OPPENHEIMER SMALL CAP GROWTH FUND/VA
a series of Oppenheimer Variable Account Funds
Supplement dated May 24, 2000
to the Prospectus dated May 1, 2000
The Prospectus is changed as follows: The section captioned "Portfolio Manager"
on page 6 is deleted and replaced with the following:
|X| Portfolio Management. Since May 24, 2000, the Fund has been managed by
a portfolio management team comprised of investment professionals selected from
the Manager's growth team in its equity portfolio department. This portfolio
management team is primarily responsible for the day-to-day management of the
Fund's portfolio. Certain members of the Fund's portfolio management team have
portfolio management responsibilities for other Oppenheimer funds.
May 24, 2000 PS0297.004
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Oppenheimer Variable Account Funds
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6803 S. Tucson Way, Englewood, Colorado 80112
1-888-470-0861
Statement of Additional Information dated May 1, 2000;
Revised May 24, 2000
OPPENHEIMER VARIABLE ACCOUNT FUNDS (the "Trust") is an investment company
consisting of ten separate Funds (the "Funds"):
Oppenheimer Money Fund/VA Oppenheimer High Income Fund/VA Oppenheimer Bond
Fund/VA Oppenheimer Strategic Bond Fund/VA Oppenheimer Aggressive Growth Fund/VA
Oppenheimer Capital Appreciation Fund/VA Oppenheimer Small Cap Growth Fund/VA
Oppenheimer Global Securities Fund/VA Oppenheimer Multiple Strategies Fund/VA
Oppenheimer Main Street Growth & Income Fund(R)/VA
Shares of the Funds are sold to provide benefits under variable life insurance
policies and variable annuity contracts and other insurance company separate
accounts, as described in the Prospectuses for the Funds and for the insurance
products you have selected.
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Funds and the Trust, and
supplements information in the Funds' Prospectuses dated May 1, 2000. It should
be read together with the Prospectuses. You can obtain a Prospectus by writing
to the Funds' Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free number
shown above.
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Contents
Page
About the Funds
Additional Information About the Funds' Investment
Policies and Risks 3
The Funds' Investment Policies............................ 3
Other Investment Techniques and Strategies................ 11
Investment Restrictions................................... 30
How the Funds are Managed ................................... 32
Organization and History.................................. 32
Trustees and Officers..................................... 34
The Manager............................................... 41
Brokerage Policies of the Funds.............................. 43
Distribution and Service Plans (Service Shares Only)......... 45
Performance of the Funds..................................... 46
About Your Account
How To Buy and Sell Shares................................... 52
Dividends, Capital Gains and Taxes........................... 56
Additional Information About the Funds....................... 56
Financial Information About the Funds
Independent Auditors' Report................................. 58
Financial Statements......................................... 59
Appendix A: Ratings Definitions.............................. A-1
Appendix B: Industry Classifications......................... B-1
Appendix C: Major Shareholders............................... C-1
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ABOUT THE FUNDS
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Additional Information About the Funds' Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Funds are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Funds' investment Manager, OppenheimerFunds,
Inc., can select for the Funds. Additional information is also provided about
the strategies that each Fund may use to try to achieve its objective. The full
name of each Fund is shown on the cover page, after which the word "Oppenheimer"
is omitted from these names to conserve space.
The Funds' Investment Policies. The composition of the Funds' portfolio and the
techniques and strategies that the Manager uses in selecting portfolio
securities will vary over time. The Funds are not required to use all of the
investment techniques and strategies described below at all times in seeking
their goals. They may use some of the special investment techniques and
strategies at some times or not at all.
In selecting securities for the Funds' portfolios, the Manager evaluates
the merits of particular securities primarily through the exercise of its own
investment analysis. That process may include, among other things, evaluation of
the issuer's historical operations, prospects for the industry of which the
issuer is part, the issuer's financial condition, its pending product
developments and business (and those of competitors), the effect of general
market and economic conditions on the issuer's business, and legislative
proposals that might affect the issuer.
The Funds are categorized by the types of investment they make. Capital
Appreciation Fund/VA, Aggressive Growth Fund/VA, Small Cap Growth Fund/VA and
Global Securities Fund/VA can be categorized as "Equity Funds." High Income
Fund/VA, Bond Fund/VA, and Strategic Bond Fund/VA can be categorized as "Fixed
Income Funds." Multiple Strategies Fund/VA and Main Street Growth & Income
Fund/VA share the investment characteristics (and certain of the Investment
Policies) of both the Equity Funds and the Fixed Income Funds, depending upon
the allocations determined from time to time by their portfolio managers. The
allocation of Main Street Growth & Income Fund/VA's portfolio to equity
securities is generally substantially larger than its allocation to fixed-income
securities. Money Fund's/VA investment policies are explained separately;
however, discussion below about investment restrictions, repurchase agreements,
illiquid securities and loans of portfolio securities also apply to Money
Fund/VA.
|X| Investments in Equity Securities. The Equity Funds focus their
investments in equity securities, which include common stocks, preferred stocks,
rights and warrants, and securities convertible into common stock. Certain
equity securities may be selected not only for their appreciation possibilities
but because they may provide dividend income.
Small-cap growth companies may offer greater opportunities for capital
appreciation than securities of large, more established companies. However,
these securities also involve greater risks than securities of larger companies.
Securities of small capitalization issuers may be subject to greater price
volatility in general than securities of large-cap and mid-cap companies.
Therefore, to the degree that a Fund has investments in smaller capitalization
companies at times of market volatility, that Fund's share price may fluctuate
more. Those investments may be limited to the extent the Manager believes that
such investments would be inconsistent with the goal of preservation of
principal.
|_| Growth Companies. The Equity Funds in particular may invest in
securities of "growth" companies. Growth companies are those companies that the
Manager believes are entering into a growth cycle in their business, with the
expectation that their stock will increase in value. They may be established
companies as well as newer companies in the development stage. Growth companies
may have a variety of characteristics that in the Manager's view define them as
"growth" issuers.
They may be generating or applying new technologies, new or improved
distribution techniques or new services. They may own or develop natural
resources. They may be companies that can benefit from changing consumer demands
or lifestyles, or companies that have projected earnings in excess of the
average for their sector or industry. In each case, they have prospects that the
Manager believes are favorable for the long term. The portfolio managers of the
Funds look for growth companies with strong, capable management sound financial
and accounting policies, successful product development and marketing and other
factors.
|_| Value Investing. In selecting equity investments, the portfolio
managers for the Equity Funds in particular may from time to time use a value
investing style. In using a value approach, the portfolio managers seek stock
and other equity securities that appear to be temporarily undervalued, by
various measures, such as price/earnings ratios, rather than seeking stocks of
"growth" issuers. This approach is subject to change and might not necessarily
be used in all cases. Value investing seeks stocks having prices that are low in
relation to their real worth or future prospects, in the hope that a Fund will
realize appreciation in the value of its holdings when other investors realize
the intrinsic value of the stock.
Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures that can be used to
identify these securities include, among others:
|_| Price/Earnings ratio, which is the stock's price divided by its earnings per
share. A stock having a price/earnings ratio lower than its historical range, or
the market as a whole or that of similar companies may offer attractive
investment opportunities.
|_| Price/book value ratio, which is the stock price divided by the book value
of the company per share, which measures the company's stock price in relation
to its asset value.
|_| Dividend Yield is measured by dividing the annual dividend by the stock
price per share.
|_| Valuation of Assets, which compares the stock price to the value of the
company's underlying assets, including their projected value in the marketplace
and liquidation value.
|_| Convertible Securities. While convertible securities are a form
of debt security, in many cases their conversion feature (allowing conversion
into equity securities) causes them to be regarded by the Manager more as
"equity equivalents." As a result, the rating assigned to the security has less
impact on the Manager's investment decision with respect to convertible
securities than in the case of non-convertible fixed income securities.
Convertible securities are subject to the credit risks and interest rate risks
described below in "Debt Securities."
To determine whether convertible securities should be regarded as "equity
equivalents," the Manager examines the following factors:
(1) whether, at the option of the investor, the convertible security can be
exchanged for a fixed number of shares of common stock of the issuer,
(2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of conversion of the convertible securities),
and
(3) the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any appreciation in
the price of the issuer's common stock.
|_| Rights and Warrants. The Funds may invest in warrants or rights.
They do not expect that their investments in warrants and rights will exceed 5%
of their total assets.
Warrants basically are options to purchase equity securities at specific
prices valid for a specific period of time. Their prices do not necessarily move
parallel to the prices of the underlying securities. Rights are similar to
warrants, but normally have a short duration and are distributed directly by the
issuer to its shareholders. Rights and warrants have no voting rights, receive
no dividends and have no rights with respect to the assets of the issuer.
|X| Investments in Bonds and Other Debt Securities. The Fixed Income Funds
in particular can invest in bonds, debentures and other debt securities to seek
current income as part of its investment objective.
The Funds' debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated in one of the four highest categories by
Moody's Investors Service, Inc., Standard & Poor's Corporation, Fitch IBCA,
Inc., Duff & Phelps, Inc., or that have comparable ratings by another
nationally-recognized rating organization, or if unrated or split-rated,
determined by the Manager to be of comparable quality. In making investments in
debt securities, the Manager may rely to some extent on the ratings of ratings
organizations or it may use its own research to evaluate a security's
credit-worthiness.
|_| U.S. Government Securities. The Funds can buy securities issued
or guaranteed by the U.S. government or its agencies and instrumentalities.
Securities issued by the U.S. Treasury are backed by the full faith and credit
of the U.S. government and are subject to very little credit risk. Obligations
of U.S. government agencies or instrumentalities (including mortgage-backed
securities) may or may not be guaranteed or supported by the "full faith and
credit" of the United States. Some are backed by the right of the issuer to
borrow from the U.S. Treasury; others, by discretionary authority of the U.S.
government to purchase the agencies' obligations; while others are supported
only by the credit of the instrumentality. If a security is not backed by the
full faith and credit of the United States, the owner of the security must look
principally to the agency issuing the obligation for repayment and may not be
able to assert a claim against the United States in the event that the agency or
instrumentality does not meet its commitment. A Fund will invest in securities
of U.S. government agencies and instrumentalities only when the Manager is
satisfied that the credit risk with respect to the agency or instrumentality is
minimal.
|_| Special Risks of Lower-Grade Securities. Because lower-rated
securities tend to offer higher yields than investment grade securities, a Fund
may invest in lower grade securities if the Manager is trying to achieve greater
income (and, in some cases, the appreciation possibilities of lower-grade
securities may be a reason they are selected for a Fund's portfolio).
Some of the special credit risks of lower-grade securities are discussed
in the Prospectus. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of
investment-grade securities. The issuer's low creditworthiness may increase the
potential for its insolvency. An overall decline in values in the high yield
bond market is also more likely during a period of a general economic downturn.
An economic downturn or an increase in interest rates could severely disrupt the
market for high yield bonds, adversely affecting the values of outstanding bonds
as well as the ability of issuers to pay interest or repay principal. In the
case of foreign high yield bonds, these risks are in addition to the special
risk of foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are investment-grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics. Definitions of the debt security ratings categories of Moody's,
Standard & Poor's, Fitch IBCA and Duff & Phelps are included in Appendix A to
this Statement of Additional Information.
|X| Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of assets, typically accounts receivable or consumer loans.
They are issued by trusts or special-purpose corporations. They are similar to
mortgage-backed securities, described below, and are backed by a pool of assets
that consist of obligations of individual borrowers. The income from the pool is
passed through to the holders of participation interest in the pools. The pools
may offer a credit enhancement, such as a bank letter of credit, to try to
reduce the risks that the underlying debtors will not pay their obligations when
due. However, the enhancement, if any, might not be for the full par value of
the security. If the enhancement is exhausted and any required payments of
interest or repayments of principal are not made, that Fund could suffer losses
on its investment or delays in receiving payment.
The value of an asset-backed security is affected by changes in the
market's perception of the asset backing the security, the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also affected if
any credit enhancement has been exhausted. The risks of investing in
asset-backed securities are ultimately related to payment of consumer loans by
the individual borrowers. As a purchaser of an asset-backed security, the Fund
would generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to prepayments,
which may shorten the weighted average life of asset-backed securities and may
lower their return, in the same manner as in the case of mortgage-backed
securities and CMOs, described below. Unlike mortgage-backed securities,
asset-backed securities typically do not have the benefit of a security interest
in the underlying collateral.
|X| Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or entities or by private issuers. These
securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real-estate
related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fixed Income Funds can
buy mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages. Therefore, it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. Therefore, these securities may
be less effective as a means of "locking in" attractive long-term interest
rates, and they may have less potential for appreciation during periods of
declining interest rates, than conventional bonds with comparable stated
maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of that Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium that Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in responses to changes in interest rates. If the prepayments on a
Fund's mortgage-related securities were to decrease broadly, that Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
|_| Collateralized Mortgage Obligations. CMOs are multi-class
bonds that are backed by pools of mortgage loans or mortgage pass-through
certificates. They may be collateralized by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie
Mae, or Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans' Affairs,
(3) unsecuritized conventional mortgages,
(4) other mortgage-related securities, or
(5) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the reverse direction to an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
|X| Foreign Securities. The Equity Funds and the Fixed Income Funds may
invest in foreign securities, and Global Securities Fund expects to have
substantial investments in foreign securities. These include equity securities
issued by foreign companies and debt securities issued or guaranteed by foreign
companies or governments, including supra-national entities. "Foreign
securities" include equity and debt securities of companies organized under the
laws of countries other than the United States and debt securities issued or
guaranteed by governments other than the U.S. government or by foreign
supra-national entities. They also include securities of companies (including
those that are located in the U.S. or organized under U.S. law) that derive a
significant portion of their revenue or profits from foreign businesses,
investments or sales, or that have a significant portion of their assets abroad.
They may be traded on foreign securities exchanges or in the foreign
over-the-counter markets.
Securities of foreign issuers that are represented by American Depository
Receipts or that are listed on a U.S. securities exchange or traded in the U.S.
over-the-counter markets are not considered "foreign securities" for the purpose
of a Fund's investment allocations, because they are not subject to many of the
special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.
Because the Funds may purchase securities denominated in foreign
currencies, a change in the value of such foreign currency against the U.S.
dollar will result in a change in the amount of income the Funds have available
for distribution. Because a portion of the Funds' investment income may be
received in foreign currencies, the Funds will be required to compute their
income in U.S. dollars for distribution to shareholders, and therefore the Funds
will absorb the cost of currency fluctuations. After the Funds have distributed
income, subsequent foreign currency losses may result in the Fund's having
distributed more income in a particular fiscal period than was available from
investment income, which could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. The Funds will hold foreign currency only in connection with the
purchase or sale of foreign securities.
|_| Foreign Debt Obligations. The debt obligations of foreign
governments and entities may or may not be supported by the full faith and
credit of the foreign government. The Fixed Income Funds may buy securities
issued by certain supra-national entities, which include entities designated or
supported by governments to promote economic reconstruction or development,
international banking organizations and related government agencies. Examples
are the International Bank for Reconstruction and Development (commonly called
the "World Bank"), the Asian Development bank and the Inter-American Development
Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
The Fixed Income Funds can invest in U.S. dollar-denominated "Brady
Bonds." These foreign debt obligations may be fixed-rate par bonds or
floating-rate discount bonds. They are generally collateralized in full as to
repayment of principal at maturity by U.S. Treasury zero-coupon obligations that
have the same maturity as the Brady Bonds. Brady Bonds can be viewed as having
three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity. Those uncollateralized amounts constitute what is
called the "residual risk."
If there is a default on collateralized Brady Bonds resulting in
acceleration of the payment obligations of the issuer, the zero-coupon U.S.
Treasury securities held as collateral for the payment of principal will not be
distributed to investors, nor will those obligations be sold to distribute the
proceeds. The collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds. The defaulted bonds will continue to
remain outstanding, and the face amount of the collateral will equal the
principal payments which would have then been due on the Brady Bonds in the
normal course. Because of the residual risk of Brady Bonds and the history of
defaults with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, Brady Bonds are considered speculative
investments.
|_| Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards
in foreign countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic
developments; and
o unfavorable differences between the U.S. economy and foreign economies.
In the past, U.S. Government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be re-imposed.
|_| Special Risks of Emerging Markets. Emerging and developing
markets abroad may also offer special opportunities for growth investing but
have greater risks than more developed foreign markets, such as those in Europe,
Canada, Australia, New Zealand and Japan. There may be even less liquidity in
their securities markets, and settlements of purchases and sales of securities
may be subject to additional delays. They are subject to greater risks of
limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be subject
to the risk of greater political and economic instability, which can greatly
affect the volatility of prices of securities in those countries. The Manager
will consider these factors when evaluating securities in these markets, because
the selection of those securities must be consistent with the Fund's goal of
preservation of principal.
The Funds intend to invest less than 5% of their total assets in
securities of issuers of Eastern European countries. The social, political and
economic reforms in most Eastern European countries are still in their early
stages, and there can be no assurance that these reforms will continue. Eastern
European countries in many cases do not have a sophisticated or well-established
capital market structure for the sale and trading of securities. Participation
in the investment markets in some of those countries may be available initially
or solely through investment in joint ventures, state enterprises, private
placements, unlisted securities or other similar illiquid investment vehicles.
In addition, although investment opportunities may exist in Eastern
European countries, any change in the leadership or policies of the governments
of those countries, or changes in the leadership or policies of any other
government that exercises a significant influence over those countries, may halt
the expansion of or reverse the liberalization of foreign investment policies
now occurring. As a result investment opportunities which may currently exist
may be threatened.
The prior authoritarian governments of a number of the Eastern European
countries previously expropriated large amounts of real and personal property,
which may include property which will be represented by or held by entities
issuing the securities a Fund might wish to purchase. In many cases, the claims
of the prior property owners against those governments were never finally
settled. There can be no assurance that any property represented by or held by
entities issuing securities purchased by a Fund will not also be expropriated,
nationalized, or confiscated. If that property were confiscated, the Fund could
lose a substantial portion of its investments in such countries. A Fund's
investments could also be adversely affected by exchange control regulations
imposed in any of those countries.
|X| Portfolio Turnover. "Portfolio turnover" describes the rates at which
the Funds traded their portfolio securities during its last fiscal year. For
example, if a Fund sold all of its securities during the year, its portfolio
turnover rate would have been 100%. The Funds' portfolio turnover rates will
fluctuate from year to year, and any of the Funds may have portfolio turnover
rates of more than 100% annually.
Other Investment Techniques and Strategies. In seeking their respective
objectives, the Funds may from time to time use the types of investment
strategies and investments described below. They are not required to use all of
these strategies at all times, and at times may not use them.
|X| Investing in Small, Unseasoned Companies. The Funds may invest in
securities of small, unseasoned companies, subject to limits (if any) stated in
that Fund's Prospectus. These are companies that have been in operation for less
than three years, including the operations of any predecessors. Securities of
these companies may be subject to volatility in their prices. They may have a
limited trading market, which may adversely affect their ability to dispose of
them and can reduce the price the Funds might be able to obtain for them. Other
investors that own a security issued by a small, unseasoned issuer for which
there is limited liquidity might trade the security when the Funds are
attempting to dispose of their holdings of that security. In that case, a Fund
might receive a lower price for its holdings than might otherwise be obtained.
|X| When-Issued and Delayed-Delivery Transactions (All Portfolios). The
Funds may invest in securities on a "when-issued" basis and may purchase or sell
securities on a "delayed-delivery" or "forward commitment" basis. When-issued
and delayed-delivery are terms that refer to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Manager before settlement
will affect the value of such securities and may cause a loss to the Funds.
During the period between purchase and settlement, no payment is made by the
Funds to the issuer and no interest accrues to that portfolio from the
investment. No income begins to accrue to the Funds on a when-issued security
until the Funds receive the security at settlement of the trade.
The Funds will engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time of entering
into the obligation. When a Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause that Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When a Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purpose of investment
leverage. Although a Fund will enter into delayed-delivery or when-issued
purchase transactions to acquire securities, it may dispose of a commitment
prior to settlement. If a Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or to dispose of its right to
delivery or receive against a forward commitment, it may incur a gain or loss.
At the time a Fund makes the commitment to purchase or sell a security on
a when-issued or delayed delivery basis, it records the transaction on their
books and reflects the value of the security purchased in determining that
Fund's net asset value. In a sale transaction, it records the proceeds to be
received. That Fund will identify on its books liquid assets at least equal in
value to the value of that Fund's purchase commitments until that Fund pays for
the investment.
