon, Inc., Indonesian Rupiah Linked Nts.:
29.55%, 4/12/00 50,000 68,244
32.65%, 4/6/00 135,000 186,413
- --------------------------------------------------------------------------------------------------------------------------------
Salomon, Inc., Turkish Lira Treasury Bill Linked Nts., 74.50%, 8/19/99(6) 800,000 758,040
- --------------------------------------------------------------------------------------------------------------------------------
Shoshone Partners Loan Trust Sr. Nts., 6.653%, 4/28/02 (representing a basket of
reference loans and a total return swap between Chase Manhattan Bank and the Trust)(5)(6) 750,000 711,067
- --------------------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank, Indian Rupee/Japanese Yen Linked Nts.,
Zero Coupon, 13.17%, 8/17/01(10) 350,000 258,405
- --------------------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank, Indonesian Rupiah Linked Nts.:
32%, 4/7/00 270,000 387,261
33.50%, 4/5/00 95,000 137,503
- --------------------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank, Philippine Peso Linked Nts., 15.09%, 7/22/99 150,000 153,450
- --------------------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank, Philippine Peso/Japanese Yen Linked Nts., 16.04%, 5/10/00 130,000 130,559
-----------
Total Structured Instruments (Cost $14,221,738) 12,301,861
<CAPTION>
Date Strike Contracts
================================================================================================================================
Call Options Purchased--0.0%
- --------------------------------------------------------------------------------------------------------------------------------
European Monetary Unit Call Opt.(5) 8/99 1.067(EUR) 1,290,000 3,974
- --------------------------------------------------------------------------------------------------------------------------------
European Monetary Unit Call Opt. 8/99 1.074(EUR) 1,450,000 4,648
-----------
Total Call Options Purchased (Cost $61,310) 8,622
================================================================================================================================
Put Options Purchased--0.0%
- --------------------------------------------------------------------------------------------------------------------------------
Hong Kong Dollar Put Opt. 1/00 7.894(HKD) 4,815,340 2,321
- --------------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Capitalization Bonds,
Cl. C., 8%, 4/15/14 Put Opt. 7/99 65.375% 1,105 28,459
- --------------------------------------------------------------------------------------------------------------------------------
J.P. Morgan & Co., Inc., The Emerging Market Bond Index Put Opt.(5)(17) 7/99 148.99 770 5,258
-----------
Total Put Options Purchased (Cost $85,176) 36,038
Oppenheimer Strategic Bond Fund/VA 23
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<CAPTION>
Principal Market Value
Amount(1) Note 1
================================================================================================================================
Repurchase Agreements--0.0%
- --------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 4.80%, dated 6/30/99,
to be repurchased at $100,013 on 7/1/99, collateralized by U.S. Treasury Nts.,
5.50%--8%, 11/30/99--7/15/06, with a value of $84,420, U.S. Treasury Bonds,
6%--9.25%, 2/15/16--2/15/26, with a value of $17,678 (Cost $100,000) $100,000 $ 100,000
- --------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $304,764,152) 102.9% 287,208,280
- --------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (2.9) (8,182,466)
-------- ------------
Net Assets 100.0% $279,025,814
======== ============
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP--Argentine Peso JPY--Japanese Yen
AUD--Australian Dollar MXP--Mexican Peso
CAD--Canadian Dollar NOK--Norwegian Krone
DEM--German Mark NZD--New Zealand Dollar
DKK--Danish Krone PLZ--Polish Zloty
EUR--Euro RUR--Russian Ruble
FRF--French Franc SEK--Swedish Krona
GBP--British Pound Sterling TRL--Turkish Lira
HKD--Hong Kong Dollar ZAR--South African Rand
IDR--Indonesian Rupiah
2. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
3. When-issued security to be delivered and settled after June 30, 1999.
4. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
5. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
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 $18,051,939 or 6.47% of the Fund's net
assets as of June 30, 1999.