When-issued and delayed-delivery transactions can be used by the Funds as
a defensive technique to hedge against anticipated changes in interest rates and
prices. For instance, in periods of rising interest rates and falling prices, a
Fund might sell securities in their portfolio on a forward commitment basis to
attempt to limit its exposure to anticipated falling prices. In periods of
falling interest rates and rising prices, a Fund might sell portfolio securities
and purchase the same or similar securities on a when-issued or delayed-delivery
basis to obtain the benefit of currently higher cash yields.
|X| Zero-Coupon Securities. The Fixed Income Funds may buy zero-coupon and
delayed interest securities, and "stripped" securities of foreign government
issuers, which may or may not be backed by the "full faith and credit" of the
issuing foreign government, and of corporations. The Fixed Income Funds may also
buy zero-coupon and "stripped" U.S. government securities. Zero-coupon
securities issued by foreign governments and by corporations will be subject to
greater credit risks than U.S. government zero-coupon securities.
|X| "Stripped" Mortgage-Related Securities. The Fixed Income Funds can
invest in stripped mortgage-related securities that are created by segregating
the cash flows from underlying mortgage loans or mortgage securities to create
two or more new securities. Each has a specified percentage of the underlying
security's principal or interest payments. These are a form of derivative
investment.
Mortgage securities may be partially stripped so that each class receives
some interest and some principal. However, they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an "interest-only" security, or "I/O," and all of the principal is
distributed to holders of another type of security, known as a "principal-only"
security or "P/O." Strips can be created for pass-through certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, that Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.
|X| Repurchase Agreements. The Funds may acquire securities subject to
repurchase agreements. They may do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions,
or for temporary defensive purposes, as described below.
In a repurchase transaction, the Funds buy a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S.
branches of foreign banks, or broker-dealers that have been designated as
primary dealers in government securities. They must meet credit requirements set
by the Manager from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to each
Fund's limit on holding illiquid investments. No Fund will enter into a
repurchase agreement that causes more than 15% of its net assets (for Money
Fund/VA, 10%) to be subject to repurchase agreements having a maturity beyond
seven days. There is no limit on the amount of a Fund's net assets that may be
subject to repurchase agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Funds' repurchase
agreements require that at all times while the repurchase agreement are in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. However, if the vendor fails to
pay the resale price on the delivery date, the Funds may incur costs in
disposing of the collateral and may experience losses if there is any delay in
its ability to do so. The Manager will monitor the vendor's creditworthiness to
confirm that the vendor is financially sound and will continuously monitor the
collateral's value.
|X| Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Funds' investments. To enable a Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, that Fund may have to cause those securities to be registered. The
expenses of registering restricted securities may be negotiated by the Fund with
the issuer at the time the Fund buys the securities. When a Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. That Fund would
bear the risks of any downward price fluctuation during that period.
The Funds may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit a Fund's ability to dispose of the
securities and might lower the amount a Fund could realize upon the sale.
The Funds have limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to qualified
institutional purchasers under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid by the Manager under Board-approved
guidelines. Those guidelines take into account the trading activity for such
securities and the availability of reliable pricing information, among other
factors. If there is a lack of trading interest in a particular Rule 144A
security, the Funds' holdings of that security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable within
seven days.
|X| Forward Rolls. The Funds can enter into "forward roll" transactions
with respect to mortgage related securities. In this type of transaction, the
Funds sell a mortgage related security to a buyer and simultaneously agrees to
repurchase a similar security (the same type of security, and having the same
coupon and maturity) at a later date at a set price. The securities that are
repurchased will have the same interest rate as the securities that are sold,
but typically will be collateralized by different pools of mortgages (with
different prepayment histories) than the securities that have been sold.
Proceeds from the sale are invested in short-term instruments, such as
repurchase agreements. The income from those investments, plus the fees from the
forward roll transaction, are expected to generate income to the Funds in excess
of the yield on the securities that have been sold.
The Funds will only enter into "covered" rolls. To assure their future
payment of the purchase price, the Funds will identify as segregated on their
respective books liquid assets in an amount equal to their respective payment
obligations under the roll.
These transactions have risks. During the period between the sale and the
repurchase, the Funds will not be entitled to receive interest and principal
payments on the securities that have been sold. It is possible that the market
value of the securities the Funds sell may decline below the price at which the
Funds are obligated to repurchase securities.
|X| Loans of Portfolio Securities. To raise cash for liquidity purposes or
income, the Funds can lend their portfolio securities to brokers, dealers and
other types of financial institutions approved by the Fund's Board of Trustees.
These loans are limited to not more than 10% of the value of that Fund's net
assets. The Funds currently do not intend to engage in loans of securities in
the coming year, but if they do so, such loans will not likely exceed 5% of that
Fund's total assets.
There are some risks in connection with securities lending. The Funds
might experience a delay in receiving additional collateral to secure a loan, or
a delay in recovery of the loaned securities if the borrower defaults. The Funds
must receive collateral for a loan. Under current applicable regulatory
requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It must
consist of cash, bank letters of credit, or securities of the U.S. Government or
its agencies or instrumentalities, or other cash equivalents in which that Fund
is permitted to invest. To be acceptable as collateral, letters of credit must
obligate a bank to pay amounts demanded by the Funds if the demand meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Funds.
When they lend securities, that Fund receives amounts equal to the
dividends or interest on loaned securities. It also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and (c)
interest on any short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. That Fund
may also pay reasonable finder's, custodian and administrative fees in
connection with these loans. The terms of a Fund's loans must meet applicable
tests under the Internal Revenue Code and must permit the Fund to reacquire
loaned securities on five days' notice or in time to vote on any important
matter.
|X| Borrowing for Leverage. Each Fund has the ability to borrow from banks
on an unsecured basis. Each Fund has undertaken to limit borrowing to 25% of the
value of that Fund's net assets, which is further limited to 10% if borrowing is
for a purpose other than to facilitate redemptions. Investing borrowed funds in
portfolio securities is a speculative technique known as "leverage." As a matter
of fundamental policy, borrowings can be made only to the extent that the value
of that Fund's assets, less its liabilities other than borrowings, is equal to
at least 300% of all borrowings (including the proposed borrowing). If the value
of that Fund's assets fails to meet this 300% asset coverage requirement, that
Fund will reduce its bank debt within three days to meet the requirement. To do
so, that Fund might have to sell a portion of its investments at a
disadvantageous time.
A Fund will pay interest on these loans, and that interest expense will
raise the overall expenses of that Fund and reduce its returns. If it does
borrow, its expenses will be greater than comparable funds that do not borrow
for leverage. Additionally, that Fund's net asset value per share might
fluctuate more than that of funds that do not borrow. Currently, the Funds do
not contemplate using this technique in the next year but if they do so, it will
not likely be to a substantial degree.
|X| Derivatives. The Funds can invest in a variety of derivative
investments for hedging purposes. Some derivative investments the Funds can use
are the hedging instruments described below in this Statement of Additional
Information. The Equity Funds do not use, and do not currently contemplate
using, derivatives or hedging instruments to a significant degree in the coming
year and they are not obligated to use them in seeking their objectives.
Other derivative investments the Fixed Income Funds can invest in include
"index-linked" notes. Principal and/or interest payments on these notes depend
on the performance of an underlying index. Currency-indexed securities are
another derivative these Funds may use. Typically, these are short-term or
intermediate-term debt securities. Their value at maturity or the rates at which
they pay income are determined by the change in value of the U.S. dollar against
one or more foreign currencies or an index. In some cases, these securities may
pay an amount at maturity based on a multiple of the amount of the relative
currency movements. This type of index security offers the potential for
increased income or principal payments but at a greater risk of loss than a
typical debt security of the same maturity and credit quality.
Other derivative investments the Fixed Income Funds can use include debt
exchangeable for common stock of an issuer or "equity-linked debt securities" of
an issuer. At maturity, the debt security is exchanged for common stock of the
issuer or it is payable in an amount based on the price of the issuer's common
stock at the time of maturity. Both alternatives present a risk that the amount
payable at maturity will be less than the principal amount of the debt because
the price of the issuer's common stock might not be as high as the Manager
expected.
|X| Hedging. Although the Funds can use hedging instruments, they are not
obligated to use them in seeking their objective. To attempt to protect against
declines in the market value of the Funds' portfolio, to permit the Funds to
retain unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons, the
Funds could:
|_| sell futures contracts,
|_| buy puts on such futures or on securities, or
|_| write covered calls on securities or futures. Covered calls may also
be used to increase the Funds' income, but the Manager does not expect to
engage extensively in that practice.
The Funds can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case the
Funds would normally seek to purchase the securities and then terminate that
hedging position. The Funds might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Funds could:
|_| buy futures, or
|_| buy calls on such futures or on securities.
The Funds' strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Funds can use are described below. The Funds
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Funds' investment objective and
are permissible under applicable regulations governing the Fund.
|_| Futures. The Funds can buy and sell futures contracts that relate to
(1) broadly-based stock indices (these are referred to as "stock index
futures"), (2) bond indices (these are referred to as "bond index futures"), (3)
debt securities (these are referred to as "interest rate futures"), and (4)
foreign currencies (these are referred to as "forward contracts").
A broadly-based stock index is used as the basis for trading stock index
futures. They may in some cases be based on stocks of issuers in a particular
industry or group of industries. A stock index assigns relative values to the
common stocks included in the index and its value fluctuates in response to the
changes in value of the underlying stocks. A stock index cannot be purchased or
sold directly. Bond index futures are similar contracts based on the future
value of the basket of securities that comprise the index. These contracts
obligate the seller to deliver, and the purchaser to take, cash to settle the
futures transaction. There is no delivery made of the underlying securities to
settle the futures obligation. Either party may also settle the transaction by
entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the purchaser
to take) cash or a specified type of debt security to settle the futures
transaction. Either party could also enter into an offsetting contract to close
out the position.
No money is paid or received by the Funds on the purchase or sale of a
future. Upon entering into a futures transaction, the Funds will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Funds'
custodian bank in an account registered in the futures broker's name. However,
the futures broker can gain access to that account only under specified
conditions. As the future is marked to market (that is, its value on that Fund's
books is changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures broker
daily.
At any time prior to expiration of the future, the Funds may elect to
close out their position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to that Fund. Any loss or gain on the future is then realized by
that Fund for tax purposes. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are traded.
|_| Put and Call Options. The Funds can buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Funds can buy and sell
exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, commodities options, and options
on the other types of futures described above.
|_| Writing Covered Call Options. The Funds can write (that is, sell)
covered calls. If a Fund sells a call option, it must be covered. That means the
Fund must own the security subject to the call while the call is outstanding,
or, for certain types of calls, the call may be covered by segregating liquid
assets to enable that Fund to satisfy its obligations if the call is exercised.
Up to 100% of a Fund's total assets may be subject to calls that Fund writes.
When a Fund writes a call on a security, it receives cash (a premium).
That Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. That Fund shares the risk of
loss that the price of the underlying security may decline during the call
period. That risk may be offset to some extent by the premium the Fund receives.
If the value of the investment does not rise above the call price, it is likely
that the call will lapse without being exercised. In that case the Fund would
keep the cash premium and the investment.
When a Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by a specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium.
The Funds' custodian bank, or a securities depository acting for the
custodian bank, will act as the Funds' escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which the
Funds have written calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or when the Funds
enter into a closing transaction.
When a Fund writes an over-the-counter ("OTC") option, that Fund will
enter into an arrangement with a primary U.S. government securities dealer which
will establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the option is "in the money"). When a Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, a Fund may purchase
a corresponding call in a "closing purchase transaction." A Fund will then
realize a profit or loss, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call the Fund wrote is
more or less than the price of the call the Fund purchases to close out the
transaction. That Fund may realize a profit if the call expires unexercised,
because that Fund will retain the underlying security and the premium it
received when it wrote the call. Any such profits are considered short-term
capital gains for Federal income tax purposes, as are the premiums on lapsed
calls. When distributed by a Fund they are taxable as ordinary income. If a Fund
cannot effect a closing purchase transaction due to the lack of a market, it
will have to hold the callable securities until the call expires or is
exercised.
A Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, that Fund must cover the call by segregating an
equivalent dollar amount of liquid assets. The Fund will segregate additional
liquid assets if the value of the segregated assets drops below 100% of the
current value of the future. Because of this segregation requirement, in no
circumstances would that Fund's receipt of an exercise notice as to that future
require that Fund to deliver a futures contract. It would simply put that Fund
in a short futures position, which is permitted by the Funds' hedging policies.
|_| Writing Put Options. Each Fund can sell put options. A put option
on securities gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying investment at the exercise price during the
option period. The Funds will not write puts if, as a result, more than 50% of
the Fund's net assets would be required to be segregated to cover such put
options.
If a Fund writes a put, the put must be covered by segregated liquid
assets. The premium the Funds receive from writing a put represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, that Fund also assumes the obligation during
the option period to buy the underlying investment from the buyer of the put at
the exercise price, even if the value of the investment falls below the exercise
price. If a put a Fund has written expires unexercised, that Fund realizes a
gain in the amount of the premium less the transaction costs incurred. If the
put is exercised, that Fund must fulfill its obligation to purchase the
underlying investment at the exercise price. That price will usually exceed the
market value of the investment at that time. In that case, that Fund may incur a
loss if it sells the underlying investment. That loss will be equal to the sum
of the sale price of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs the Fund incurred.
When writing a put option on a security, to secure its obligation to pay
for the underlying security, that Fund will identify as segregated on its
records liquid assets with a value equal to or greater than the exercise price
of the underlying securities. That Fund therefore forgoes the opportunity of
investing the segregated assets or writing calls against those assets.
As long as a Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require that Fund to take delivery of the underlying security
and pay the exercise price. No Fund has control over when it may be required to
purchase the underlying security, since it may be assigned an exercise notice at
any time prior to the termination of its obligation as the writer of the put.
That obligation terminates upon expiration of the put. It may also terminate if,
before it receives an exercise notice, that Fund effects a closing purchase
transaction by purchasing a put of the same series as it sold. Once a Fund has
been assigned an exercise notice, it cannot effect a closing purchase
transaction.
A Fund may decide to effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent the underlying
security from being put. Effecting a closing purchase transaction will also
permit that Fund to write another put option on the security, or to sell the
security and use the proceeds from the sale for other investments. A Fund will
realize a profit or loss from a closing purchase transaction depending on
whether the cost of the transaction is less or more than the premium received
from writing the put option. Any profits from writing puts are considered
short-term capital gains for Federal tax purposes, and when distributed by a
Fund, is taxable as ordinary income.
|_| Purchasing Calls and Puts. Each Fund can purchase calls to
protect against the possibility that its portfolio will not participate in an
anticipated rise in the securities market. When a Fund buys a call (other than
in a closing purchase transaction), it pays a premium. That Fund then has the
right to buy the underlying investment from a seller of a corresponding call on
the same investment during the call period at a fixed exercise price. A Fund
benefits only if it sells the call at a profit or if, during the call period,
the market price of the underlying investment is above the sum of the call price
plus the transaction costs and the premium paid for the call and the Fund
exercises the call. If a Fund does not exercise the call or sell it (whether or
not at a profit), the call will become worthless at its expiration date. In that
case the Fund will have paid the premium but lost the right to purchase the
underlying investment.
A Fund can buy puts whether or not it holds the underlying investment in
its portfolio. When a Fund purchases a put, it pays a premium and, except as to
puts on indices, has the right to sell the underlying investment to a seller of
a put on a corresponding investment during the put period at a fixed exercise
price. Buying a put on securities or futures a Fund owns enables that Fund to
attempt to protect itself during the put period against a decline in the value
of the underlying investment below the exercise price by selling the underlying
investment at the exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or above the exercise
price and, as a result, the put is not exercised or resold, the put will become
worthless at its expiration date. In that case the Fund will have paid the
premium but lost the right to sell the underlying investment. However, the Fund
may sell the put prior to its expiration. That sale may or may not be at a
profit.
When a Fund purchases a call or put on an index or future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund. A gain or loss depends on changes in the index in
question (and thus on price movements in the securities market generally) rather
than on price movements in individual securities or futures contracts.
A Fund may buy a call or put only if, after the purchase, the value of all
call and put options held by the Fund will not exceed 5% of the Fund's total
assets.
|_| Buying and Selling Options on Foreign Currencies. A Fund can buy
and sell calls and puts on foreign currencies. They include puts and calls that
trade on a securities or commodities exchange or in the over-the-counter markets
or are quoted by major recognized dealers in such options. A Fund could use
these calls and puts to try to protect against declines in the dollar value of
foreign securities and increases in the dollar cost of foreign securities the
Fund wants to acquire.
If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of those securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If the Manager anticipates a decline in the dollar
value of a foreign currency, the decline in the dollar value of portfolio
securities denominated in that currency might be partially offset by writing
calls or purchasing puts on that foreign currency. However, the currency rates
could fluctuate in a direction adverse to a Fund's position. That Fund will then
have incurred option premium payments and transaction costs without a
corresponding benefit.
A call the Fund writes on a foreign currency is "covered" if that Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration held in a
segregated account by its custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
A Fund could write a call on a foreign currency to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund owns or has the
right to acquire and which is denominated in the currency underlying the option.
That decline might be one that occurs due to an expected adverse change in the
exchange rate. This is known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by identifying as segregated on its
books liquid assets in an amount equal to the exercise price of the option.
|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce a Fund's return. A Fund could also
experience losses if the prices of its futures and options positions were not
correlated with its other investments.
A Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause a
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by a Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within a Fund's control, holding a put might cause
that Fund to sell the related investments for reasons that would not exist in
the absence of the put.
A Fund could pay a brokerage commission each time it buys or sells a call,
a put or an underlying investment in connection with the exercise of a call or
put. Those commissions could be higher on a relative basis than the commissions
for direct purchases or sales of the underlying investments. Premiums paid for
options are small in relation to the market value of the underlying investments.
Consequently, put and call options offer large amounts of leverage. The leverage
offered by trading in options could result in a Fund's net asset values being
more sensitive to changes in the value of the underlying investment.
If a covered call written by a Fund is exercised on an investment that has
increased in value, that Fund will be required to sell the investment at the
call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. A Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of a Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of that Fund's securities. For example, it is possible that
while a Fund has used a hedging instrument in a short hedge, the market might
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instrument
and also experience a decline in the value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities will tend to move in the
same direction as the indices upon which the hedging instrument is based.
The risk of imperfect correlation increases as the composition of a Fund's
portfolio diverges from the securities included in the applicable index. To
compensate for the imperfect correlation of movements in the price of the
portfolio securities being hedged and movements in the price of the hedging
instruments, a Fund may use hedging instruments in a greater dollar amount than
the dollar amount of portfolio securities being hedged. It might do so if the
historical volatility of the prices of the portfolio securities being hedged are
more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
A Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when a Fund does so
the market might decline. If that Fund then concludes not to invest in
securities because of concerns that the market might decline further or for
other reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the securities purchased.
|_| Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery at
a fixed price. A Fund uses them to "lock in" the U.S. dollar price of a security
denominated in a foreign currency that the Fund has bought or sold, or to
protect against possible losses from changes in the relative values of the U.S.
dollar and a foreign currency. A Fund limits its exposure in foreign currency
exchange contracts in a particular foreign currency to the amount of its assets
denominated in that currency or a closely-correlated currency. A Fund may also
use "cross-hedging" where it hedges against changes in currencies other than the
currency in which a security it holds is denominated.
Under a forward contract, one party agrees to purchase, and another party
agrees to sell, a specific currency at a future date. That date may be any fixed
number of days from the date of the contract agreed upon by the parties. The
transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among currency
traders (usually large commercial banks) and their customers.
The Funds may use forward contracts to protect against uncertainty in
the level of future exchange rates. The use of forward contracts does not
eliminate the risk of fluctuations in the prices of the underlying
securities a Fund owns or intends to acquire, but it does fix a rate of
exchange in advance. Although forward contracts may reduce the risk of loss
from a decline in the value of the hedged currency, at the same time they
limit any potential gain if the value of the hedged currency increases.
When a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, or when it anticipates receiving dividend
payments in a foreign currency, the Fund might desire to "lock-in" the U.S.
dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, that Fund could enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in the currency exchange rates during
the period between the date on which the security is purchased or sold or on
which the payment is declared, and the date on which the payments are made or
received.
A Fund could also use forward contracts to lock in the U.S. dollar value
of a portfolio position. This is called a "position hedge." When a Fund believes
that foreign currency might suffer a substantial decline against the U.S.
dollar, it could enter into a forward contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When a Fund believes that the
U.S. dollar might suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, a Fund could enter into a forward contract to sell
a different foreign currency for a fixed U.S. dollar amount if the Fund believes
that the U.S. dollar value of the foreign currency to be sold pursuant to its
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated. That
is referred to as a "cross hedge."
A Fund will cover its short position in these cases by identifying to its
custodian bank assets having a value equal to the aggregate amount of the Fund's
commitment under forward contracts. No Fund will enter into forward contracts or
maintain a net exposure to such contracts if the consummation of the contracts
would obligate a Fund to deliver an amount of foreign currency in excess of the
value of that Fund's portfolio securities or other assets denominated in that
currency or another currency that is the subject of the hedge.
The precise matching of the amounts under forward contracts and the
value of the securities involved generally will not be possible because the
future value of securities denominated in foreign currencies will change as
a consequence of market movements between the date the forward contract is
entered into and the date it is sold. In some cases the Manager might
decide to sell the security and deliver foreign currency to settle the
original purchase obligation. If the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver, the
Fund might have to purchase additional foreign currency on the "spot" (that
is, cash) market to settle the security trade. If the market value of the
security instead exceeds the amount of foreign currency the Fund is
obligated to deliver to settle the trade, the Fund might have to sell on
the spot market some of the foreign currency received upon the sale of the
security. There will be additional transaction costs on the spot market in
those cases.
The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing a Fund to sustain losses on
these contracts and to pay additional transactions costs. The use of forward
contracts in this manner might reduce a Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if a Fund had
not entered into such contracts.
At or before the maturity of a forward contract requiring a Fund to sell a
currency, the Fund might sell a portfolio security and use the sale proceeds to
make delivery of the currency. In the alternative a Fund might retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract. Under that contract a Fund will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, a Fund might close out a forward contract requiring it to
purchase a specified currency by entering into a second contract entitling it to
sell the same amount of the same currency on the maturity date of the first
contract. The Fund would realize a gain or loss as a result of entering into
such an offsetting forward contract under either circumstance. The gain or loss
will depend on the extent to which the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
The costs to a Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no brokerage fees or commissions are involved.
Because these contracts are not traded on an exchange, a Fund must evaluate the
credit and performance risk of the counterparty under each forward contract.
Although a Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. Funds may convert foreign currency from time to time, and will
incur costs in doing so. Foreign exchange dealers do not charge a fee for
conversion, but they do seek to realize a profit based on the difference between
the prices at which they buy and sell various currencies. Thus, a dealer might
offer to sell a foreign currency to a Fund at one rate, while offering a lesser
rate of exchange if the Fund desires to resell that currency to the dealer.
|_| Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Funds are required to operate within certain
guidelines and restrictions with respect to the use of futures as
established by the Commodities Futures Trading Commission (the "CFTC"). In
particular, a Fund is exempted from registration with the CFTC as a
"commodity pool operator" if the Fund complies with the requirements of
Rule 4.5 adopted by the CFTC. The Rule does not limit the percentage of a
Fund's assets that may be used for futures margin and related options
premiums for a bona fide hedging position. However, under the Rule, a Fund
must limit its aggregate initial futures margin and related options
premiums to not more than 5% of the Funds' net assets for hedging
strategies that are not considered bona fide hedging strategies under the
Rule.
Transactions in options by a Fund are subject to limitations established
by the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more accounts
or through one or more different exchanges or through one or more brokers. Thus,
the number of options that a Fund may write or hold may be affected by options
written or held by other entities, including other investment companies having
the same advisor as that Fund (or an adviser that is an affiliate of the Funds'
advisor). The exchanges also impose position limits on futures transactions. An
exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions.
Under the Investment Company Act, when a Fund purchases a future, it must
identify as segregated on its records liquid assets in an amount equal to the
market value of the securities underlying the future, less the margin deposit
applicable to it.
|_| Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts are treated as "Section 1256 contracts" under the Internal
Revenue Code. In general, gains or losses relating to Section 1256 contracts are
characterized as 60% long-term and 40% short-term capital gains or losses under
the Code. However, foreign currency gains or losses arising from Section 1256
contracts that are forward contracts generally are treated as ordinary income or
loss. In addition, Section 1256 contracts held by the Funds at the end of each
taxable year are "marked-to-market," and unrealized gains or losses are treated
as though they were realized. These contracts also may be marked-to-market for
other purposes under rules prescribed pursuant to the Internal Revenue Code. An
election can be made by a Fund to exempt those transactions from this
marked-to-market treatment.
Certain forward contracts a Fund enters into may result in "straddles" for
Federal income tax purposes. The straddle rules may affect the character and
timing of gains (or losses) recognized by that Fund on straddle positions.
Generally, a loss sustained on the disposition of a position making up a
straddle is allowed only to the extent that the loss exceeds any unrecognized
gain in the offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain in the
offsetting positions making up the straddle, or the offsetting position is
disposed of.
Under the Internal Revenue Code, the following gains or losses are treated
as ordinary income or loss:
(1) gains or losses attributable to fluctuations in exchange rates that occur
between the time a Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time
that Fund actually collects such receivables or pays such liabilities, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated in a
foreign currency or foreign currency forward contracts and the date of
disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the amount
of a Fund's investment income available for distribution to its shareholders.
|X| Temporary Defensive Investments. When market conditions are unstable,
or the Manager believes it is otherwise appropriate to reduce holdings in
stocks, the Funds can invest in a variety of debt securities for defensive
purposes. The Funds can also purchase these securities for liquidity purposes to
meet cash needs due to the redemption of Fund shares, or to hold while waiting
to reinvest cash received from the sale of other portfolio securities. The Funds
can buy:
|_| obligations issued or guaranteed by the U. S. government or its
instrumentalities or agencies,
|_| commercial paper (short-term, unsecured, promissory notes of domestic
or foreign companies) rated in the three top rating categories of a
nationally recognized rating organization,
|_| short-term debt obligations of corporate issuers, rated investment
grade (rated at least Baa by Moody's Investors Service, Inc. or at
least BBB by Standard & Poor's Corporation, or a comparable rating by
another rating organization), or unrated securities judged by the
Manager to have a comparable quality to rated securities in those
categories,
|_| certificates of deposit and bankers' acceptances of domestic and
foreign banks having total assets in excess of $1 billion, and
|_| repurchase agreements.
Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly, are
not generally subject to significant fluctuations in principal value and their
value will be less subject to interest rate risk than longer-term debt
securities.
Money Fund/VA Investment Policies. Under Rule 2a-7, Money Fund/VA may
purchase only "Eligible Securities," as defined below, that the Manger, under
procedures approved by the Trust's Board of Trustees, has determined have
minimal credit risk. An "Eligible Security" is (a) a security that has received
a rating in one of the two highest short-term rating categories by any two
"nationally-recognized statistical rating organizations" as defined in Rule 2a-7
("Rating Organizations"), or, if only one Rating Organization has rated that
security, by that Rating Organization (the "Rating Requirements"), (b) a
security that is guaranteed, and either that guarantee or the party providing
that guarantee meets the Rating Requirements, or (c) an unrated security that is
either issued by an issuer having another similar security that meets the Rating
Requirements, or is judged by the Manager to be of comparable quality to
investments that meet the Rating Requirements. Rule 2a-7 permits Money Fund/VA
to purchase "First Tier Securities," which are Eligible Securities rated in the
highest category for short-term debt obligations by at least two Rating
Organizations, or, if only one Rating Organization has rated a particular
security, by that Rating Organization, or comparable unrated securities.
If a security's rating is downgraded, the Manager and/or the Board may
have to reassess the security's credit risk. If a security has ceased to be a
First Tier Security, the Manager will promptly reassess whether the security
continues to present "minimal credit risk." If the Manager becomes aware that
any Rating Organization has downgraded its rating of a Second Tier Security or
rated an unrated security below its second highest rating category, the Trust's
Board of Trustees shall promptly reassess whether the security presents minimal
credit risk and whether it is in Money Fund/VA's best interests to dispose of
it.
If Money Fund/VA disposes of the security within 5 days of the Manager
learning of the downgrade, the Manager will provide the Board with subsequent
notice of such downgrade. If a security is in default, or ceases to be an
Eligible Security, or is determined no longer to present minimal credit risks,
the Board must determine whether it would be in Money Fund/VA's best interests
to dispose of the security. In making that determination, the Board may take
into consideration default insurance coverage that Money Fund shares with other
money market funds managed by the Manager and an affiliate. If such coverage is
available for a portion of the loss caused by the default and the security can
only be sold at a depressed price, the Board may determine it is in Money
Fund/VA's best interests not to sell that defaulted security. In that case,
retention of the security would not violate Rule 2a-7. Due to coverage limits,
exclusions and deductibles, there can be no assurance of the adequacy or
availability of insurance coverage in the event a security is in default.
The Rating Organizations currently designated as such by the Securities
and Exchange Commission ("SEC") are Standard & Poor's Corporation, Moody's
Investors Service, Inc., Fitch IBCA, Inc., Duff & Phelps, Inc., and Thomson
BankWatch, Inc. See Appendix A to this Statement of Additional Information for a
description of the rating categories of the Rating Organizations.
G Certificates of Deposit and Commercial Paper. Money Fund/VA may invest
in certificates of deposit of up to $100,000 of a domestic bank if such
certificates of deposit are fully insured as to principal by the Federal Deposit
Insurance Corporation. For purposes of this section, the term "bank" includes
commercial banks, savings banks, and savings and loan associations and the term
"foreign bank" includes foreign branches of U.S. banks (issuers of "Eurodollar"
instruments), U.S. branches and agencies of foreign banks (issuers of "Yankee
dollar" instruments) and foreign branches of foreign banks. Money Fund/VA also
may purchase obligations issued by other entities if they are: (i) guaranteed as
to principal and interest by a bank or corporation whose certificates of deposit
or commercial paper may otherwise be purchased by Money Fund/VA, or (ii) subject
to repurchase agreements (explained in the prospectus), if the collateral for
the agreement complies with Rule 2a-7.
Bank Loan Participation Agreements. Money Fund/VA may invest in bank
loan participation agreements. They provide the Fund with an undivided interest
in a loan made by the issuing bank in the proportion the Fund's interest bears
to the total principal amount of the loan. In evaluating the risk of these
investments, the Fund looks to the creditworthiness of the borrower that is
obligated to make principal and interest payments on the loan.
Time Deposits. Money Fund/VA may invest in fixed time deposits, which
are non-negotiable deposits in a bank for a specified period of time at a stated
interest rate, whether or not subject to withdrawal penalties; however, such
deposits which are subject to such penalties, other than deposits maturing in
less than 7 days, are subject to the 10% limitation applicable to illiquid
securities purchased by Money Fund/VA.
Floating Rate/Variable Rate Notes. Money Fund/VA may invest in
instruments with floating or variable interest rates. The interest rate on a
floating rate obligation is based on a stated prevailing market rate, such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate of return on
commercial paper or bank certificates of deposit, or some other standard, and is
adjusted automatically each time such market rate is adjusted. The interest rate
on a variable rate obligation is also based on a stated prevailing market rate
but is adjusted automatically at a specified interval of no less than one year.
Some variable rate or floating rate obligations in which Money Fund/VA may
invest have a demand feature entitling the holder to demand payment at an amount
approximately equal to the principal amount thereof plus accrued interest at any
time, or at specified intervals not exceeding one year. These notes may or may
not be backed by bank letters of credit. The interest rates on these notes
fluctuate from time to time. Generally, the changes in the interest rate on such
securities reduce the fluctuation in their market value. As interest rates
decrease or increase, the potential for capital appreciation or depreciation is
less than that for fixed-rate obligations of the same maturity.
<PAGE>
Master Demand Notes. Master demand notes are corporate obligations that
permit the investment of fluctuating amounts by Money Fund/VA at varying rates
of interest pursuant to direct arrangements between Money Fund/VA, as lender,
and the corporate borrower that issues the note. These notes permit daily
changes in the amounts borrowed. Money Fund/VA has the right to increase the
amount under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount. The borrower may repay up to the full
amount of the note at any time without penalty. It is not generally contemplated
that master demand notes will be traded because they are direct lending
arrangements between the lender and the borrower. There is no secondary market
for these notes, although they are redeemable and thus immediately repayable by
the borrower at face value, plus accrued interest, at any time. Accordingly,
where these obligations are not secured by letters of credit or other credit
support arrangements, Money Fund/VA's right to redeem is dependent upon the
ability of the borrower to pay principal and interest on demand. In evaluating
the master demand arrangements, the Manager considers the earning power, cash
flow, and other liquidity ratios of the issuer. If they are not rated by Rating
Organizations, Money Fund/VA may invest in them only if, at the time of an
investment, they are Eligible Securities. The Manager will continuously monitor
the borrower's financial ability to meet all of its obligations because Money
Fund/VA's liquidity might be impaired if the borrower were unable to pay
principal and interest on demand. There is no limit on the amount of the Money
Fund/VA's assets that may be invested in floating rate and variable rate
obligations. Floating rate or variable rate obligations which do not provide for
recovery of principal and interest within seven days' notice will be subject to
the 10% limitation applicable to illiquid securities purchased by Money Fund/VA.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
|_| 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or
|_| more than 50% of the outstanding shares.
The Funds' investment objectives are fundamental policies. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Funds' Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Funds' most significant investment policies are described in
the Prospectus.
|X| Do the Funds Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Funds.
|_| No Fund can buy securities issued or guaranteed by any one issuer if
(i) more than 5% of its total assets would be invested in securities of that
issuer or (ii) it would then own more than 10% of that issuer's voting
securities, or (iii) it would then own more than 10% in principal amount of that
issuer's outstanding debt securities. The restriction on debt securities does
not apply to Strategic Bond Fund/VA. All of the restrictions apply only to 75%
of each Fund's total assets. The limits do not apply to securities issued by the
U.S. Government or any of its agencies or instrumentalities.
|_| The Funds cannot lend money. However, they can invest in all or a
portion of an issue of bonds, debentures, commercial paper or other similar
corporate obligations of the types that are usually purchased by institutions,
whether or not they are publicly distributed. The Funds may also enter into
repurchase agreements, and make loans of portfolio securities.
|_| The Funds cannot concentrate investments. That means they cannot
invest 25% or more of their total assets in companies in any one industry.
Obligations of the U.S. government, its agencies and instrumentalities are not
considered to be part of an "industry" for the purposes of this restriction.
This policy does not limit investments by Money Fund/VA in obligations issued by
banks.
|_| The Funds cannot buy or sell real estate or interests in real estate.
However, the Funds can purchase debt securities secured by real estate or
interests in real estate, or issued by companies, including real estate
investment trusts, which invest in real estate or interests in real estate.
|_| The Funds cannot underwrite securities of other companies. A permitted
exception is in case a Fund is deemed to be an underwriter under the Securities
Act of 1933 when reselling any securities held in its own portfolio.
|_| The Funds cannot invest in commodities or commodity contracts, other
than the hedging instruments permitted by any of its other fundamental policies.
It does not matter whether the hedging instrument is considered to be a
commodity or commodity contract.
|_| The Funds cannot invest in the securities issued by any company for
the purpose of exercising control of management of that company.
|_| The Funds cannot invest in or hold securities of any issuer if
officers and Trustees of the Funds or the Manager individually beneficially own
more than 1/2 of 1% of the securities of that issuer and together own more than
5% of the securities of that issuer.
|_| The Funds cannot mortgage, pledge, hypothecate or otherwise encumber
any of its assets to secure a debt or a loan. However, this does not prohibit
the Funds from entering into an escrow, collateral or margin arrangement with
any of its investments.
|_| The Funds cannot invest in oil, gas or other mineral explorations or
development programs. However, the Funds may purchase options, futures
contracts, swaps and other investments which are backed by, or the investment
return from which are linked to oil, gas and mineral values.
|_| The Funds cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Funds are designated as
segregated, or margin, collateral or escrow arrangements are established, to
cover the related obligations. Examples of those activities include borrowing
money, reverse repurchase agreements, delayed-delivery and when-issued
arrangements for portfolio securities transactions, and contracts to buy or sell
derivatives, hedging instruments, options or futures.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. The Fund need not sell securities to meet
the percentage limits if the value of the investment increases in proportion to
the size of the Fund.
For purposes of the Funds' policy not to concentrate its investments as
described above, the Funds have adopted the industry classifications set forth
in Appendix B to this Statement of Additional Information. This is not a
fundamental policy.
The Board of Trustees is expected to propose that shareholders approve a
number of changes to the fundamental policies listed above. Specifically, that
proposal would eliminate all but the first and last fundamental investment
policies listed above. That proposal would also amend the fundamental policy of
the Funds on lending and borrowing. There can be no assurance that the proposal
will be submitted to shareholders by any specific date, or that once submitted,
it will be approved. If adopted, these changes are not expected to change the
operation of any Fund in any material manner. For that reason, no revision or
supplement to this Statement of Additional Information may be made to reflect
these changes if and when they are approved and implemented.
How the Funds Are Managed
Organization and History. Each Fund is an investment portfolio, or "series" of
Oppenheimer Variable Account Funds (the "Trust"), a multi-series open-end
diversified management investment company organized as a Massachusetts business
trust that presently includes ten series. Money Fund/VA, Bond Fund/VA and
Capital Appreciation Fund/VA were all organized in 1983, High Income Fund/VA,
Aggressive Growth Fund/VA and Multiple Strategies Fund/VA, were all organized in
1986, Global Securities Fund/VA was organized in 1990, Strategic Bond Fund/VA
was organized in 1993, Main Street Growth & Income Fund/VA was organized in
1995, and Small Cap Growth Fund/VA was organized in 1998. The suffix "VA" was
added to each Fund's name on May 1, 1999. Prior to that date, Oppenheimer
Capital Appreciation Fund/VA was named "Oppenheimer Growth Fund," and
Oppenheimer Main Street Growth & Income Fund/VA was named "Oppenheimer Growth &
Income Fund." Prior to May 1, 1998, Oppenheimer Aggressive Growth Fund/VA was
named "Oppenheimer Capital Appreciation Fund." All references to the Fund's
Board of Trustees and Officers refer to the Trustees and Officers, respectively,
of Oppenheimer Variable Account Funds.
The Funds are governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Funds' activities, review
their performance, and review the actions of the Manager. Although the Funds
will not normally hold annual meetings of its shareholders, they may hold
shareholder meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Declaration of Trust of Oppenheimer Variable Account Funds.
|X| Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of any Fund into two or more
classes. The Board has done so, and each Fund currently has two classes of
shares:
(1) a class with no specific name, other than the name shown two paragraphs
above, and
(2) "Service shares," which are subject to a distribution and service plan,
described under that heading below. All classes invest in the same investment
portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and o votes as a
class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of each Fund represents an
interest in that Fund proportionately equal to the interest of each other share
of the same class.
The Trustees are authorized to create new series and classes of shares.
The Trustees may reclassify unissued shares of the Funds into additional series
or classes of shares. The Trustees also may divide or combine the shares of a
class into a greater or lesser number of shares without changing the
proportionate beneficial interest of a shareholder in the Funds. Shares do not
have cumulative voting rights or preemptive or subscription rights. Shares may
be voted in person or by proxy at shareholder meetings.
|X| Meetings of Shareholders. As a Massachusetts business trust, the Funds
are not required to hold, and do not plan to hold, regular annual meetings of
shareholders. The Funds will hold meetings when required to do so by the
Investment Company Act or other applicable law. They will also do so when a
shareholder meeting is called by the Trustees or upon proper request of the
shareholders.
Shareholders have the right, upon the declaration in writing or vote of
two-thirds of the outstanding shares of all the Funds, to remove a Trustee. The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of 10% of all outstanding shares.
If the Trustees receive a request from at least 10 shareholders stating that
they wish to communicate with other shareholders to request a meeting to remove
a Trustee, the Trustees will then either make the shareholder list available to
the applicants or mail their communication to all other shareholders at the
applicants' expense. The shareholders making the request must have been
shareholders for at least six months and must hold shares of the Funds valued at
$25,000 or more or constituting at least 1% of the Funds' outstanding shares,
whichever is less. The Trustees may also take other action as permitted by the
Investment Company Act.
|X| Shareholder and Trustee Liability. The Declaration of Trust contains
an express disclaimer of shareholder or Trustee liability for the Funds'
obligations. It also provides for indemnification and reimbursement of expenses
out of a Fund's property for any shareholder held personally liable for its
obligations. The Declaration of Trust also states that upon request, a Fund
shall assume the defense of any claim made against a shareholder for any act or
obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Trust)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which a Fund would be unable to meet its obligations.
The Funds' contractual arrangements state that any person doing business
with the Funds (and each shareholder of the Funds) agrees under its Declaration
of Trust to look solely to the assets of the Fund for satisfaction of any claim
or demand that may arise out of any dealings with that Fund. Additionally, the
Trustees shall have no personal liability to any such person, to the extent
permitted by law.
Trustees and Officers of the Funds. The Trustees and officers of the Funds, and
their principal occupations and business affiliations during the past five years
are listed below. Trustees denoted with an asterisk (*) below are deemed to be
"interested persons" of the Funds under the Investment Company Act. All of the
Trustees are also trustees, directors or managing general partners of the
following Denver-based Oppenheimer funds:
Oppenheimer Cash Reserves Oppenheimer Total Return Fund,
Inc.
Oppenheimer Champion Income Fund Oppenheimer Variable Account Funds
Oppenheimer Capital Income Fund Panorama Series Fund, Inc.
Oppenheimer High Yield Fund Centennial America Fund, L. P.
Oppenheimer International Bond Centennial California Tax Exempt
Fund Trust
Oppenheimer Integrity Funds Centennial Government Trust
Oppenheimer Limited-Term Centennial Money Market Trust
Government Fund
Oppenheimer Main Street Funds, Centennial New York Tax Exempt
Inc. Trust
Oppenheimer Municipal Fund Centennial Tax Exempt Trust
Oppenheimer Real Asset Fund Oppenheimer Main Street Small Cap
Fund
Oppenheimer Strategic Income
Fund
Oppenheimer Senior Floating Rate Fund
Ms. Macaskill and Messrs. Swain, Bishop, Donohue, Farrar and Zack, who are
officers of the Fund, respectively hold the same offices with the other
Denver-based Oppenheimer funds. As of April 1, 2000, the Trustees and
officers of the Fund as a group did not beneficially own any shares of any
Fund.