8. Securities with an aggregate market value of $896,799 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
24 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:
<TABLE>
<CAPTION>
Face/
Contracts Expiration Exercise Premium Market Value
Subject to Put Date Price Received Note 1
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brazil (Federal Republic of)
Capitalization Bonds,
8%, 4/15/14 Call Option $1,769,000 7/15/99 66.625% $ 53,446 $41,571
Brazil (Federal Republic of)
Capitalization Bonds,
8%, 4/15/14 Call Option 920,000 7/20/99 63.375 20,727 9,434
Mexican Peso Put Option 8,239,000 10/11/99 10.700(MXP) 24,640 4,675
Mexican Peso Put Option 8,277,500 10/13/99 10.750(MXP) 21,329 4,202
Mexican Peso Put Option 8,525,000 9/23/99 11.000(MXP) 27,668 1,044
-------- -------
$147,810 $60,926
======== =======
</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.
14. Interest or dividend is paid in kind.
15. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, principal amount disclosed represents total
underlying principal.
16. Non-income producing security.
17. 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, Philippines, Poland, Russia and Venezuela.
See accompanying Notes to Financial Statements.
Oppenheimer Strategic Bond Fund/VA 25
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
==========================================================================================================
<S> <C>
Assets
Investments, at value (cost $304,764,152)--see accompanying statement $287,208,280
- ----------------------------------------------------------------------------------------------------------
Cash 153,969
- ----------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency exchange contracts--Note 5 167,964
- ----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest 4,983,775
Investments sold 325,073
Shares of beneficial interest sold 267,099
Daily variation on futures contracts-Note 6 22,433
Other 2,964
------------
Total assets 293,131,557
==========================================================================================================
Liabilities
Unrealized depreciation on foreign currency exchange contracts--Note 5 153,187
- ----------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $147,810)--see accompanying statement--Note 7 60,926
- ----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $3,342,000 purchased on a when-issued basis)--Note 1 12,776,174
Shares of beneficial interest redeemed 980,739
Daily variation on futures contracts--Note 6 59,313
Custodian fees 21,315
Shareholder reports 15,908
Transfer and shareholder servicing agent fees 180
Trustees' compensation 72
Other 37,929
------------
Total liabilities 14,105,743
==========================================================================================================
Net Assets $279,025,814
============
==========================================================================================================
Composition of Net Assets
Paid-in capital $289,772,968
- ----------------------------------------------------------------------------------------------------------
Undistributed net investment income 11,813,987
- ----------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (5,048,514)
- ----------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (17,512,627)
------------
Net assets--applicable to 57,646,727 shares of beneficial interest outstanding $279,025,814
============
==========================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $4.84
</TABLE>
See accompanying Notes to Financial Statements.
26 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
======================================================================================
<S> <C>
Investment Income
Interest (net of foreign withholding taxes of $8,800) $ 12,640,152
- --------------------------------------------------------------------------------------
Dividends 287,031
------------
Total income 12,927,183
======================================================================================
Expenses
Management fees--Note 4 1,028,359
- --------------------------------------------------------------------------------------
Custodian fees and expenses 23,091
- --------------------------------------------------------------------------------------
Legal, auditing and other professional fees 8,579
- --------------------------------------------------------------------------------------
Registration and filing fees 4,301
- --------------------------------------------------------------------------------------
Insurance expenses 2,100
- --------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 1,053
- --------------------------------------------------------------------------------------
Trustees' compensation 594
- --------------------------------------------------------------------------------------
Shareholder reports 519
- --------------------------------------------------------------------------------------
Other 2,914
------------
Total expenses 1,071,510
Less expenses paid indirectly--Note 1 (5,385)
------------
Net expenses 1,066,125
======================================================================================
Net Investment Income 11,861,058
======================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (1,056,230)
Closing of futures contracts 101,384
Closing and expiration of option contracts written--Note 7 140,593
Foreign currency transactions (1,881,619)