William L. Armstrong, Trustee, Age: 63.
11 Carriage Lane, Littleton, Colorado 80121
Chairman of the following private mortgage banking companies: Cherry Creek
Mortgage Company (since 1991), Centennial State Mortgage Company (since 1994),
The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc.
(since 1997), and Ambassador Media Corporation (since 1984); Chairman of the
following private companies: Frontier Real Estate, Inc. (residential real estate
brokerage) (since 1994), Frontier Title (title insurance agency) (since 1995)
and Great Frontier Insurance (insurance agency) (since 1995); Director of the
following public companies: Storage Technology Corporation (computer equipment
company) (since 1991), Helmerich & Payne, Inc. (oil and gas drilling/production
company) (since 1992), UNUMProvident (insurance company) (since 1991); formerly
Director of the following public companies: International Family Entertainment
(television channel) (1991 - 1997) and Natec Resources, Inc. (air pollution
control equipment and services company) (1991 - 1995); formerly U.S. Senator
(January 1979 - January 1991).
Robert G. Avis*, Trustee, Age: 68.
One North Jefferson Ave., St. Louis, Missouri 63103
Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc.
(general partnership of private equity funds), Director of A.G. Edwards &
Sons, Inc. (a broker-dealer) and Director of A.G. Edwards Trust Companies
(trust companies), formerly, Vice Chairman of A.G. Edwards & Sons, Inc. and
A.G. Edwards, Inc. (its parent holding company) and Chairman of A.G.E. Asset
Management (an investment advisor).
William A. Baker, Trustee, Age: 85.
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
George C. Bowen, Trustee, Age: 64
9224 Bauer Court, Lone Tree, Colorado 80124
Formerly (until April 1999) Mr. Bowen held the following positions: Senior Vice
President (since September 1987) and Treasurer (since March 1985) of the
Manager; Vice President (since June 1983) and Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. ("OFDI"); Vice President (since October 1989)
and Treasurer (since April 1986) of HarbourView Asset Management Corporation;
Senior Vice President (since February 1992), Treasurer (since July 1991)
Assistant Secretary and a director (since December 1991) of Centennial Asset
Management Corporation; President, Treasurer and a director of Centennial
Capital Corporation (since June 1989); Vice President and Treasurer (since
August 1978) and Secretary (since April 1981) of Shareholder Services, Inc.;
Vice President, Treasurer and Secretary of Shareholder Financial Services, Inc.
(since November 1989); Assistant Treasurer of Oppenheimer Acquisition Corp.
(since March 1998); Treasurer of Oppenheimer Partnership Holdings, Inc. (since
November 1989); Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc. (since July 1996); Treasurer of OppenheimerFunds International
Ltd. and Oppenheimer Millennium Funds plc (since October 1997).
Edward L. Cameron, Trustee, Age: 66.
Spring Valley Road, Morristown, New Jersey 07960
Formerly (from 1974-1999) a partner with PricewaterhouseCoopers LLC (an
accounting firm) and Chairman, Price Waterhouse LLP Global Investment management
Industry Services Group (from 1994-1998).
Jon S. Fossel, Trustee, Age: 56.
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Manager, President and a director of
Oppenheimer Acquisition Corp., the Manager's parent holding company, and
Shareholder Services, Inc. and Shareholder Financial Services, Inc., transfer
agent subsidiaries of the Manager.
Sam Freedman, Trustee, Age: 59.
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of Shareholder Services, Inc.,
Chairman, Chief Executive Officer and director of Shareholder Financial
Services, Inc., Vice President and director of Oppenheimer Acquisition Corp.
and a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Trustee, Age: 70.
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products
training company), self-employed consultant (securities matters).
C. Howard Kast, Trustee, Age: 77.
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee, Age: 78.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
James C. Swain*, Chairman, Chief Executive Officer and Trustee, Age: 66.
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman of the Manager (since September 1988); formerly President and a
director of Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager and Chairman of the Board of Shareholder Services,
Inc.
Bridget A. Macaskill*, President and Trustee, Age: 51.
Two World Trade Center, New York, New York 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation, an investment adviser
subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), transfer agent subsidiaries of the Manager; President (since September
1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the
Manager's parent holding company; President (since September 1995) and a
director (since November 1989) of Oppenheimer Partnership Holdings, Inc., a
holding company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund management
subsidiary of the Manager and of Oppenheimer Millennium Funds plc; President and
a director of other Oppenheimer funds; a director of Prudential Corporation plc
(a U.K. financial service company).
Ned M. Steel, Trustee, Age: 85.
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting Nurse
Corporation of Colorado.
Charles Albers, Vice President and Portfolio Manager, Age: 60.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since April 1998); a Certified Financial
Analyst; formerly a Vice President and portfolio manager for Guardian Investor
Services, the investment management subsidiary of The Guardian Life Insurance
Company (since 1972).
Bruce Bartlett, Vice President and Portfolio Manager, Age: 50.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since April 1995); an officer of other
Oppenheimer funds; formerly a Vice President and Senior Portfolio Manager at
First of America Investment Corp.
John P. Doney, Vice President and Portfolio Manager, Age: 71.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since June 1992); prior to joining the Manager in
June 1992, he was Senior Vice President and Chief Investment Officer Equities of
National Securities & Research Corporation (mutual fund adviser) and Vice
President of the National Affiliated Investment Companies.
John S. Kowalik, Vice President and Portfolio Manager, Age: 44.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since July 1998); an officer of other
Oppenheimer funds; formerly Managing Director and Senior Portfolio Manager at
Prudential Global Advisors (June 1989 - June 1998).
Michael S. Levine, Vice President and Portfolio Manager, Age: 35.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since April 1996); formerly Assistant Portfolio
Manager of the Manager (from June 1994 - April 1996) and portfolio manager and
research associate for Amas Securities, Inc. (from February 1990 - February
1994).
Nikolaos D. Monoyios, Vice President and Portfolio Manager, Age: 51.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since April 1998); a Certified Financial Analyst;
formerly a Vice President and portfolio manager for Guardian Investor Services,
the investment management subsidiary of The Guardian Life Insurance Company
(since 1979).
David P. Negri, Vice President and Portfolio Manager, Age: 46.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since June 1989); an officer of other
Oppenheimer funds.
Jane Putnam, Vice President and Portfolio Manager, Age: 40.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since October 1995); before joining the Manager
in May 1994, she was a portfolio manager and equity research analyst for
Chemical Bank (June 1989 - May 1994).
Thomas P. Reedy, Vice President and Portfolio Manager, Age: 39.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since June 1993); an officer of other
Oppenheimer funds.
Richard H. Rubinstein, Vice President and Portfolio Manager, Age: 52.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since October 1995); an officer of
other Oppenheimer funds (since joining the Manager in June 1990).
Arthur P. Steinmetz, Vice President and Portfolio Manager, Age: 42.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since March 1993); an officer of other
Oppenheimer funds.
William L. Wilby, Vice President and Portfolio Manager, Age: 56.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since July 1994) and Vice President of
HarbourView Asset Management Corporation (since October 1993); an officer of
other Oppenheimer funds; formerly international investment strategist at Brown
Brothers Harriman & Co., prior to which he was a Managing Director and Portfolio
Manager at AIG Global Investors.
Carol E. Wolf, Vice President and Portfolio Manager, Age: 48.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager and Centennial Asset Management Corporation
(since June 1990); an officer of other Oppenheimer funds.
Andrew J. Donohue, Vice President and Secretary, Age: 49.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of OFDI; Executive Vice President, General Counsel and a director
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc., Oppenheimer Partnership Holdings, Inc.
(since September 1995) and Oppenheimer Trust Company (since March 2000);
President and a director of Centennial Asset Management Corporation (since
September 1995); President, General Counsel and a director of Oppenheimer Real
Asset Management, Inc. (since July 1996); General Counsel (since May 1996) and
Secretary (since April 1997) of Oppenheimer Acquisition Corp.; Vice President
and a director of OppenheimerFunds International Ltd. and Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds.
Brian W. Wixted, Treasurer, Age: 39.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
Robert J. Bishop, Assistant Treasurer, Age: 41.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund
Controller for the Manager.
Scott T. Farrar, Assistant Treasurer, Age: 34.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund Controller
for the Manager.
Robert G. Zack, Assistant Secretary, Age: 51.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager, Assistant Secretary of Shareholder Services, Inc.
(since May 1985), and Shareholder Financial Services, Inc. (since November
1989); Assistant Secretary of OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer of other
Oppenheimer funds.
|X| Remuneration of Trustees. The officers of the Funds and two Trustees of
the Fund (Ms. Macaskill and Mr. Swain) are affiliated with the Manager and
receive no salary or fee from the Funds. The remaining Trustees of the Funds
received the compensation shown below. The compensation from the Funds were paid
during their fiscal year ended December 31, 1999. The compensation from all of
the Denver-based Oppenheimer funds includes the compensation from the Funds and
represents compensation received as a director, trustee, managing general
partner or member of a committee of the Board during the calendar year 1999.
- --------------------------------------------------------------------
Aggregate Compensation Total Compensation
Trustee's Name and from Oppenheimer From all
Other Positions Variable Denver-Based
Account Funds Oppenheimer Funds 1
- --------------------------------------------------------------------
- --------------------------------------------------------------------
William H. Armstrong2 $1,148 $14,542
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Robert G. Avis $5,370 $67,998
- --------------------------------------------------------------------
- --------------------------------------------------------------------
William A. Baker $5,370 $67,998
- --------------------------------------------------------------------
- --------------------------------------------------------------------
George Bowen2 None $23,879
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Edward L. Cameron2 $193 $2,430
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Jon S. Fossel $5,256 $66,586
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Sam Freedman
Review Committee $5,841 $73,998
Member
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Raymond J. Kalinowski
Audit Committee Member
$5,780 $73,248
- --------------------------------------------------------------------
- --------------------------------------------------------------------
C. Howard Kast
Chairman, Audit and
Review Committees $6,226 $78,873
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Robert M. Kirchner $5,467 $69,248
Audit Committee Member
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Ned M. Steel $5,366 $67,998
- --------------------------------------------------------------------
1. For the 1999 calendar year.
2. Mr. Armstrong and Mr. Cameron were not Trustees or Directors of the
Denver-based Oppenheimer funds prior to August 24, 1999 and December 14,
1999, respectively, and Mr. Bowen was not a Trustee of the Fund prior to
December 14, 1999.
|X| Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested Trustees that enables them to elect to defer
receipt of all or a portion of the annual fees they are entitled to receive from
the Funds. Under the plan, the compensation deferred by a Trustee is
periodically adjusted as though an equivalent amount had been invested in shares
of one or more Oppenheimer funds selected by the Trustee. The amount paid to the
Trustee under the plan will be determined based upon the performance of the
selected funds.
Deferral of Trustee's fees under the plan will not materially affect the
Funds' assets, liabilities and net income per share. The plan will not obligate
the fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Funds may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
Major Shareholders. As of April 1, 2000 the holders of 5% or more of the
outstanding shares of any Fund were separate accounts of the following insurance
companies and their respective affiliates: (i) Monarch Life Insurance Company
("Monarch"), Springfield, MA; (ii) ReliaStar Bankers Security Life Insurance
Company ("ReliaStar"), Minneapolis, MN; (iii) GE Life & Annuity Assurance
Company ("GE"), Richmond, VA; (iv) Nationwide Life Insurance Company
("Nationwide"), Columbus, OH; (v) Aetna Life Insurance and Annuity Company
("Aetna"), Hartford, CT; (vi) Massachusetts Mutual Life Insurance Company,
Springfield, MA ("MassMutual"), (vii) Jefferson-Pilot Life Insurance Company,
Greensboro, NC and Alexander Hamilton Life Insurance Company of America,
Concord, NH (collectively, "Jefferson Pilot"); (viii) CUNA Mutual Group
("CUNA"), Madison, WI; (ix) American General Annuity Insurance Company, Houston,
TX ("American General"); and (x) Protective Life Insurance Company, Birmingham,
AL ("Protective"). Such shares were held as shown in Appendix C. No Service
shares of any Fund were outstanding as of that date.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and OFDI have a Code of Ethics.
It is designed to detect and prevent improper personal trading by certain
employees, including portfolio managers, that would compete with or take
advantage of the Fund's portfolio transactions. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
The Code of Ethics is an exhibit to the Fund's registration statement
filed with the Securities and Exchange Commission and can be reviewed and copied
at the SEC's Public Reference Room in Washington, D.C. You can obtain
information about the hours of operation of the Public Reference Room by calling
the SEC at 1-202-942-8090. The Code of Ethics can also be viewed as part of the
Fund's registration statement on the SEC's EDGAR database at the SEC's Internet
web site at http://www.sec.gov. Copies may be obtained, after paying a
duplicating fee, by electronic request at the following E-mail address:
[email protected]., or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
|X| The Investment Advisory Agreements. The Manager provides investment
advisory and management services to each Fund under an investment advisory
agreement between the Manager and the Trust for each Fund. The Manager selects
securities for the Funds' portfolios and handles their day-to-day business. The
portfolio managers of the Funds are employed by the Manager and are the persons
who are principally responsible for the day-to-day management of the Funds'
portfolios. Other members of the Manager's Teams provide the portfolio managers
with counsel and support in managing the Funds' portfolios. For Global
Securities Fund/VA, this includes George Evans and Frank Jennings. Similarly,
other members of the Manager's Fixed Income Portfolio Department, particularly
portfolio analysts, traders and other portfolio managers having broad experience
with domestic and international government and fixed-income securities, provide
the portfolio managers of the High Income Fund/VA, Bond Fund/VA and Strategic
Bond Fund/VA with support in managing the portfolios of those Funds.
The agreements require the Manager, at its expense, to provide the Funds
with adequate office space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Funds.
Those responsibilities include the compilation and maintenance of records with
respect to operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for continuous public
sale of shares of the Funds.
The Funds pay expenses not expressly assumed by the Manager under the
advisory agreement, or by the Distributor under the General Distributor's
Agreements for Service shares. The advisory agreement lists examples of expenses
paid by the Funds. The major categories relate to interest, taxes, brokerage
commissions, fees to certain Trustees, legal and audit expenses, custodian and
transfer agent expenses, share issuance costs, certain printing and registration
costs and non-recurring expenses, including litigation costs. The management
fees paid by the Funds to the Manager are calculated at the rates described in
the Prospectus, which are applied to the assets of each Fund as a whole. Prior
to May 1, 1999, the advisory agreement for Aggressive Growth Fund/VA did not
include a breakpoint above $800 million. In the event more than one class of
shares is issued, the fees are allocated to each class of shares based upon the
relative proportion of a Fund's net assets represented by that class.
- -----------------------------------------------------------------
Management Fees for the Fiscal Year Ended December 31:
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Fund: 1997 1998 1999
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Money Fund/VA $ 601,698 $ 619,030 $ 749,665
- -----------------------------------------------------------------
- -----------------------------------------------------------------
High Income Fund/VA $1,667,490 $2,383,008 $2,511,521
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Bond Fund/VA $3,281,556 $4,218,231 $4,539,138
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Aggressive Growth $5,324,309 $6,564,650 $8,700,904
Fund/VA
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Capital Appreciation $2,859,202 $4,369,487 $6,845,473
Fund/VA
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Multiple Strategies $4,068,887 $4,584,184 $4,271,996
Fund/VA
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Global Securities $5,615,606 $7,167,836 $8,336,850
Fund/VA
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Strategic Bond Fund/VA $1,197,613 $1,860,227 $2,066,323
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Main Street Growth
& Income Fund/VA $ 790,577 $1,742,253 $2,864,220
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Small Cap Growth
Fund/VA(2) N/A $2,219(1) $20,414
- -----------------------------------------------------------------
- --------------------
(1) From May 1, 1998 (commencement of operations) to December 31, 1998.
(2) The Manager voluntarily reimbursed certain expenses other than management
fees during the periods shown.
The investment advisory agreements state that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss resulting from a good faith
error or omission on its part with respect to any of its duties under the
agreement.
The agreements permit the Manager to act as investment advisor for any other
person, firm or corporation and to use the name "Oppenheimer" in connection with
other investment companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment advisor to a Fund,
the Manager may withdraw the right of that Fund to use the name "Oppenheimer" as
part of its name.
Brokerage Policies of the Funds
Brokerage Provisions of the Investment Advisory Agreements. One of the duties of
the Manager under the investment advisory agreements is to arrange the portfolio
transactions for the Funds. The advisory agreements contain provisions relating
to the employment of broker-dealers to effect the Funds' portfolio transactions.
The Manager is authorized by the advisory agreements to employ broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act. The Manager may employ broker-dealers that the Manager thinks, in
its best judgment based on all relevant factors, will implement the policy of
the Funds to obtain, at reasonable expense, the "best execution" of the Funds'
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent consistent
with the interests and policies of the Funds as established by its Board of
Trustees.
Under the investment advisory agreements, the Manager may select brokers
(other than affiliates) that provide brokerage and/or research services for the
Funds and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Funds' portfolio transactions, the Manager may also consider
sales of shares of the Funds and other investment companies for which the
Manager or an affiliate serves as investment adviser.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Funds subject to the provisions of the investment advisory agreements and
the procedures and rules described above. Generally, the Manager's portfolio
traders allocate brokerage based upon recommendations from the Manager's
portfolio managers. In certain instances, portfolio managers may directly place
trades and allocate brokerage. In either case, the Manager's executive officers
supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Funds may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Funds ordinarily use the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates.
Other funds advised by the Manager have investment policies similar to those
of the Funds. Those other funds may purchase or sell the same securities as the
Funds at the same time as the Funds, which could affect the supply and price of
the securities. If two or more funds advised by the Manager purchase the same
security on the same day from the same dealer, the transactions under those
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.
Most purchases of debt obligations are principal transactions at net prices.
This affects a substantial portion of the portfolio transactions of Money
Fund/VA, High Income Fund/VA, Bond Fund/VA and Strategic Bond Fund/VA. Instead
of using a broker for those transactions, the Funds normally deal directly with
the selling or purchasing principal or market maker unless the Manager
determines that a better price or execution can be obtained by using the
services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
Purchases from dealers include a spread between the bid and asked prices. The
Funds seek to obtain prompt execution of these orders at the most favorable net
price.
The investment advisory agreements permit the Manager to allocate brokerage
for research services. The research services provided by a particular broker may
be useful only to one or more of the advisory accounts of the Manager and its
affiliates. The investment research received for the commissions of those other
accounts may be useful both to one of the Funds and one or more of the Manager's
other accounts. Investment research may be supplied to the Manager by a third
party at the instance of a broker through which trades are placed.
Investment research services include information and analysis on particular
companies and industries as well as market or economic trends and portfolio
strategy, market quotations for portfolio evaluations, information systems,
computer hardware and similar products and services. If a research service also
assists the Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Manager in the investment decision-making process may be paid
in commission dollars.
The Board of Trustees permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
to the Manager that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal transaction.
The Board of Trustees permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broadens the scope and supplements
the research activities of the Manager. That research provides additional views
and comparisons for consideration, and helps the Manager to obtain market
information for the valuation of securities that are either held in the Fund's
portfolio or are being considered for purchase. The Manager provides information
to the Board about the commissions paid to brokers furnishing such services,
together with the Manager's representation that the amount of such commissions
was reasonably related to the value or benefit of such services.
The (i) total brokerage commissions paid by the Funds (other than Money
Fund/VA, which paid no brokerage commissions), not including spreads or
concessions on principal transactions on a net trade basis, for the Funds'
fiscal year ended December 31, 1997, 1998 and 1999; and (ii) for the Funds'
fiscal year ended December 31, 1999, the amount of transactions directed to
brokers for research services, and the amount of the commissions paid to
broker-dealers for those services, is shown in the chart below:
- ----------------------------------------------------------------------
Transaction Commissions
Total Brokerage Commissions Directed Paid
Paid by the Funds for For
Research 1 Research 1
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Fund 1997 1998 1999 1999 1999
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
High Income
Fund/VA $ 20,256 $ 62,251 $ 12,736 $605,887 $50
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Bond Fund/VA $ 26,799 $ 91,170 $ 294,377 $13,530,189 $1,837
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Strategic
Bond $ 17,121 $219,537 $ 37,459 $4,409,292 $3,243
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Aggressive
Growth $810,749 $1,264,440 $1,260,968 $308,986,39 $361,679
Fund/VA
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Capital
Appreciation $506,443 $805,08 $1,229,872 $499,225,91 $695,842
Fund/VA
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Small Cap
Growth -- $ 829 $ 4,819 $359,409 $1,054
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Global
Securities $2,114,52 $2,900,162 $3,026,315 $773,222,45 $1,847,998
Fund/VA
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Multiple
Strategies $500,783 $ 430,211 $269,657 $53,879,024 $ 104,269
Fund/VA
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Main Street
Growth $209,630 $ 458,120 $1,278,160 $140,243,57 $223,423
& Income
Fund/VA
- ----------------------------------------------------------------------
1. The amount of transactions directed to brokers for research services and the
amount of the commissions paid to brokers for those services are shown in these
columns.
Distribution and Service Plans (Service Shares Only)
Under its General Distributor's Agreements with the Funds,
OppenheimerFunds Distributor, Inc. will only act as the principal underwriter
of the Funds' Service shares.
Each Fund has adopted a Distribution and Service Plan (the "Plan") for its
Service shares under Rule 12b-1 of the Investment Company Act, pursuant to which
each Fund will make payments to the Distributor in connection with the
distribution and/or servicing of Service shares. The Distributor will pay
insurance company separate account sponsors and other entities that offer and/or
provide services to Service shares, as described in the Prospectus. Each Plan
has been approved by a vote of (i) the Board of Trustees of the Trust, including
a majority of the Independent Trustees, cast in person at a meeting called for
the purpose of voting on that Plan, and (ii) the Manager as the then-sole
initial holder of such shares. Prior to May 1, 2000, no Service shares have been
issued and therefore no payments have been made prior to that date.
Under the Plans, no payment will be made to any insurance company separate
account sponsor or affiliate thereof under a Fund's Plan (each is referred to as
a "Recipient") in any quarter if the aggregate net assets of a Fund's Service
shares held by the Recipient for itself and its customers did not exceed a
minimum amount, if any, that may be determined from time to time by a majority
of the Trust's Independent Trustees. Initially, the Board of Trustees has set
the fee at 0.15% of average annual net assets and set no minimum amount.
Under the Plans, the Manager and the Distributor may make payments to
affiliates and, in their sole discretion, from time to time may use their own
resources (which, as to the Manager, may include profits derived from the
advisory fee it receives from each respective Fund) to make payments to
Recipients for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or decrease
the amount of distribution assistance payments they make to Recipients from
their own assets.
Unless terminated as described below, each Plan continues in effect from
year to year but only as long as such continuance is specifically approved at
least annually by the Trust's Board of Trustees and its Independent Trustees by
a vote cast in person at a meeting called for the purpose of voting on such
continuance. Any Plan may be terminated at any time by the vote of a majority of
the Independent Trustees or by the vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding Service shares. For
purposes of voting with respect to the Plans, Account owners are considered to
be shareholders of a Fund's shares. No Plan may be amended to increase
materially the amount of payments to be made unless such amendment is approved
by Account owners of the class affected by the amendment. All material
amendments must be approved by the Board and a majority of the Independent
Trustees.
While the plans are in effect and Service shares are outstanding, the
Treasurer of the Trust must provide separate written reports to the Trust's
Board of Trustees at least quarterly describing the amount of payments and the
purpose of the payment made pursuant to each Plan. These reports are subject to
the review and approval of the Independent Trustees.
Performance of the Funds
Explanation of Performance Terminology. The Funds use a variety of terms to
illustrate their investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Funds'
performance as of the Funds' most recent fiscal year end. You can obtain current
performance information by following the instructions in the prospectus for your
insurance product, or by calling the Funds' Transfer Agent at 1-888-470-0861.
The Funds' illustrations of their performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by a Fund of its performance data must
include the average annual total returns for the advertised class of shares of
that Fund. Those returns must be shown for the 1, 5 and 10-year periods (or the
life of the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement (or its submission for
publication).
No performance information is presented for any Fund's Service shares,
which were not offered prior to May 1, 2000. Because Service shares are subject
to an additional fee, the performance is expected to be lower for any given
period.
Use of standardized performance calculations enables an investor to
compare the Funds' performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Funds' performance information as a basis for comparison with other investments:
|_| Total returns measure the performance of a hypothetical account in a
Fund over various periods and do not show the performance of each shareholder's
account. Your account's performance will vary from the model performance data if
you buy or sell shares during the period, or you bought your shares at a
different time and price than the shares used in the model.
|_| The Fund's performance does not reflect the charges deducted from an
investor's separate account by the insurance company or other sponsor of that
separate account, which vary from product to product. If these charges were
deducted, performance will be lower than as described in the Fund's Prospectus
and Statement of Additional Information. In addition, the separate accounts may
have inception dates different from those of the Funds. The sponsor for your
insurance product can provide performance information that reflects those
charges and inception dates.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The Funds' performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.
|_| The principal value of the Funds' shares and total returns are not
guaranteed and normally will fluctuate on a daily basis.1
|_| When an investor's shares are redeemed, they may be worth more or
less than their original cost.1
|_| Total returns for any given past period represent historical
performance information and are not, and should not be considered, a prediction
of future returns. The Funds' total returns should not be expected to be the
same as the returns of other Oppenheimer funds, whether or not such other funds
have the same portfolio managers and/or similar names.
The Funds' total returns are affected by market conditions, the quality of
that Funds' investments, the maturity of debt investments, the types of
investments that Fund holds, and its operating expenses.
|X| Total Return Information. There are different types of "total
returns" to measure the Funds' performance. Total return is the change in
value of a hypothetical investment in a Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares and that the investment is redeemed at the end of the
period. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return shows
the average rate of return for each year in a period that would produce the
cumulative total return over the entire period. However, average annual total
returns do not show actual year-by-year performance. The Funds use
standardized calculations for its total returns as prescribed by the SEC. The
methodology is discussed below.
- -----------------
1. These statements do not apply to Money Fund/VA, which seeks to maintain a
stable net asset value of $1.00 per shares. There can be no assurance that Money
Fund/VA will be able to do so.
|_| Average Annual Total Return. The "average annual total return" of
each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
( ERV )
( ----- ) - 1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. The "cumulative total return"
calculation measures the change in value of a hypothetical investment of $1,000
over an entire period of years. Its calculation uses some of the same factors as
average annual total return, but it does not average the rate of return on an
annual basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
The Funds' Total Returns for the Periods Ended 12/31/99
- -----------------------------------------------------------------
Average Annual Total Return For:
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Five Ten Cumulative
Fiscal Year Year InceptiTotal
Year Period Period to Return
Fund Ended Ended Ended 12/31/9From
12/31/99 12/31/99 12/31/99 Inception1
to
12/31/99
- -----------------------------------------------------------------
- -----------------------------------------------------------------
High Income Fund/VA 4.29% 10.24% 12.65% 11.66% 229.17%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Bond Fund/VA - 7.10% 7.76% 8.96% 111.14%
1.52%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Aggressive Growth 83.60% 29.70% 20.43% 541.50%
Fund/VA 19.16%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Capital
Appreciation 41.66% 30.65% 18.46% 17.61% 444.08%
Fund/VA
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Multiple 11.80% 14.40% 10.83% 179.74%
Strategies Fund/VA 11.59%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Global Securities 58.48% 21.67% n/a 312.83%
Fund/VA 16.79%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Strategic Bond 2.83% 8.25% n/a 49.13%
Fund/VA 6.18%
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Main Street Growth
& 21.71% n/a n/a 25.80% 180.20%
Income Fund/VA
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Small Cap Growth 46.56% n/a n/a
Fund/VA 22.74% 40.70%
- -----------------------------------------------------------------
- ---------------
(1)Inception dates are as follows: 4/30/86 for High Income Fund/VA; 4/3/85 for
Bond Fund/VA and Capital Appreciation Fund/VA; 8/15/86 for Aggressive Growth
Fund/VA; 2/9/87 for Multiple Strategies Fund/VA; 11/12/90 for Global
Securities Fund/VA; 5/3/93 for Strategic Bond Fund/VA; 7/5/95 for Main Street
Growth & Income Fund/VA and 5/1/98 for Small Cap Fund./VA. For inception
dates of Service shares, call 1-888-470-0861.
|_| Standardized Yield. The "standardized yield" (sometimes referred to just as
"yield") is shown for a stated 30-day period. It is not based on actual
distributions paid by the Fixed Income Funds to shareholders in the 30-day
period, but is a hypothetical yield based upon the net investment income from
the Fund's portfolio investments for that period. It may therefore differ from
the "dividend yield" for the same class of shares, described below.
Standardized yield is calculated using the following formula set forth in
rules adopted by the Securities and Exchange Commission, designed to assure
uniformity in the way that all funds calculate their yields:
a - b 6
Standardized Yield = 2 [ ----- + 1 ) - 1]
cd
The symbols above represent the following factors:
a =dividends and interest earned during the 30-day period.
b =expenses accrued for the period (net of any expense assumptions).
c =the average daily number of shares of that class outstanding during
the 30-day period that were entitled to receive dividends.
d =the maximum offering price per share of that class on the last day of
the period, adjusted for undistributed net investment income.
The standardized yield for a particular 30-day period may differ from the
yield for other periods. The SEC formula assumes that the standardized yield for
a 30-day period occurs at a constant rate for a six-month period and is
annualized at the end of the six-month period. Additionally, because each class
of shares is subject to different expenses, it is likely that the standardized
yields of the Fund's classes of shares will differ for any 30-day period.
|_| Dividend Yield. The Fixed Income Funds may quote a "dividend
yield" for each class of its shares. Dividend yield is based on the dividends
paid on a class of shares during the actual dividend period. To calculate
dividend yield, the dividends of a class declared during a stated period are
added together, and the sum is multiplied by 12 (to annualize the yield) and
divided by the maximum offering price on the last day of the dividend period.
Because the Fixed Income Funds pay their annual dividend in March of each year,
dividend yield is shown for the 30 days ended March 31, 1999. The formula is
shown below:
Dividend Yield = dividends paid x 12/maximum offering price (payment date)
- ----------------------------------------------------------------------
Standardized Yield Dividend Yield for
for the 30-Day Period the 30-Day Period
Fund Ended 12/31/99 Ended
3/31/99
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
High Income Fund/VA 11.02% 11.32%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Bond Fund/VA 7.49% 8.64%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Strategic Bond Fund/VA 10.05% 8.76%
- ----------------------------------------------------------------------
|_| Money Fund/VA Yields. The current yield for Money Fund/VA is
calculated for a seven-day period of time as follows. First, a base period
return is calculated for the seven-day period by determining the net change in
the value of a hypothetical pre-existing account having one share at the
beginning of the seven-day period. The change includes dividends declared on the
original share and dividends declared on any shares purchased with dividends on
that share, but such dividends are adjusted to exclude any realized or
unrealized capital gains or losses affecting the dividends declared. Next, the
base period return is multiplied by 365/7 to obtain the current yield to the
nearest hundredth of one percent.
The compounded effective yield for a seven-day period is calculated by
(1) adding 1 to the base period return (obtained as described above),
(2) raising the sum to a power equal to 365 divided by 7, and
(3) subtracting 1 from the result.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each daily
dividend to the nearest full cent. The calculation of yield under either
procedure described above does not take into consideration any realized or
unrealized gains or losses on the Fund's portfolio securities which may affect
dividends. Therefore, the return on dividends declared during a period may not
be the same on an annualized basis as the yield for that period.
Other Performance Comparisons. The Funds may compare their performance annually
to that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Funds may also compare their performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Funds may publish the rankings
of their performance by Lipper Analytical Services, Inc. Lipper is a
widely-recognized independent mutual fund monitoring service. Lipper monitors
the performance of regulated investment companies, including the Funds, and
ranks their performance for various periods based on categories relating to
investment styles. The Lipper performance rankings are based on total returns
that include the reinvestment of capital gain distributions and income dividends
but do not take sales charges or taxes into consideration. Lipper also publishes
"peer-group" indices of the performance of all mutual funds in a category that
it monitors and averages of the performance of the funds in particular
categories.
|X| Morningstar Ratings and Rankings. From time to time the star rating
and ranking of the performance of separate accounts that hold Fund shares will
be determined by Morningstar, an independent mutual fund monitoring service.
Morningstar rates and ranks separate accounts that hold mutual funds in broad
investment categories. The results may be published by or for the Funds or the
separate account sponsors.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures one-, three-, five- and
ten-year average annual total returns (depending on the inception of the
separate account) in excess of 90-day U.S. Treasury bill returns after
considering the fund's sales charges and expenses. Risk measures a separate
account performance below 90-day U.S. Treasury bill returns. Risk and investment
return are combined to produce star ratings reflecting performance relative to
the average fund in a fund's category. Five stars is the highest rating (top 10%
of separate accounts in a category), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average" (next 22.5%)
and one star is "lowest" (bottom 10%). The current overall star rating is the
separate account's 3-year rating or its combined 3- and 5-year rating (weighted
60%/40% respectively), or its combined 3-, 5-, and 10- year rating (weighted
40%, 30% and 30%, respectively), depending on the inception date of the separate
accounts. Ratings are subject to change monthly.
The total return rating of a separate account holding shares of a Fund may
also be compared to that of other separate accounts in its Morningstar category,
in addition to its star ratings. Those total return ratings are percentages from
one percent to one hundred percent and are not risk adjusted. For example, if a
separate account is in the 94th percentile, that means that 94% of the separate
accounts in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Funds may include in advertisements and
sales literature performance information about the Funds cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The Funds' performance may
be compared in publications to the performance of various market indices or
other investments, and averages, performance rankings or other benchmarks
prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Funds' shares to the
return on fixed-income investments available from banks and thrift institutions.
Those include certificates of deposit, ordinary interest-paying checking and
savings accounts, and other forms of fixed or variable time deposits, and
various other instruments such as Treasury bills. However, the Funds' returns
and share price are not guaranteed or insured by the FDIC or any other agency
and will fluctuate daily,1 while bank depository obligations may be insured by
the FDIC and may provide fixed rates of return. Repayment of principal and
payment of interest on Treasury securities is backed by the full faith and
credit of the U.S. government.
- -----------------
1. These statements do not apply to Money Fund/VA, which seeks to maintain a
stable net asset value of $1.00 per shares. There can be no assurance that Money
Fund/VA will be able to do so.
From time to time, the Funds may publish rankings or ratings of the
Manager or Transfer Agent, and of the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder and
investor services by third parties may include comparisons of their services to
those provided by other mutual fund families selected by the rating or ranking
services. They may be based upon the opinions of the rating or ranking service
itself, using its research or judgment, or based upon surveys of investors,
brokers, insurance sponsors, shareholders or others.
- -------------------------------------------------------------------------------
ABOUT YOUR ACCOUNT
- -------------------------------------------------------------------------------
How to Buy and Sell Shares
Shares of the Funds are sold to provide benefits under variable life
insurance policies and variable annuity and other insurance company separate
accounts, as explained in the Funds' Prospectuses for the Funds and for the
insurance product you have selected. Therefore, instructions from an investor to
buy or sell shares of the Funds should be directed to the insurance sponsor for
the investor's separate account, or that insurance sponsor's agent.
|X| Allocation of Expenses. The Funds pay expenses related to its daily
operations, such as custodian bank fees, Trustees' fees, transfer agency fees,
legal fees and auditing costs. Those expenses are paid out of the Fund's assets
and are not paid directly by shareholders. However, those expenses reduce the
net asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
For any Fund that has two classes of shares outstanding, the methodology
for calculating the net asset value, dividends and distributions of the Fund's
share classes recognizes two types of expenses. General expenses that do not
pertain specifically to any one class are allocated pro rata to the shares of
all classes. The allocation is based on the percentage of the Fund's total
assets that is represented by the assets of each class, and then equally to each
outstanding share within a given class. Such general expenses include management
fees, legal, bookkeeping and audit fees, printing and mailing costs of
shareholder reports, Prospectuses, Statements of Additional Information and
other materials for current shareholders, fees to unaffiliated Trustees,
custodian bank expenses, share issuance costs, organization and start-up costs,
interest, taxes and brokerage commissions, and non-recurring expenses, such as
litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include 12b-1 distribution and service fees of Service shares, transfer
and shareholder servicing agent fees and expenses, and shareholder meeting
expenses (to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Funds are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done by dividing the value of the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding. The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for
example, in case of weather emergencies or on days falling before a holiday).
The Exchange's most recent annual announcement (which is subject to change)
states that it will close on New Year's Day, Presidents' Day, Martin Luther
King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Funds' net asset
values will not be calculated on those days, and the values of some of the
Fund's portfolio securities may change significantly on those days, when
shareholders may not purchase or redeem shares. Additionally, trading on
European and Asian stock exchanges and over-the-counter markets normally is
completed before the close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Funds' calculation of their net asset values that day unless
the Board of Trustees determines that the event is likely to effect a material
change in the value of the security. The Manager may make that determination,
under procedures established by the Board.
|X| Securities Valuation.1 The Funds' Board of Trustees has established
procedures for the valuation of the Funds' securities. In general those
procedures are as follows:
|_| Equity securities traded on a U.S. securities exchange or on NASDAQ
are valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which they
are traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they
are valued at the last reported sale price preceding the valuation
date if it is within the spread of the closing "bid" and "asked"
prices on the valuation date or, if not, at the closing "bid" price
on the valuation date.
|_| Equity securities traded on a foreign securities exchange generally
are valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Trustees, or
(2) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the basis
of reasonable inquiry, from two market makers in the security.
- -----------------
1. These statements do not apply to Money Fund/VA, which seeks to maintain a
stable net asset value of $1.00 per shares. There can be no assurance that Money
Fund/VA will be able to do so.
|_| Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Funds' Board
of Trustees or obtained by the Manager from two active market makers in
the security on the basis of reasonable inquiry.
|_| The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Funds' Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when issued, (2)
debt instruments that had a maturity of 397 days or less when issued and
have a remaining maturity of more than 60 days, and (3) non-money market
debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or less.
|_| The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1) money market debt securities held by a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
|_| Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield, and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be valued at the last sale
price on the preceding trading day if it is within the spread of the closing
"bid" and "asked" prices on the principal exchange or on NASDAQ on the valuation
date. If not, the value shall be the closing bid price on the principal exchange
or on NASDAQ on the valuation date. If the put, call or future is not traded on
an exchange or on NASDAQ, it shall be valued by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is available.
When a Fund writes an option, an amount equal to the premium received is
included in that Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by a Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by a Fund expires, that Fund has a gain in the amount of the
premium. If that Fund enters into a closing purchase transaction, it will have a
gain or loss, depending on whether the premium received was more or less than
the cost of the closing transaction. If a Fund exercises a put it holds, the
amount that Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
Money Fund/VA Net Asset Valuation Per Share. Money Fund/VA will seek to maintain
a net asset value of $1.00 per share for purchases and redemptions. There can be
no assurance it will do so. Money Fund/VA operates under Rule 2a-7 under which
it may use the amortized cost method of valuing their shares. The Funds' Board
of Trustees has adopted procedures for that purpose. The amortized cost method
values a security initially at its cost and thereafter assumes a constant
amortization of any premium or accretion of any discount, regardless of the
impact of fluctuating interest rates on the market value of the security. This
method does not take into account unrealized capital gains or losses.
The Funds' Board of Trustees has established procedures intended to
stabilize Money Fund/VA's net asset value at $1.00 per share. If Money Fund/VA's
net asset value per share were to deviate from $1.00 by more than 0.5%, Rule
2a-7 requires the Board promptly to consider what action, if any, should be
taken. If the Trustees find that the extent of any such deviation may result in
material dilution or other unfair effects on shareholders, the Board will take
whatever steps it considers appropriate to eliminate or reduce such dilution or
unfair effects, including, without limitation, selling portfolio securities
prior to maturity, shortening the average portfolio maturity, withholding or
reducing dividends, reducing the outstanding number of shares of that Fund
without monetary consideration, or calculating net asset value per share by
using available market quotations.
As long as Money Fund/VA uses Rule 2a-7, it must abide by certain
conditions described in the Prospectus which limit the maturity of securities
that Fund buys. Under Rule 2a-7, the maturity of an instrument is generally
considered to be its stated maturity (or in the case of an instrument called for
redemption, the date on which the redemption payment must be made), with special
exceptions for certain variable rate demand and floating rate instruments.
Repurchase agreements and securities loan agreements are, in general, treated as
having maturity equal to the period scheduled until repurchase or return, or if
subject to demand, equal to the notice period.
While amortized cost method provides certainty in valuation, there may be
periods during which the value of an instrument, as determined by amortized
cost, is higher or lower than the price Money Fund/VA would receive if it sold
the instrument. During periods of declining interest rates, the daily yield on
shares of that Fund may tend to be lower (and net investment income and daily
dividends higher) than market prices or estimates of market prices for its
portfolio. Thus, if the use of amortized cost by the funds resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in Money
Fund/VA would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values, and existing investors in
that Fund would receive less investment income than if Money Fund/VA were priced
at market value. Conversely, during periods of rising interest rates, the daily
yield on shares of that Fund will tend to be higher and its aggregate value
lower than that of a portfolio priced at market value. A prospective investor
would receive a lower yield than from an investment in a portfolio priced at
market value, while existing investors in Money Fund/VA would receive more
investment income than if that Fund were priced at market value.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The dividends and distributions paid by a
class of shares will vary from time to time depending on market conditions, the
composition of the Funds' portfolios, and expenses borne by the Funds or borne
separately by a class (if more than one class of shares are outstanding).
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. Dividends on Service shares are expected to be
lower. That is because of the effect of the additional fee on Service shares.
Those dividends will also differ in amount as a consequence of any difference in
the net asset values of the different classes of shares.