------------
Net realized loss (2,695,872)
- --------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (6,620,702)
Translation of assets and liabilities denominated in foreign currencies (1,979,320)
------------
Net change (8,600,022)
------------
Net realized and unrealized loss (11,295,894)
======================================================================================
Net Increase in Net Assets Resulting from Operations $ 565,164
============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Strategic Bond Fund/VA 27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31,
(Unaudited) 1998
=========================================================================================
<S> <C> <C>
Operations
Net investment income $ 11,861,058 $ 20,451,817
- -----------------------------------------------------------------------------------------
Net realized loss (2,695,872) (2,696,918)
- -----------------------------------------------------------------------------------------
Net change in unrealized depreciation (8,600,022) (11,476,607)
------------ ------------
Net increase in net assets resulting from operations 565,164 6,278,292
=========================================================================================
Dividends and Distributions to Shareholders
Dividends from net investment income (15,617,496) (3,974,494)
- -----------------------------------------------------------------------------------------
Distributions from net realized gain -- (2,561,341)
=========================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from
beneficial interest transactions--Note 2 14,877,750 71,618,535
=========================================================================================
Net Assets
Total increase (decrease) (174,582) 71,360,992
- -----------------------------------------------------------------------------------------
Beginning of period 279,200,396 207,839,404
------------ ------------
End of period (including undistributed net investment
income of $11,813,987 and $15,570,425, respectively) $279,025,814 $279,200,396
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
28 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1999 Year Ended December 31,
(Unaudited) 1998 1997 1996 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $5.12 $5.12 $5.09 $4.91 $4.60 $5.12
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 .39 .39 .38 .38 .35
Net realized and unrealized gain (loss) (.20) (.24) .04 .19 .30 (.54)
- ------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations .01 .15 .43 .57 .68 (.19)
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.29) (.09) (.39) (.39) (.37) (.32)
Distributions from net realized gain -- (.06) (.01) -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.29) (.15) (.40) (.39) (.37) (.33)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.84 $5.12 $5.12 $5.09 $4.91 $4.60
===== ===== ===== ===== ===== =====
==============================================================================================================================
Total Return, at Net Asset Value(1) 0.14% 2.90% 8.71% 12.07% 15.33% (3.78)%
==============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $279,026 $279,200 $207,839 $118,716 $60,098 $20,320
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $279,694 $250,227 $159,934 $ 82,604 $37,698 $15,389
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: (2)
Net investment income 8.55% 8.17% 8.23% 8.48% 9.32% 8.36%
Expenses (3) 0.77% 0.80% 0.83% 0.85% 0.85% 0.87%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 36% 134% 150% 144% 87% 137%
</TABLE>
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period,with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Total
returns are not annualized for periods less than one full year. Total return
information does not reflect expenses that apply at the separate account level
or to related insurance products. Inclusion of these charges would reduce the
total return figures for all periods shown.
2. Annualized for periods less than one full year.
3. Beginning in fiscal 1995, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended June 30, 1999, were $122,900,511 and $95,098,131, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer Strategic Bond Fund/VA 29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Strategic Bond Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund operated under the name Oppenheimer Strategic Bond
Fund through April 30, 1999. The Fund's investment objective is to seek a high
level of current income. The Trust's investment advisor is OppenheimerFunds,
Inc. (the Manager). The following is a summary of significant accounting
policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
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 Fund invests in foreign currency-linked structured notes
whose market value and redemption price are linked to foreign currency exchange
rates. The structured notes may be leveraged, which increases the notes'
volatility relative to the face of the security. Fluctuations in value of these
securities are recorded as unrealized gains and losses in the accompanying
financial statements. As of June 30, 1999, the market value of these securities
comprised 4.14% of the Fund's net assets and resulted in realized and unrealized
gains of $2,439,925. The Fund also hedges a portion of the foreign currency
exposure generated by these securities, as discussed in Note 5.