Tax Status of the Fund's Dividends and Distributions. The federal tax treatment
of the Funds' dividends and capital gains distributions is briefly highlighted
in the Prospectus, and may also be explained in the prospectus for the insurance
product you have selected.
The Funds intend to qualify as a "regulated investment company" under the
Internal Revenue Code (although it reserves the right not to qualify). If the
Funds qualify as "regulated investment companies" under the Internal Revenue
Code, they will not be liable for federal income taxes on amounts paid by it as
dividends and distributions. The Funds qualified as regulated investment
companies in its last fiscal year. The Internal Revenue Code contains a number
of complex tests relating to qualification which the Funds might not meet in any
particular year. If it did not so qualify, the Funds would be treated for tax
purposes as an ordinary corporation and receive no tax deduction for payments
made to shareholders.
Additional Information About the Funds
The Transfer Agent. OppenheimerFunds Services, Inc., the Fund's Transfer Agent,
is a division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders of record (the participating
insurance companies that hold shares in their separate accounts). It also
handles administrative functions. It acts on an "at-cost" basis. It also acts as
shareholder servicing agent for the other Oppenheimer funds. Contract owners
should refer inquiries about their accounts as directed by the instructions in
the prospectus of their insurance product.
The Custodian Bank. The Bank of New York is the custodian bank for the Funds'
assets. The custodian bank's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the delivery of such
securities to and from the Funds. It will be the practice of the Funds to deal
with the custodian bank in a manner uninfluenced by any banking relationship the
custodian bank may have with the Manager and its affiliates. The Funds' cash
balances with the custodian bank in excess of $100,000 are not protected by
Federal deposit insurance. Those uninsured balances at times may be substantial.
Independent Auditors. Deloitte & Touche LLP are the independent auditors of the
Funds. They audit the Funds' financial statements and perform other related
audit services. They also act as auditors for certain other funds advised by the
Manager and its affiliates.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Money Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppeneheimer Money Fund/VA (which is a series
of Oppenheimer Variable Account Funds) as of December 31, 1999, the related
statement of operations for the year then ended, the statements of changes in
net assets for the years ended December 31, 1999 and 1998 and the financial
highlights for the period January 1, 1995, to December 31, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Money Fund/VA as of December 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- --------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
Amount Note 1
================================================================================================================================
<S> <C> <C>
Direct Bank Obligations--5.4%
- --------------------------------------------------------------------------------------------------------------------------------
Bank of America NA:
6.12%, 1/6/00 $2,000,000 $ 2,000,000
- --------------------------------------------------------------------------------------------------------------------------------
Dresdner Bank AG:
6.09%, 1/5/00 4,000,000 4,000,004
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Bank NA Minneapolis:
5.96%, 3/22/00(1) 5,000,000 5,000,000
-----------
Total Direct Bank Obligations 11,000,004
================================================================================================================================
Letters of Credit--2.5%
- --------------------------------------------------------------------------------------------------------------------------------
Dresdner Bank AG, guaranteeing commercial paper of Louis Dreyfus Corp., Series DR2:
6.85%, 1/18/00 5,000,000 4,983,826
================================================================================================================================
Short-Term Notes--91.3%
- --------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--2.5%
British Aerospace North America, Inc.:
6.14%, 3/10/00(1) 5,000,000 4,941,158
- --------------------------------------------------------------------------------------------------------------------------------
Asset-Backed--22.3%
Asset Backed Capital Finance, Inc.:
6.05%, 1/18/00(1) 5,000,000 4,985,715
- --------------------------------------------------------------------------------------------------------------------------------
Asset-Securitization Cooperative:
5.82%, 2/24/00(1) 4,000,000 3,965,080
- --------------------------------------------------------------------------------------------------------------------------------
Beta Finance, Inc.:
5.73%, 2/10/00(1) 5,000,000 4,968,167
- --------------------------------------------------------------------------------------------------------------------------------
Breeds Hill Capital Co. LLC, Series A:
5.91%, 3/16/00(1) 4,418,000 4,363,603
- --------------------------------------------------------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers, Inc., Series A:
5.85%, 3/17/00 2,500,000 2,469,125
- --------------------------------------------------------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers, Inc., Series B:
6.17%, 3/15/00 2,100,000 2,073,366
- --------------------------------------------------------------------------------------------------------------------------------
Eureka Securitization, Inc.:
5.98%, 1/28/00(1) 3,700,000 3,683,295
- --------------------------------------------------------------------------------------------------------------------------------
Lexington Parker Capital Co. LLC:
5.92%, 3/17/00(1) 5,000,000 4,936,139
- --------------------------------------------------------------------------------------------------------------------------------
Moat Funding LLC:
6.35%, 1/14/00(1) 3,500,000 3,491,974
- --------------------------------------------------------------------------------------------------------------------------------
Preferred Receivables Funding Corp.:
5.88%, 2/29/00(1) 5,000,000 4,951,817
- --------------------------------------------------------------------------------------------------------------------------------
Sigma Finance, Inc.:
6.07%, 1/21/00(1) 5,000,000 4,983,139
-----------
44,871,420
- --------------------------------------------------------------------------------------------------------------------------------
Automotive--3.7%
BMW US Capital Corp.:
6.01%, 3/21/00 7,500,000 7,399,833
Oppenheimer Money Fund/VA 3
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Principal Value
Amount Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Banks--2.5%
First Chicago Financial Corp.:
5.79%, 1/20/00(1) $5,000,000 $ 4,984,721
- --------------------------------------------------------------------------------------------------------------------------------
Beverages--1.2%
Coca-Cola Enterprises, Inc.:
5.47%, 1/28/00(1) 2,500,000 2,489,744
- --------------------------------------------------------------------------------------------------------------------------------
Broker/Dealers--15.4%
Banc of America Securities LLC:
5.95%, 1/3/00(2) 5,000,000 5,000,000
- --------------------------------------------------------------------------------------------------------------------------------
Bear Stearns Cos., Inc.:
5.83%, 1/11/00 3,500,000 3,494,332
- --------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group LP:
5.60%, 1/27/00 3,000,000 2,987,867
- --------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.:
5.85%, 2/7/00 3,000,000 2,981,963
6%, 1/31/00 2,600,000 2,586,827
- --------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley, Dean Witter & Co.:
4.50%, 6/8/00(2) 3,500,000 3,500,000
5.79%, 2/28/00 4,400,000 4,358,955
- --------------------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc.:
5.44%, 1/26/00 6,000,000 5,975,875
-----------
30,885,819
- --------------------------------------------------------------------------------------------------------------------------------
Building Materials--2.4%
Compagnie de Saint-Gobain:
5.80%, 3/27/00(1) 5,000,000 4,930,722
- --------------------------------------------------------------------------------------------------------------------------------
Commercial Finance--5.9%
Caterpillar Financial Services Corp.:
6.10%, 4/3/00 6,000,000 5,905,450
- --------------------------------------------------------------------------------------------------------------------------------
Heller Financial, Inc., Series H:
6.33%, 6/1/00(2) 1,000,000 1,000,341
- --------------------------------------------------------------------------------------------------------------------------------
Homeside Lending, Inc.:
5.86%, 2/3/00 5,000,000 4,973,142
-----------
11,878,933
- --------------------------------------------------------------------------------------------------------------------------------
Consumer Services--3.7%
Prudential Funding Corp.:
5.79%, 1/26/00 4,500,000 4,481,906
6.07%, 1/10/00 3,000,000 2,995,448
-----------
7,477,354
- --------------------------------------------------------------------------------------------------------------------------------
Diversified Financial--6.9%
Associates Corp. of North America:
4%, 1/3/00 6,000,000 5,998,667
- --------------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
5.99%, 1/26/00 8,000,000 7,966,722
-----------
13,965,389
4 Oppenheimer Money Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Principal Value
Amount Note 1
- --------------------------------------------------------------------------------------------------------------------------------
Insurance--12.2%
AIG Life Insurance Co.:
6.476%, 5/31/00(2)(3) $3,000,000 $ 3,000,000
- --------------------------------------------------------------------------------------------------------------------------------
Marsh U.S.A., Inc.:
5.60%, 1/26/00(1) 6,000,000 5,976,667
- --------------------------------------------------------------------------------------------------------------------------------
Metropolitan Life Insurance Co.:
5.839%, 1/3/00(2) 3,500,000 3,500,000
- --------------------------------------------------------------------------------------------------------------------------------
Pacific Mutual Life Insurance Co.:
5.53%, 2/14/00(2)(3) 5,000,000 5,000,000
- --------------------------------------------------------------------------------------------------------------------------------
Protective Life Insurance Co.:
5.658%, 6/1/00(2) 5,000,000 5,000,000
- --------------------------------------------------------------------------------------------------------------------------------
Travelers Insurance Co.:
5.608%, 9/16/00(2)(3) 2,000,000 2,000,000
------------
24,476,667
- --------------------------------------------------------------------------------------------------------------------------------
Manufacturing--2.2%
Eaton Corp.:
5.95%, 1/31/00(1) 4,400,000 4,378,183
- --------------------------------------------------------------------------------------------------------------------------------
Nondurable Household Goods--4.5%
Newell Co.:
5%, 1/7/00(1) 9,000,000 8,992,500
- --------------------------------------------------------------------------------------------------------------------------------
Special Purpose Financial--3.9%
KZH-KMS Corp.:
5.83%, 3/29/00(1) 5,000,000 4,928,744
5.86%, 4/6/00(1) 3,000,000 2,953,120
------------
7,881,864
- --------------------------------------------------------------------------------------------------------------------------------
Telecommunications: Technology--2.0%
GTE Corp.:
6.155%, 6/12/00(2) 4,000,000 3,998,853
------------
Total Short-Term Notes 183,553,160
- --------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value 99.2% 199,536,990
- --------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.8 1,528,667
---------- ------------
Net Assets 100.0% $201,065,657
========== ============
</TABLE>
Short-term notes, direct bank obligations and letters of credit are generally
traded on a discount basis; the interest rate is the discount rate received by
the Fund at the time of purchase.
1. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $89,904,488, or 44.71% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
2. Represents the current interest rate for a variable rate security.
3. Represents a restricted security which is considered illiquid, by virtue of
the absence of a readily available market or because of legal or contractual
restrictions on resale. Such securities amount to $10,000,000, or 4.97% of the
Fund's net assets. The Fund may not invest more than 10% of its net assets
(determined at the time of purchase) in illiquid securities.
See accompanying Notes to Financial Statements.
Oppenheimer Money Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
================================================================================================
Assets
Investments, at value--see accompanying statement $199,536,990
- ------------------------------------------------------------------------------------------------
Cash 1,523,358
- ------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 1,013,551
Interest 278,529
Other 3,889
------------
Total assets 202,356,317
================================================================================================
Liabilities
Payables and other liabilities:
Dividends 430,915
Shares of beneficial interest redeemed 826,738
Trustees' compensation 235
Transfer and shareholder servicing agent fees 187
Other 32,585
------------
Total liabilities 1,290,660
================================================================================================
Net Assets $201,065,657
============
================================================================================================
Composition of Net Assets
Paid-in capital $201,082,465
- ------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (16,808)
------------
Net assets--applicable to 201,082,486 shares of beneficial interest outstanding $201,065,657
============
================================================================================================
Net Asset Value, Redemption Price and Offering Price Per Share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Money Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
=====================================================================
Investment Income
Interest $8,907,818
=====================================================================
Expenses
Management fees 749,665
- ---------------------------------------------------------------------
Custodian fees and expenses 9,011
- ---------------------------------------------------------------------
Trustees' compensation 2,226
- ---------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,110
- ---------------------------------------------------------------------
Other 32,014
----------
Total expenses 795,026
Less expenses paid indirectly (4,083)
----------
Net expenses 790,943
=====================================================================
Net Investment Income 8,116,875
=====================================================================
Net Realized Gain on Investments 1,540
=====================================================================
Net Increase in Net Assets Resulting from Operations $8,118,415
==========
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Money Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
==============================================================================================================
<S> <C> <C>
Operations
Net investment income $ 8,116,875 $ 7,050,032
- --------------------------------------------------------------------------------------------------------------
Net realized gain 1,540 9,101
------------ ------------
Net increase in net assets resulting from operations 8,118,415 7,059,133
==============================================================================================================
Dividends and/or Distributions to Shareholders (8,128,189) (7,050,032)
==============================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions 49,276,631 25,007,317
==============================================================================================================
Net Assets
Total increase 49,266,857 25,016,418
- --------------------------------------------------------------------------------------------------------------
Beginning of period 151,798,800 126,782,382
------------ ------------
End of period (including undistributed net investment income
of $11,314 for the year ended December 31, 1998) $201,065,657 $151,798,800
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Money Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------
Income from investment operations--net
investment income and net realized gain .05 .05 .05 .05 .06
Dividends and/or distributions to shareholders (.05) (.05) (.05) (.05) (.06)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
====================================================================================================================
Total Return(1) 4.96% 5.25% 5.31% 5.13% 5.62%
====================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $201,066 $151,799 $126,782 $129,719 $65,386
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $166,727 $137,633 $133,707 $ 99,263 $75,136
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 4.87% 5.12% 5.19% 5.01% 5.52%
Expenses 0.48% 0.50%(3) 0.48%(3) 0.49%(3) 0.51%(3)
</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 reflect changes in net investment income only. 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. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
See accompanying Notes to Financial Statements.
Oppenheimer Money Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Money Fund/VA (the Fund) is a separate series of Oppenheimer
Variable Account Funds (the Trust), a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek the maximum current income
from investment in money market securities consistent with low capital risk and
the maintenance of liquidity. The Fund'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 on the basis of amortized
cost, which approximates market value.
- --------------------------------------------------------------------------------
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 to shareholders.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
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. Realized
gains and losses on investments are determined on an identified cost basis,
which is the same basis used for federal income tax purposes.
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.
10 Oppenheimer Money Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (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>
Year Ended December 31, 1999 Year Ended December 31, 1998
------------------------------- ------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 381,258,296 $ 381,258,296 318,160,993 $ 318,160,993
Dividends and/or distributions reinvested 7,983,593 7,983,593 7,008,382 7,008,382
Redeemed (339,965,258) (339,965,258) (300,162,058) (300,162,058)
------------ ------------- ------------ -------------
Net increase 49,276,631 $ 49,276,631 25,007,317 $ 25,007,317
============ ============= ============ =============
</TABLE>
================================================================================
3. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.45% of
the first $500 million of average annual net assets, 0.425% of the next $500
million, 0.40% of the next $500 million and 0.375% of average annual net assets
in excess of $1.5 billion. The Fund's management fee for the year ended December
31, 1999, was 0.45% of average annual net assets.
- --------------------------------------------------------------------------------
Transfer Agent Fees. 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 for cost.
<PAGE>
Oppenheimer Bond Fund/VA
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Bond Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Bond Fund/VA (which is a series of
Oppenheimer Variable Account Funds) as of December 31, 1999, the related
statement of operations for the year then ended, the statements of changes in
net assets for the years ended December 31, 1999 and 1998, and the financial
highlights for the period January 1, 1995 to December 31, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Bond Fund/VA as of December 31, 1999, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
===================================================================================================================
Mortgage-Backed Obligations--33.2%
Government Agency--11.7%
- -------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--10.6%
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates:
Series 151, Cl. F, 9%, 5/15/21 $ 528,711 $ 546,223
Series 1092, Cl. K, 8.50%, 6/15/21 1,988,407 2,031,278
Series 1541, Cl. H, 7%, 10/15/22 4,750,000 4,626,785
Series 1714, Cl. M, 7%, 8/15/23 2,000,000 1,945,000
- -------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation
Certificates, 7%, 4/1/26 3,071,879 2,980,676
- -------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 197, Cl. IO, 11.419%, 4/1/28(2) 13,692,632 4,483,267
Series 194, Cl. IO, 10.159%, 4/1/28(2) 15,300,874 5,115,035
Series 202, Cl. IO, 10.086%-10.125%, 4/1/29(2) 48,541,614 16,678,595
Series 2178, Cl. PI, 10.359%, 8/15/29(2) 25,675,000 6,137,930
- -------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 3/1/11 502,929 488,888
7%, 4/1/04-11/1/25 691,754 672,422
7.50%, 1/1/08-1/1/26 2,153,288 2,137,694
8%, 5/1/17 116,584 118,357
- -------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, 8.75%, 11/25/05 1,262,358 1,291,153
- -------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 1989-17, Cl. E, 10.40%, 4/25/19 610,095 648,416
- -------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security,
Trust 294, Cl. 2, 10.581%-16.633%, 2/1/28(2) 41,634,511 13,693,852
-----------
63,595,571
- -------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed--1.1%
Government National Mortgage Assn.:
7%, 1/15/09-5/15/09 388,328 384,321
8%, 1/15/28-9/15/28 6,372,802 6,436,535
-----------
6,820,856
- -------------------------------------------------------------------------------------------------------------------
Private--21.5%
- -------------------------------------------------------------------------------------------------------------------
Commercial--18.3%
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1997-D5, Cl. A6, 7.186%, 2/14/41(3) 3,000,000 2,427,187
Series 1997-D5, Cl. B2, 6.93%, 2/14/41 5,400,000 3,459,375
Series 1998-MD6, Cl. A3, 7.227%, 3/17/28(3) 4,875,000 4,387,500
- -------------------------------------------------------------------------------------------------------------------
Asset Securitization Corp., Interest-Only Stripped Mtg.-Backed Security,
Series 1997-D5, Cl. PS1, 9.108%, 2/14/41(2) 18,257,799 1,560,471
- -------------------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Stripped Mtg.-Backed Security,
Series 1997-CTL1, 10.29%, 6/22/24(2)(4) 30,606,042 1,209,895
- -------------------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., Collateralized Mtg. Obligations,
Series 1996-C1, Cl. D, 7.367%, 12/25/20(3)(4) 2,500,000 2,414,844
- -------------------------------------------------------------------------------------------------------------------
Commercial Mortgage Asset Trust, Series 1999-C1, Cl. C, 7.35%, 8/17/13 9,750,000 8,921,250
- -------------------------------------------------------------------------------------------------------------------
CRIIMI MAE Trust I, Collateralized Mtg. Obligations,
Series 1996-C1, Cl. A2, 7.56%, 8/30/05(5) 2,000,000 1,860,625
</TABLE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Commercial (continued)
CRIIMI MAE Trust I, Commercial Mtg. Trust, Series 1998-C1, Cl. A1, 7%, 11/2/06(4) $ 3,300,000 $ 2,919,469
- ---------------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1998-C1, Cl. AX, 8.19%, 4/11/30(2) 24,745,453 1,531,125
- ---------------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates,
Series 1997-C2, Cl. F, 6.85%, 12/17/07 3,250,000 3,055,000
- ---------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Series 1994-C1, Cl. 2-D, 8.70%, 9/25/25 1,500,000 1,447,500
Series 1994-C1, Cl. 2-E, 8.70%, 9/25/25 1,500,000 1,461,562
- ---------------------------------------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage Trust, Commercial Mtg.