- --------------------------------------------------------------------------------
Securities Purchased on a When-Issued Basis. Delivery and payment for securities
that have been purchased by the Fund on a forward commitment or when-issued
basis can take place a month or more after the transaction date. Normally the
settlement date occurs within six months after the transaction date; however,
the fund may, from time to time, purchase securities whose settlement date
extends beyond six months and possibly as long as two years or more beyond trade
date. During this period, such securities do not earn interest, are subject to
market fluctuation and may increase or decrease in value prior to their
delivery. The Fund maintains segregated assets with a market value equal to or
greater than the amount of its purchase commitments. The purchase of securities
on a when-issued or forward commitment basis may increase the volatility of the
Fund's net asset value to the extent the Fund makes such purchases while
remaining substantially fully invested. As of June 30, 1999, the Fund had
entered into outstanding when-issued or forward commitments of $3,342,000.
In connection with its ability to purchase securities on a when-issued
or forward commitment basis, the Fund may enter into mortgage dollar-rolls in
which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Fund records each dollar-roll as a sale and a new purchase
transaction.
30 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Security Credit Risk. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default. As of June 30, 1999, securities with an
aggregate market value of $1,172,661, representing 0.21% of the Fund's net
assets, were in default.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. As of December 31,
1998, the Fund had available for federal income tax purposes an unused capital
loss carryover of approximately $1,014,000, expiring in 2006.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Distributions to shareholders, which are
determined in accordance with income tax regulations, are recorded on the
ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of distributions made
during the year from net investment income or net realized gains may differ from
its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and options
written and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
Oppenheimer Strategic Bond Fund/VA 31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999 Year Ended December 31, 1998
------------------------------ ----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 6,667,668 $ 33,176,123 21,445,910 $109,659,739
Dividends and distributions reinvested 3,226,755 15,617,496 1,279,028 6,535,835
Redeemed (6,817,515) (33,915,869) (8,759,684) (44,577,039)
---------- ------------ ---------- ------------
Net increase 3,076,908 $ 14,877,750 13,965,254 $ 71,618,535
========== ============ ========== ============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of June 30, 1999, net unrealized depreciation on investments and options
written of $17,468,988 gross appreciation of $3,417,295, and gross depreciation
of $20,886,283.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.75% of the first
$200 million of average annual net assets, 0.72% of the next $200 million, 0.69%
of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200
million and 0.50% of average annual net assets over $1 billion. The Manager has
agreed to limit the management fee charged so that the ordinary operating
expenses of the Fund will not exceed 1.0% of its average net assets in any
fiscal year. The Fund's management fee for the six months ended June 30, 1999
was 0.74% of average annual net assets.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer agent for the Fund and is responsible for maintaining the shareholder
registry and shareholder accounting records for the Fund. OFS provides these
services at cost.
================================================================================
5. Foreign Currency Contracts
A foreign currency exchange contract is a commitment to purchase or sell a
foreign currency at a future date, at a negotiated rate. The Fund may enter into
foreign currency exchange contracts for operational purposes and to seek to
protect against adverse exchange rate fluctuation. Risks to the Fund include the
potential inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
32 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
5. Foreign Currency Contracts (continued)
As of June 30, 1999, the Fund had outstanding foreign currency contracts as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized Unrealized
Contract Description Dates Amounts (000s) June 30, 1999 Appreciation Depreciation
- ------------------------------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
<S> <C> <C> <C> <C> <C>
British Pound Sterling (GBP) 7/19/99 880 GBP $ 15,732 $ -- $ 15,732
Euro (EUR) 7/19/99-7/22/99 2,249 EUR 54,611 -- 54,611
Japanese Yen (JPY) 8/9/99 267,300 JPY 7,378 -- 7,378
-------- --------
-- 77,721
-------- --------
Contracts to Sell
- -----------------
British Pound Sterling (GBP) 7/15/99-7/12/99 1,677 GBP 2,643,172 51,667 --
Canadian Dollar (CAD) 7/12/99 930 CAD 628,467 931 --
Euro (EUR) 7/12/99-12/1/99 4,011 EUR 4,143,290 61,334 --
Hong Kong Dollar (HKD) 1/26/00-1/31/00 4,859 HKD 622,895 -- 12,895
Japanese Yen (JPY) 7/22/99 150,113 JPY 1,245,019 6,621 --
Mexican Peso (MXP) 7/1/99 13,000 MXP 1,375,997 -- 62,571
New Zealand Dollar (NZD) 8/24/99 2,610 NZD 1,384,565 47,411 --
-------- --------
167,964 75,466
-------- --------
Total Unrealized Appreciation and Depreciation $167,964 $153,187
======== ========
</TABLE>
================================================================================
6. Futures Contracts
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to protect against changes in interest rates. The Fund may also buy or
write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases
in interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund may recognize a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include
the possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value of
the underlying securities.
Oppenheimer Strategic Bond Fund/VA 33
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
6. Futures Contracts (continued)
As of June 30, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Unrealized
Expiration Number of Valuation as of Appreciation
Contract Description Date Contracts June 30, 1999 (Depreciation)
- -------------------------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
<S> <C> <C> <C> <C>
LIBOR, 90 Day 3/15/00 1 $ 186,082 $ (236)
LIBOR, 90 Day 9/15/00 1 187,028 158
U.S. Treasury Bonds, 30 yr. 9/21/99 28 3,245,375 (39,109)
--------
(39,187)
--------
Contracts to Sell
- -----------------
Canadian Bond, 10 yr. 9/21/99 5 424,817 (2,534)
Euro, 90 Day 3/13/00 1 235,525 200
Euro, 90 Day 9/13/99 1 236,488 113
UK Long Gilt 9/28/99 4 701,832 5,454
U.S. Treasury Nts., 10 yr. 9/21/99 34 3,780,375 (22,047)
U.S. Treasury Nts., 5 yr. 9/21/99 31 3,379,000 17,203
--------
(1,611)
--------
$(40,798)
========
</TABLE>
================================================================================
7. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options
to hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are detailed
in a note to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
34 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
================================================================================
7. Option Activity (continued)
Written option activity for the six months ended June 30, 1999, was as follows:
<TABLE>
<CAPTION>
Call Options Put Options
------------------------------ --------------------------
Number of Amount of Number of Amount of
Options Premiums Options Premiums
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding as of December 31, 1998 147,606,100 $ 25,235 -- $ --
Options written 205,978,550 24,248 25,062,185 347,568
Options closed or expired (353,584,650) (49,483) (17,996) (199,758)
------------ -------- ---------- ---------
Options outstanding as of June 30, 1999 -- $ -- 25,044,189 $ 147,810
============ ======== ========== =========
</TABLE>
================================================================================
8. Illiquid or Restricted Securities
As of June 30, 1999, investments in securities included issues that are illiquid
or restricted. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of June 30, 1999, was $13,371,101,
which represents 4.79% of the Fund's net assets, of which $611,474 is considered
restricted. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation Per
Acquisition Cost Per Unit as of
Security Dates Unit June 30, 1999
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds
- -----
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05 12/8/95 100.00% 112.50%
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
</TABLE>
Oppenheimer Strategic Bond Fund/VA 35
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA
- --------------------------------------------------------------------------------
A Series of Oppenheimer Variable Account Funds
<TABLE>
===============================================================================================
<S> <C>
Officers and Trustees James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, President
Robert G. Avis, Trustee
William A. Baker, Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
David P. Negri, Vice President
Arthur P. Steinmetz, Vice President
Andrew J. Donohue, Vice President and Secretary
Brian W. Wixted, Vice President and Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
===============================================================================================
Investment Advisor OppenheimerFunds, Inc.
===============================================================================================
Transfer Agent OppenheimerFunds Services
===============================================================================================
Custodian of Portfolio Securities The Bank of New York
===============================================================================================
Independent Auditors Deloitte & Touche LLP
===============================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
The financial statements included herein have been
taken from the records of the Fund without
examination of the independent auditors.
This is a copy of a report to shareholders of
Oppenheimer Strategic Bond Fund/VA. This report must
be preceded or accompanied by a Prospectus of
Oppenheimer Strategic Bond Fund/VA. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, are not insured by the FDIC or any other
agency, and involve investment risks, including the
possible loss of the principal amount invested.
</TABLE>
36 Oppenheimer Strategic Bond Fund/VA