Pass-Through Certificates, Series 1998-C2, Cl. E, 6.778%, 5/18/13 2,000,000 1,568,750
- ---------------------------------------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage Trust, Interest-Only Stripped
Mtg.-Backed Security, Series 1998-C2, 9.274%, 5/18/28(2) 29,447,557 1,074,951
- ---------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., Collateralized Mtg. Obligations:
Series 1997-C2, Cl. D, 7.192%, 1/15/08 3,500,000 3,062,500
Series 1998-C1, Cl. E, 7.088%, 3/15/11(3) 3,500,000 3,109,531
- ---------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security:
Series 1997-C1, Cl. X, 9.033%, 7/15/27(2) 18,165,432 1,368,084
Series 1997-C1, Cl. X, 8.553%, 7/15/27(2) 9,036,122 680,533
- ---------------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through Certificates:
Series 1997-CL1, Cl. F, 7.155%, 7/13/30(3) 1,000,000 936,875
Series 1997-CL1, Cl. F, 7.625%, 7/13/30(3) 4,000,000 3,478,750
- ---------------------------------------------------------------------------------------------------------------
Lehman Brothers Commercial Conduit Mortgage Trust, Interest-Only Stripped
Mtg.-Backed Security, Series 1998-C1, Cl. IO, 9.063%, 2/18/28(2)(4) 43,952,818 2,321,258
- ---------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates:
Series 1996-C1, Cl. D, 7.42%, 4/25/28 2,000,000 1,900,937
Series 1997-C2, Cl. D, 7.004%, 12/10/29(3) 4,000,000 3,617,500
- ---------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates:
Series 1996-C1, Cl. D1, 7.421%, 2/15/28(3)(4) 1,000,000 953,906
Series 1997-RR, Cl. D, 7.671%, 4/30/39(4) 4,300,231 3,020,241
Series 1997-XL1, Cl. F, 7.411%, 10/3/30(3) 2,500,000 2,246,875
- ---------------------------------------------------------------------------------------------------------------
NationsCommercial Corp., NB Commercial Mtg. Pass-Through Certificates:
Series DMC, Cl. B, 8.562%, 8/12/11(4) 1,600,000 1,448,500
Series DMC, Cl. C, 8.921%, 8/12/11(4) 4,400,000 3,980,625
- ---------------------------------------------------------------------------------------------------------------
NC Finance Trust, Collateralized Mtg. Obligations,
Series 1999-I, Cl. ECFD, 8.75%, 12/25/28 15,829,568 15,379,415
- ---------------------------------------------------------------------------------------------------------------
Option One Mortgage Trust, Collateralized Mtg. Obligations:
Series 1999-1A, 10.06%, 3/1/29(4) 6,155,847 6,067,357
Series 1999-3, Cl. BB, 10.80%, 12/15/29 6,261,813 6,218,764
- ---------------------------------------------------------------------------------------------------------------
Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through Certificates,
Series 1, Cl. C, 7.217%, 12/21/26(4) 250,000 235,000
- ---------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1994-C1, Cl. C, 8%, 6/25/26 1,160,794 1,154,084
Series 1995-C1, Cl. D, 6.90%, 2/25/27 3,000,000 2,915,391
- ---------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through Certificates:
Series 1996-CFL, Cl. D, 7.034%, 2/25/28 1,800,000 1,769,062
Series 1999-1, 10%, 8/25/28 4,955,997 4,900,242
------------
110,064,934
</TABLE>
Oppenheimer Bond Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Multi-Family--0.2%
Countrywide Funding Corp., Mtg. Pass-Through Certificates,
Series 1993-12, Cl. B1, 6.625%, 2/25/24 $ 946,747 $ 856,215
- ------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Trust, Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates, Series 43, Cl. E, 6.50%, 8/27/15 263,338 260,210
------------
1,116,425
- ------------------------------------------------------------------------------------------------------------------------
Other--0.0%
Salomon Brothers Mortgage Securities VI, Interest-Only Stripped Mtg.-Backed Security,
Series 1987-3, Cl. B, 20.132%, 10/23/17(2) 57,595 15,676
- ------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VI, Principal-Only Stripped Mtg.-Backed Security,
Series 1987-3, Cl. A, 2.377%-16.21%, 10/23/17(6) 85,230 68,877
------------
84,553
- ------------------------------------------------------------------------------------------------------------------------
Residential--3.0%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates:
Series 1997-C1, Cl. E, 7.50%, 3/1/11(4) 5,006,000 4,076,761
Series 1999-C1, Cl. C, 7.682%, 9/15/09(3) 6,500,000 6,382,187
- ------------------------------------------------------------------------------------------------------------------------
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates,
Series 1997-CHL1, Cl. C, 8.127%, 7/25/06(3)(4) 4,024,000 3,621,600
- ------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates,
Series 1997-HF1, Cl. E, 7.55%, 7/15/29(4) 1,500,000 1,365,938
- ------------------------------------------------------------------------------------------------------------------------
NationsBank Trust, Lease Pass-Through Certificates,
Series 1997A-1, 7.442%, 1/10/11(3) 2,500,000 2,389,063
- ------------------------------------------------------------------------------------------------------------------------
Ryland Mortgage Securities Corp. III, Sub. Bonds,
Series 1992-A, Cl. 1A, 8.259%, 3/29/30(3) 204,852 201,908
------------
18,037,457
------------
Total Mortgage-Backed Obligations (Cost $207,143,112) 199,719,796
========================================================================================================================
U.S. Government Obligations--6.1%
- ------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.25%, 2/15/29 3,705,000 3,065,887
- ------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 5.875%, 8/15/09(7)(8) 34,550,000 33,481,127
------------
Total U.S. Government Obligations (Cost $37,315,504) 36,547,014
========================================================================================================================
Foreign Government Obligations--1.5%
- ------------------------------------------------------------------------------------------------------------------------
Israel (State of) Bonds, 7.25%, 12/15/28 9,750,000 8,387,204
- ------------------------------------------------------------------------------------------------------------------------
Ontario, Canada (Province of) Bonds, 8%, 10/17/01 750,000 765,382
- ------------------------------------------------------------------------------------------------------------------------
PT Hutama Karya Medium-Term Nts., Zero Coupon, 3/17/99(4)(9)(10)IDR 1,000,000,000 39,356
------------
Total Foreign Government Obligations (Cost $10,234,242) 9,191,942
========================================================================================================================
Loan Participations--0.6%
- ------------------------------------------------------------------------------------------------------------------------
Ferrell Companies, Inc., 10.18% Sr. Sec. Nts., 7/17/06(3)(4) (Cost $3,270,429) 3,300,000 3,283,500
========================================================================================================================
Corporate Bonds and Notes--51.8%
- ------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.6%
Amtran, Inc., 9.625% Nts., 12/15/05 800,000 772,000
- ------------------------------------------------------------------------------------------------------------------------
Atlas Air, Inc.:
8.01% Nts., 1/2/10 2,812,199 2,642,582
9.375% Sr. Unsec. Nts., 11/15/06 500,000 485,000
------------
3,899,582
</TABLE>
6 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Chemicals--1.0%
ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 $ 300,000 $ 76,500
- ---------------------------------------------------------------------------------------------------------
Equistar Chemicals LP, 7.55% Unsec. Debs., 2/15/06 3,250,000 2,641,236
- ---------------------------------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc, 10.125% Sr. Unsec. Sub. Nts., 7/1/09(5) 800,000 832,000
- ---------------------------------------------------------------------------------------------------------
Lyondell Chemical Co., 9.875% Sec. Nts., Series B, 5/1/07 1,000,000 1,025,000
- ---------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc., 12.375% Sr. Sec. Nts., Series B, 7/15/06 400,000 416,000
- ---------------------------------------------------------------------------------------------------------
ZSC Specialty Chemical plc, 11% Sr. Nts., 7/1/09(5) 800,000 834,000
-----------
5,824,736
- ---------------------------------------------------------------------------------------------------------
Consumer Non-Durables--0.2%
AKI Holdings, Inc., 10.50% Sr. Unsec. Nts., 7/1/08 300,000 268,500
- ---------------------------------------------------------------------------------------------------------
Bell Sports, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 8/15/08 210,000 211,050
- ---------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., 8.875% Sr. Unsec. Nts., 4/15/06(10) 100,000 5,500
- ---------------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 9% Sr. Nts., 11/1/06 500,000 377,500
- ---------------------------------------------------------------------------------------------------------
Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08(4) 360,000 127,800
-----------
990,350
- ---------------------------------------------------------------------------------------------------------
Energy--1.8%
Colorado Interstate Gas Corp., 10% Sr. Debs., 6/15/05 500,000 552,649
- ---------------------------------------------------------------------------------------------------------
Eastern Energy Ltd., 6.75% Sr. Nts., 12/1/06(5) 2,000,000 1,858,902
- ---------------------------------------------------------------------------------------------------------
Enron Corp., 9.875% Debs., 6/15/03 375,000 402,221
- ---------------------------------------------------------------------------------------------------------
Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(5) 300,000 256,500
- ---------------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.375% Sr. Nts., 11/15/05 500,000 487,500
- ---------------------------------------------------------------------------------------------------------
HNG Internorth/Enron Corp., 9.625% Debs., 3/15/06 500,000 539,416
- ---------------------------------------------------------------------------------------------------------
McDermott, Inc., 9.375% Nts., 3/15/02 400,000 409,221
- ---------------------------------------------------------------------------------------------------------
Mitchell Energy & Development Corp., 9.25% Sr. Nts., 1/15/02 55,000 56,227
- ---------------------------------------------------------------------------------------------------------
Murphy Oil Corp., 7.05% Sr. Unsec. Nts., 5/1/29 5,190,000 4,667,912
- ---------------------------------------------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 400,000 334,000
- ---------------------------------------------------------------------------------------------------------
RBF Finance Co., 11% Sr. Sec. Nts., 3/15/06 455,000 486,850
- ---------------------------------------------------------------------------------------------------------
Texaco Capital, Inc., 8.875% Gtd. Debs., 9/1/21(11) 500,000 556,443
-----------
10,607,841
- ---------------------------------------------------------------------------------------------------------
Financial--26.1%
Aeltus CBO II Ltd./Aeltus CBO II Corp., 7.982% Sr. Sec. Sub. Bonds, 8/6/09(5) 5,000,000 4,632,350
- ---------------------------------------------------------------------------------------------------------
Astoria Capital Trust I, 9.75% Gtd. Nts., 11/1/29(5) 3,250,000 3,220,480
- ---------------------------------------------------------------------------------------------------------
BHP Finance USA Ltd., 7.25% Nts., 3/1/16 6,500,000 5,848,804
- ---------------------------------------------------------------------------------------------------------
Chase Manhattan Corp., 10.125% Sub. Nts., 11/1/00 750,000 770,051
- ---------------------------------------------------------------------------------------------------------
Conseco, Inc., 9% Unsec. Nts., 10/15/06 19,500,000 20,221,617
- ---------------------------------------------------------------------------------------------------------
Dresdner Funding Trust II, 8.151% Nts., 6/30/31(5) 13,080,000 12,348,135
- ---------------------------------------------------------------------------------------------------------
EOP Operating LP, 7.50% Sr. Nts., 4/19/29 7,800,000 6,846,598
- ---------------------------------------------------------------------------------------------------------
HVB Fund Trust III, 9% Bonds, 10/22/31(5) 6,500,000 6,524,323
- ---------------------------------------------------------------------------------------------------------
KBC Bank Fund Trust III, 9.86% Bonds, 11/29/49(3)(5) 13,000,000 13,477,711
- ---------------------------------------------------------------------------------------------------------
Keycorp Capital III, 7.75% Nts., 7/15/29 6,500,000 6,073,041
- ---------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.:
7.875% Sr. Nts., 11/1/09 8,450,000 8,447,533
8.80% Sr. Nts., 3/1/15 3,250,000 3,413,946
- ---------------------------------------------------------------------------------------------------------
Liberty Financial Co., 7.625% Unsec. Debs., 11/15/28 6,500,000 5,950,002
- ---------------------------------------------------------------------------------------------------------
Liberty Mutual Insurance Co., 7.697% Unsec. Nts., 10/15/2097(5) 19,000,000 15,927,016
</TABLE>
Oppenheimer Bond Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Financial (continued)
Nordbanken AB, 8.95% Bonds, 11/29/49(3)(5) $ 16,250,000 $ 16,019,282
- --------------------------------------------------------------------------------------------------------
Rothmans Nederland Holdings BV, 6.875% Sr. Unsec. Unsub. Nts., 5/6/08 13,750,000 12,399,750
- --------------------------------------------------------------------------------------------------------
Safeco Capital Trust I, 8.072% Nts., 7/15/37(11) 7,429,000 6,554,503
- --------------------------------------------------------------------------------------------------------
Standard Chartered Nakornthon Bank, 6.734% Unsec. Sub. Nts., 6/11/06(3)(4) 7,500,000 7,200,000
- --------------------------------------------------------------------------------------------------------
U.S. Leasing International, Inc., 6.625% Sr. Nts., 5/15/03 750,000 732,715
------------
156,607,857
- --------------------------------------------------------------------------------------------------------
Food & Drug--0.0%
Pathmark Stores, Inc.:
10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03 1,095,000 136,875
12.625% Sub. Nts., 6/15/02 400,000 134,000
------------
270,875
- --------------------------------------------------------------------------------------------------------
Food/Tobacco--0.2%
Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 300,000 287,250
- --------------------------------------------------------------------------------------------------------
Canadaiqua Brands, Inc., 8.625% Sr. Unsec. Nts., 8/1/06 1,000,000 1,001,250
------------
1,288,500
- --------------------------------------------------------------------------------------------------------
Forest Products/Containers--0.3%
Boise Cascade Corp., 9.90% Nts., 3/15/00 750,000 753,437
- --------------------------------------------------------------------------------------------------------
Potlatch Corp., 9.46% Medium-Term Nts., 4/2/02 500,000 521,701
- --------------------------------------------------------------------------------------------------------
Riverwood International Corp., 10.625% Sr. Unsec. Nts., 8/1/07 450,000 465,750
------------
1,740,888
- --------------------------------------------------------------------------------------------------------
Gaming/Leisure--0.6%
HMH Properties, Inc., 8.45% Sr. Nts., Series C, 12/1/08 300,000 279,000
- --------------------------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08 950,000 935,750
- --------------------------------------------------------------------------------------------------------
Meristar Hospitality Corp., 8.75% Sr. Unsec. Sub. Nts., 8/15/07 700,000 647,500
- --------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
8.125% Sr. Nts., 1/1/06 400,000 390,000
8.75% Sr. Unsec. Sub. Nts., 1/1/09 300,000 297,000
- --------------------------------------------------------------------------------------------------------
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts., 4/1/08(12) 300,000 208,500
9.75% Sr. Nts., 6/15/07 600,000 600,000
- --------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 9.75% Sr. Sub. Nts., 4/15/07 550,000 555,500
------------
3,913,250
- --------------------------------------------------------------------------------------------------------
Healthcare--0.3%
Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 600,000 555,000
- --------------------------------------------------------------------------------------------------------
ICN Pharmaceutical, Inc., 8.75% Sr. Nts., 11/15/08(5) 400,000 384,000
- --------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp., 8.625% Sr. Sub. Nts., 1/15/07 800,000 776,000
------------
1,715,000
- --------------------------------------------------------------------------------------------------------
Housing--1.7%
Building Materials Corp. of America, 8% Sr. Unsec. Nts., 12/1/08 800,000 728,000
- --------------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 400,000 368,000
- --------------------------------------------------------------------------------------------------------
Kimco Realty Corp., 6.875% Sr. Unsec. Nts., 2/10/09 9,100,000 8,325,390
- --------------------------------------------------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Nts., Series B, 9/1/07 200,000 194,500
9.25% Sr. Nts., Series B, 3/15/07 800,000 784,000
------------
10,399,890
</TABLE>
8 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Manufacturing--0.1%
Moll Industries, Inc., 10.50% Sr. Unsec. Sub. Nts., 7/1/08 $ 250,000 $ 101,250
- ------------------------------------------------------------------------------------------------------------
Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 500,000 455,000
-----------
556,250
- ------------------------------------------------------------------------------------------------------------
Media/Entertainment: Broadcasting--0.9%
Chancellor Media Corp.:
8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 2,500,000 2,531,250
9% Sr. Unsec. Sub. Nts., 10/1/08 2,200,000 2,299,000
- ------------------------------------------------------------------------------------------------------------
Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 600,000 573,000
-----------
5,403,250
- ------------------------------------------------------------------------------------------------------------
Media/Entertainment: Cable/Wireless Video--3.1%
Adelphia Communications Corp., 8.375% Sr. Nts., Series B, 2/1/08 1,300,000 1,212,250
- ------------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.:
8.25% Sr. Unsec. Nts., 4/1/07 3,000,000 2,782,500
8.625% Sr. Unsec. Nts., 4/1/09 750,000 696,562
- ------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 13,000,000 12,155,000
- ------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 1,200,000 1,212,000
- ------------------------------------------------------------------------------------------------------------
Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09(5) 500,000 518,750
-----------
18,577,062
- ------------------------------------------------------------------------------------------------------------
Media/Entertainment: Diversified Media--0.6%
AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 300,000 267,000
- ------------------------------------------------------------------------------------------------------------
GSP I Corp., 10.15% First Mtg. Bonds, 6/24/10(5) 1,071,442 996,806
- ------------------------------------------------------------------------------------------------------------
Imax Corp., 7.875% Sr. Nts., 12/1/05 900,000 855,000
- ------------------------------------------------------------------------------------------------------------
Mail-Well Corp., 8.75% Sr. Unsec. Sub. Nts., Series B, 12/15/08 535,000 510,925
- ------------------------------------------------------------------------------------------------------------
Reed Elsevier, Inc., 6.625% Nts., 10/15/23(5) 600,000 494,574
- ------------------------------------------------------------------------------------------------------------
SFX Entertainment, Inc., 9.125% Sr. Unsec. Sub. Nts., 12/1/08 600,000 573,000
-----------
3,697,305
- ------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications--1.6%
Intermedia Communications, Inc., 8.60% Sr. Unsec. Nts., Series B, 6/1/08 800,000 736,000
- ------------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Inc., 10% Sr. Unsec. Nts., Series B, 11/15/08 650,000 667,875
- ------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc.:
9.625% Sr. Nts., 10/1/07 2,200,000 2,156,000
10.75% Sr. Unsec. Nts., 11/15/08 200,000 207,000
- ------------------------------------------------------------------------------------------------------------
NTL Communications Corp., 11.50% Sr. Unsec. Nts., Series B, 10/1/08 1,000,000 1,090,000
- ------------------------------------------------------------------------------------------------------------
PSINet, Inc.:
10% Sr. Unsec. Nts., Series B, 2/15/05 600,000 596,250
11.50% Sr. Unsec. Nts., 11/1/08 1,000,000 1,050,000
- ------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc., 0%/8.29% Sr. Unsec. Disc. Nts.,
Series B, 2/1/08(12) 1,350,000 1,049,625
- ------------------------------------------------------------------------------------------------------------
Shaw Communications, Inc., 8.54% Debs., 9/30/27CAD 3,000,000 1,868,797
-----------
9,421,547
</TABLE>
Oppenheimer Bond Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications--0.6%
Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07 $ 200,000 $ 159,250
- ---------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 200,000 181,000
- ---------------------------------------------------------------------------------------------------------
Omnipoint Corp.:
11.50% Sr. Nts., 9/15/09(5) 650,000 702,000
11.625% Sr. Nts., Series A, 8/15/06 500,000 532,500
- ---------------------------------------------------------------------------------------------------------
Price Communications Wireless, Inc., 9.125% Sr. Sec. Nts., Series B, 12/15/06 1,000,000 1,017,500
- ---------------------------------------------------------------------------------------------------------
SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(12) 700,000 416,500
- ---------------------------------------------------------------------------------------------------------
Spectrasite Holdings, Inc., 0%/12% Sr. Disc. Nts., 7/15/08(12) 600,000 361,500
- ---------------------------------------------------------------------------------------------------------
Voicestream Wireless Corp., 10.375% Sr. Nts., 11/15/09(5) 500,000 517,500
-----------
3,887,750
- ---------------------------------------------------------------------------------------------------------
Metals/Minerals--1.1% AK Steel Corp.:
7.875% Sr. Unsec. Nts., 2/15/09 1,000,000 950,000
9.125% Sr. Nts., 12/15/06 3,250,000 3,323,125
- ---------------------------------------------------------------------------------------------------------
Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 750,000 716,250
- ---------------------------------------------------------------------------------------------------------
National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 500,000 517,500
- ---------------------------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 900,000 891,000
-----------
6,397,875
- ---------------------------------------------------------------------------------------------------------
Retail--3.6%
Cooper Tire & Rubber Co., 8% Sr. Nts., 12/15/19 13,000,000 12,494,716
- ---------------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 250,000 176,250
- ---------------------------------------------------------------------------------------------------------
Sherwin-Williams Co., 7.45% Debs., 2/1/2097(11) 9,750,000 8,939,122
-----------
21,610,088
- ---------------------------------------------------------------------------------------------------------
Service--4.9%
Allied Waste North America, Inc.:
7.875% Sr. Unsec. Nts., Series B, 1/1/09 965,000 857,644
10% Sr. Sub. Nts., 8/1/09(5) 450,000 405,000
- ---------------------------------------------------------------------------------------------------------
Arvin Industries, Inc., 6.75% Nts., 3/15/08 1,400,000 1,270,623
- ---------------------------------------------------------------------------------------------------------
Harcourt General, Inc., 7.30% Sr. Debs., 8/1/2097 10,025,000 8,289,091
- ---------------------------------------------------------------------------------------------------------
Philip Morris, Co., Inc., 7.75% Unsec. Debs., 1/15/27 6,500,000 5,884,522
- ---------------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc., 7.375% Gtd. Sr. Unsec. Nts., 8/15/05 1,000,000 800,000
- ---------------------------------------------------------------------------------------------------------
Safety-Kleen Corp., 9.25% Sr. Unsec. Nts., 5/15/09 800,000 778,000
- ---------------------------------------------------------------------------------------------------------
Tyco International Group SA, 6.875% Unsec. Unsub. Nts., 1/15/29 13,000,000 11,104,340
-----------
29,389,220
- ---------------------------------------------------------------------------------------------------------
Transportation--0.4%
Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 300,000 315,000
- ---------------------------------------------------------------------------------------------------------
Johnson Controls, Inc., 7.70% Debs., 3/1/15 500,000 507,090
- ---------------------------------------------------------------------------------------------------------
Kansas City Southern Industries, Inc., 6.625% Nts., 3/1/05 750,000 742,621
- ---------------------------------------------------------------------------------------------------------
Tenneco, Inc., 11.625% Sr. Sub. Nts., 10/15/09(5) 600,000 615,000
- ---------------------------------------------------------------------------------------------------------
Terex Corp., 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08 100,000 95,000
- ---------------------------------------------------------------------------------------------------------
Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 400,000 403,825
-----------
2,678,536
</TABLE>
10 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Utility--2.1%
Calpine Corp., 7.75% Sr. Nts., 4/15/09 $ 650,000 $ 617,500
- -----------------------------------------------------------------------------------------------------
Israel Electric Corp. Ltd., 7.70% Bonds, 7/15/18(5) 12,050,000 10,686,976
- -----------------------------------------------------------------------------------------------------
Public Service Co. of Colorado, 8.75% First Mtg. Bonds, 3/1/22 750,000 760,288
- -----------------------------------------------------------------------------------------------------
South Carolina Electric & Gas Co., 9% Mtg. Bonds, 7/15/06 500,000 531,081
------------
12,595,845
------------
Total Corporate Bonds and Notes (Cost $329,284,286) 311,473,497
<CAPTION>
Shares
<S> <C> <C>
=====================================================================================================
Other Securities--4.2%
- -----------------------------------------------------------------------------------------------------
Allstate Financing I, 7.95% Cum. Quarterly Income Preferred Securities,
Series A, Non-Vtg. 120,000 2,677,500
- -----------------------------------------------------------------------------------------------------
EIX Trust I, 7.875% Quarterly Income Preferred Securities 520,000 11,212,500
- -----------------------------------------------------------------------------------------------------
ING Capital Fund Trust, 7.70% Non-Cum., Non-Vtg. 130,000 2,746,250
- -----------------------------------------------------------------------------------------------------
Westpac Capital Trust I, 8% Trust Originated Preferred Securities 390,000 8,433,750
------------
Total Other Securities (Cost $29,000,000) 25,070,000
<CAPTION>
Date Strike Contracts
<S> <C> <C> <C> <C>
=====================================================================================================
Options Purchased--0.1%
- -----------------------------------------------------------------------------------------------------
U.S. Long Bond Futures, 3/22/00 Put (Cost $258,944) 2/18/00 94% 195 670,313
<CAPTION>
Principal
Amount(1)
<S> <C> <C>
=====================================================================================================
Repurchase Agreements--1.2%
- -----------------------------------------------------------------------------------------------------
Repurchase agreement with Deutsche Bank Securities Inc., 3.20%, dated
12/31/99, to be repurchased at $7,101,893 on 1/3/00, collateralized by
U.S. Treasury Bonds, 6.375%, 8/15/27, with a value of $1,955,059 and
U.S. Treasury Nts., 6.125%, 12/31/01, with a value of $5,311,688
(Cost $7,100,000) $ 7,100,000 7,100,000
- -----------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $623,606,517) 98.7% 593,056,062
- -----------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.3 8,007,537
----------- ------------
Net Assets 100.0% $601,063,599
=========== ============
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
CAD--Canadian Dollar
IDR--Indonesian Rupiah
2. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
3. Represents the current interest rate for a variable or increasing rate
security.
4. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
5. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees.These securities amount to $93,111,930 or 15.49% of the Fund's net
assets as of December 31, 1999.
6. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
Oppenheimer Bond Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:
<TABLE>
<CAPTION>
Contracts Expiration Exercise Premium Market Value
Subject to Put Date Price Received Note 1
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
U.S.Treasury Nts. Futures, 10 yr. Put 325 2/18/00 98% $328,453 $782,031
</TABLE>
8. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of Notes to Financial Statements.
9. Non-income producing security.
10. Issuer is in default.
11. Securities with an aggregate market value of $1,541,589 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
12. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
See accompanying Notes to Financial Statements.
12 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
==================================================================================================
Assets
Investments, at value (cost $623,606,517)--see accompanying statement $593,056,062
- --------------------------------------------------------------------------------------------------
Cash 505,935
- --------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 9,159,859
Shares of beneficial interest sold 45,586
Other 6,358
------------
Total assets 602,773,800
==================================================================================================
Liabilities
Unrealized depreciation on foreign currency contracts 36,676
- --------------------------------------------------------------------------------------------------
Options written, at value (premiums received $328,453)--see accompanying statement 782,031
- --------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 634,114
Daily variation on futures contracts 212,352
Trustees' compensation 1,274
Transfer and shareholder servicing agent fees 184
Other 43,570
------------
Total liabilities 1,710,201
==================================================================================================
Net Assets $601,063,599
============
==================================================================================================
Composition of Net Assets
Paid-in capital $604,669,053
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 45,409,363
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (17,446,218)
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (31,568,599)
------------
Net assets--applicable to 52,166,643 shares of beneficial interest outstanding $601,063,599
============
==================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $11.52
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Bond Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
======================================================================================
Investment Income
Interest (net of foreign withholding taxes of $8,672) $ 48,592,479
- --------------------------------------------------------------------------------------
Dividends 1,690,940
------------
Total income 50,283,419
======================================================================================
Expenses
Management fees 4,539,138
- --------------------------------------------------------------------------------------
Custodian fees and expenses 53,239
- --------------------------------------------------------------------------------------
Trustees' compensation 6,651
- --------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,102
- --------------------------------------------------------------------------------------
Other 23,256
------------
Total expenses 4,624,386
Less expenses paid indirectly (27,033)
------------
Net expenses 4,597,353
======================================================================================
Net Investment Income 45,686,066
======================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (18,429,849)
Closing of futures contracts 1,187,215
Closing and expiration of option contracts written (86,721)
Foreign currency transactions (238,230)
------------
Net realized loss (17,567,585)
- --------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (38,172,276)
Translation of assets and liabilities denominated in foreign currencies 265,182
------------
Net change (37,907,094)
------------
Net realized and unrealized loss (55,474,679)
======================================================================================
Net Decrease in Net Assets Resulting from Operations $ (9,788,613)
============
</TABLE>
See accompanying Notes to Financial Statements.
14 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
================================================================================================
Operations
Net investment income $ 45,686,066 $ 37,001,034
- ------------------------------------------------------------------------------------------------
Net realized gain (loss) (17,567,585) 5,539,991
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (37,907,094) (5,203,148)
------------ ------------
Net increase (decrease) in net assets resulting from operations (9,788,613) 37,337,877
================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (30,081,522) (9,009,958)
- ------------------------------------------------------------------------------------------------
Distributions from net realized gain (2,888,886) (8,154,014)
================================================================================================
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from
beneficial interest transactions (11,720,079) 115,290,766
================================================================================================
Net Assets
Total increase (decrease) (54,479,100) 135,464,671
- ------------------------------------------------------------------------------------------------
Beginning of period 655,542,699 520,078,028
------------ ------------
End of period (including undistributed net investment
income of $45,409,363 and $30,079,292, respectively) $601,063,599 $655,542,699
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Bond Fund/VA 15
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $12.32 $11.91 $11.63 $11.84 $10.78
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .88 .72 .76 .69 .72
Net realized and unrealized gain (loss) (1.06) .07 .28 (.15) 1.07
- ------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations (.18) .79 1.04 .54 1.79
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.57) (.20) (.72) (.74) (.73)
Distributions from net realized gain (.05) (.18) (.04) (.01) --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.62) (.38) (.76) (.75) (.73)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.52 $12.32 $11.91 $11.63 $11.84
====== ====== ====== ====== ======
==============================================================================================================================
Total Return, at Net Asset Value(1) (1.52)% 6.80% 9.25% 4.80% 17.00%
==============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $601,064 $655,543 $520,078 $426,439 $211,232
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $633,059 $586,242 $449,760 $296,253 $170,929
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 7.22% 6.31% 6.72% 6.72% 6.91%
Expenses 0.73% 0.74%(3) 0.78%(3) 0.78%(3) 0.80%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 256% 76% 117% 82% 79%
</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. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $1,625,487,960 and $1,547,628,962, respectively.
See accompanying Notes to Financial Statements.
16 Oppenheimer Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Bond Fund/VA (the Fund) is a separate series of Oppenheimer Variable
Account Funds (the Trust), a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek a high level of current income. The Fund'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 price 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.
- --------------------------------------------------------------------------------
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 December 31, 1999, securities with an
aggregate market value of $44,856, representing 0.01% of the Fund's net assets,
were in default.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
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,
1999, the Fund had available for federal income tax purposes an unused capital
loss carryover of approximately $14,340,000, which expires in 2007.
Oppenheimer Bond Fund/VA 17
<PAGE>
================================================================================
1. Significant Accounting Policies (continued)
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect a
decrease in paid-in capital of $17,573, a decrease in undistributed net
investment income of $274,473, and a decrease in accumulated net realized loss
on investments of $292,046.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and options
written and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
----------------------------- -----------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 10,494,053 $ 123,504,590 24,245,723 $ 293,126,941
Dividends and/or distributions reinvested 2,820,394 32,970,408 1,463,254 17,163,972
Redeemed (14,357,807) (168,195,077) (16,150,244) (195,000,147)
----------- ------------- ----------- -------------
Net increase (decrease) (1,043,360) $ (11,720,079) 9,558,733 $ 115,290,766
=========== ============= =========== =============
</TABLE>
18 Oppenheimer Bond Fund/VA
<PAGE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized depreciation on securities and options
written of $31,004,033 was composed of gross appreciation of $6,069,024, and
gross depreciation of $37,073,057.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust. The annual fees are 0.75% of the
first $200 million of average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the
next $200 million and 0.50% of average annual net assets over $1 billion. The
Fund's management fee for the year ended December 31, 1999, was 0.72% of average
annual net assets.
- --------------------------------------------------------------------------------
Transfer Agent Fees. 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 for cost.
================================================================================
5. Foreign Currency Contracts
A foreign currency 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 contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
As of December 31, 1999, the Fund had outstanding foreign currency contracts as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized
Contract Description Date Amounts(000s) December 31, 1999 Depreciation
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Contracts to Sell
- -----------------
Canadian Dollar (CAD) 6/1/00 3,000 CAD $2,080,272 $36,676
=======
</TABLE>
Oppenheimer Bond Fund/VA 19
<PAGE>
================================================================================
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.
As of December 31, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Unrealized
Expiration Number of Valuation as of Appreciation
Contract Description Date Contracts December 31, 1999 (Depreciation)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
U.S. Treasury Bonds, 30 yr. 3/22/00 67 $ 6,092,813 $ (17,781)
U.S. Treasury Nts., 5 yr. 3/22/00 639 62,631,984 (167,970)
U.S. Treasury Nts., 10 yr. 3/22/00 238 22,814,531 (351,422)
---------
(537,173)
---------
Contracts to Sell
- -----------------
Federal Funds Interest Rate 1/31/00 322 126,871,441 (73,798)
U.S. Treasury Bonds, 30 yr. 3/22/00 130 11,821,875 60,938
U.S. Treasury Nts., 5 yr. 3/22/00 123 12,055,922 21,453
---------
8,593
---------
$(528,580)
=========
</TABLE>
20 Oppenheimer Bond Fund/VA
<PAGE>
================================================================================
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.
Written option activity for the year ended December 31, 1999, was as follows:
<TABLE>
<CAPTION>
Put Options
------------------------------
Number of Amount of
Options Premiums
<S> <C> <C>
- ----------------------------------------------------------------------------------
Options outstanding as of December 31, 1998 -- $ --
Options written 1,170 969,017
Options closed or expired (845) (640,564)
----- ---------
- ----------------------------------------------------------------------------------
Options outstanding as of December 31, 1999 325 $ 328,453
===== =========
</TABLE>
================================================================================
8. Illiquid or Restricted Securities
As of December 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of December 31, 1999, was $44,286,050,
which represents 7.37% of the Fund's net assets.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Capital
Appreciation Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Capital Appreciation Fund/VA (which
is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the
related statement of operations for the year then ended, the statements of
changes in net assets for the years ended December 31, 1999 and 1998 and the
financial highlights for the period January 1, 1995 to December 31, 1999. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Capital Appreciation Fund/VA as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
_____________________
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
=========================================================================================================
Common Stocks--92.1%
- ---------------------------------------------------------------------------------------------------------
Basic Materials--1.2%
- ---------------------------------------------------------------------------------------------------------
Chemicals--1.0%
Lafarge Corp. 115,000 $ 3,176,875
- ---------------------------------------------------------------------------------------------------------
PPG Industries, Inc. 110,000 6,881,875
- ---------------------------------------------------------------------------------------------------------
Union Carbide Corp. 55,000 3,671,250
-----------
13,730,000
- ---------------------------------------------------------------------------------------------------------
Paper--0.2%
Boise Cascade Corp. 40,000 1,620,000
- ---------------------------------------------------------------------------------------------------------
Rayonier, Inc. 27,000 1,304,437
-----------
2,924,437
- ---------------------------------------------------------------------------------------------------------
Capital Goods--4.8%
- ---------------------------------------------------------------------------------------------------------
Electrical Equipment--1.9%
Etec Systems, Inc.(1) 10,300 462,212
- ---------------------------------------------------------------------------------------------------------
Sanmina Corp.(1) 181,000 18,077,375
- ---------------------------------------------------------------------------------------------------------
Vishay Intertechnology, Inc.(1) 260,000 8,222,500
-----------
26,762,087
- ---------------------------------------------------------------------------------------------------------
Industrial Services--0.7%
Coflexip SA, Sponsored ADR 49,200 1,869,600
- ---------------------------------------------------------------------------------------------------------
Republic Services, Inc.(1) 150,000 2,156,250
- ---------------------------------------------------------------------------------------------------------
Waste Management, Inc. 330,000 5,671,875
-----------
9,697,725
- ---------------------------------------------------------------------------------------------------------
Manufacturing--2.2%
Corning, Inc. 70,000 9,025,625
- ---------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 160,000 9,230,000
- ---------------------------------------------------------------------------------------------------------
Pentair, Inc. 100,000 3,850,000
- ---------------------------------------------------------------------------------------------------------
Tyco International Ltd. 224,044 8,709,710
-----------
30,815,335
- ---------------------------------------------------------------------------------------------------------
Communication Services--3.5%
- ---------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--2.8%
Intermedia Communications, Inc.(1) 90,000 3,493,125
- ---------------------------------------------------------------------------------------------------------
MCI WorldCom, Inc.(1) 262,200 13,912,987
- ---------------------------------------------------------------------------------------------------------
Nortel Networks Corp. 220,000 22,220,000
-----------
39,626,112
- ---------------------------------------------------------------------------------------------------------
Telephone Utilities--0.7%
CenturyTel, Inc. 110,000 5,211,250
- ---------------------------------------------------------------------------------------------------------
SBC Communications, Inc. 92,120 4,490,850
-----------
9,702,100
</TABLE>
Oppenheimer Capital Appreciation Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Consumer Cyclicals--13.5%
- ---------------------------------------------------------------------------------------------------------
Autos & Housing--3.3%
Centex Corp. 170,000 $ 4,196,875
- ---------------------------------------------------------------------------------------------------------
Ethan Allen Interiors, Inc. 121,050 3,881,166
- ---------------------------------------------------------------------------------------------------------
Ford Motor Co. 270,000 14,428,125
- ---------------------------------------------------------------------------------------------------------
Gentex Corp.(1) 230,000 6,382,500
- ---------------------------------------------------------------------------------------------------------
Southdown, Inc. 145,000 7,485,625
- ---------------------------------------------------------------------------------------------------------
Toll Brothers, Inc.(1) 130,000 2,421,250
- ---------------------------------------------------------------------------------------------------------
USG Corp. 170,000 8,011,250
-----------
46,806,791
- ---------------------------------------------------------------------------------------------------------
Consumer Services--2.3%
Budget Group, Inc., Cl. A(1) 260,000 2,356,250
- ---------------------------------------------------------------------------------------------------------
Hertz Corp., Cl. A 53,000 2,656,625
- ---------------------------------------------------------------------------------------------------------
Omnicom Group, Inc. 180,000 18,000,000
- ---------------------------------------------------------------------------------------------------------
Young & Rubicam, Inc. 144,500 10,223,375
-----------
33,236,250
- ---------------------------------------------------------------------------------------------------------
Leisure & Entertainment--2.3%
Callaway Golf Co. 210,000 3,714,375
- ---------------------------------------------------------------------------------------------------------
Carnival Corp. 395,000 18,885,937
- ---------------------------------------------------------------------------------------------------------
Harley-Davidson, Inc. 75,000 4,804,687
- ---------------------------------------------------------------------------------------------------------
Mandalay Resort Group(1) 285,000 5,735,625
-----------
33,140,624
- ---------------------------------------------------------------------------------------------------------
Media--1.8%
News Corp. Ltd. (The), Sponsored ADR 250,000 9,562,500
- ---------------------------------------------------------------------------------------------------------
Time Warner, Inc. 220,000 15,936,250
-----------
25,498,750
- ---------------------------------------------------------------------------------------------------------
Retail: General--0.3%
Dayton Hudson Corp. 70,000 5,140,625
- ---------------------------------------------------------------------------------------------------------
Retail: Specialty--2.7%
Abercrombie & Fitch Co., Cl. A(1) 300,000 8,006,250
- ---------------------------------------------------------------------------------------------------------
CSK Auto Corp.(1) 49,000 857,500
- ---------------------------------------------------------------------------------------------------------
Gap, Inc. 300,000 13,800,000
- ---------------------------------------------------------------------------------------------------------
TJX Cos., Inc. 250,000 5,109,375
- ---------------------------------------------------------------------------------------------------------
Too, Inc.(1) 181,000 3,122,250
- ---------------------------------------------------------------------------------------------------------
Zale Corp.(1) 170,000 8,223,750
-----------
39,119,125
- ---------------------------------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--0.8%
Jones Apparel Group, Inc.(1) 185,000 5,018,125
- ---------------------------------------------------------------------------------------------------------
Tommy Hilfiger Corp.(1) 260,000 6,061,250
-----------
11,079,375
</TABLE>
6 Oppenheimer Capital Appreciation Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Consumer Staples--10.6%
- ---------------------------------------------------------------------------------------------------------
Beverages--1.4%
Adolph Coors Co., Cl. B 110,000 $ 5,775,000
- ---------------------------------------------------------------------------------------------------------
Seagram Co. Ltd. (The) 320,000 14,380,000
-----------
20,155,000
- ---------------------------------------------------------------------------------------------------------
Broadcasting--4.5%
AMFM, Inc.(1) 150,000 11,737,500
- ---------------------------------------------------------------------------------------------------------
CBS Corp.(1) 220,000 14,066,250
- ---------------------------------------------------------------------------------------------------------
Comcast Corp., Cl. A Special 365,000 18,455,312
- ---------------------------------------------------------------------------------------------------------
Infinity Broadcasting Corp., Cl. A(1) 350,000 12,665,625
- ---------------------------------------------------------------------------------------------------------
Rogers Communications, Inc., Cl. B(1) 276,300 6,739,024
-----------
63,663,711
- ---------------------------------------------------------------------------------------------------------
Entertainment--1.6%
Outback Steakhouse, Inc.(1) 140,000 3,631,250
- ---------------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 380,000 18,738,750
- ---------------------------------------------------------------------------------------------------------
Wendy's International, Inc. 15,000 309,375
-----------
22,679,375
- ---------------------------------------------------------------------------------------------------------
Food--0.7%
IBP, Inc. 190,000 3,420,000
- ---------------------------------------------------------------------------------------------------------
Keebler Foods Co.(1) 140,000 3,937,500
- ---------------------------------------------------------------------------------------------------------
Nabisco Holdings Corp., Cl. A 80,000 2,530,000
-----------
9,887,500
- ---------------------------------------------------------------------------------------------------------
Food & Drug Retailers--1.7%
CVS Corp. 310,000 12,380,625
- ---------------------------------------------------------------------------------------------------------
Safeway, Inc.(1) 350,000 12,446,875
-----------
24,827,500
- ---------------------------------------------------------------------------------------------------------
Household Goods--0.7%
Avon Products, Inc. 310,000 10,230,000
- ---------------------------------------------------------------------------------------------------------
Energy--5.0%
- ---------------------------------------------------------------------------------------------------------
Energy Services--1.9%
Coastal Corp. 220,000 7,796,250
- ---------------------------------------------------------------------------------------------------------
ENSCO International, Inc. 50,000 1,143,750
- ---------------------------------------------------------------------------------------------------------
Halliburton Co. 200,000 8,050,000
- ---------------------------------------------------------------------------------------------------------
Nabors Industries, Inc.(1) 150,000 4,640,625
- ---------------------------------------------------------------------------------------------------------
Transocean Sedco Forex, Inc. 95,000 3,200,313
- ---------------------------------------------------------------------------------------------------------
Varco International, Inc.(1) 240,000 2,445,000
-----------
27,275,938
- ---------------------------------------------------------------------------------------------------------
Oil: Domestic--2.5%
Amerada Hess Corp. 155,000 8,796,250
- ---------------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 230,000 18,529,375
- ---------------------------------------------------------------------------------------------------------
Forest Oil Corp.(1) 170,000 2,241,875
- ---------------------------------------------------------------------------------------------------------
Texaco, Inc. 50,000 2,715,625
- ---------------------------------------------------------------------------------------------------------
Tosco Corp. 140,000 3,806,250
-----------
36,089,375
</TABLE>
Oppenheimer Capital Appreciation Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Oil: International--0.6%
Total Fina SA, Sponsored ADR 120,000 $ 8,310,000
- ---------------------------------------------------------------------------------------------------------
Financial--8.8%
- ---------------------------------------------------------------------------------------------------------
Banks--2.2%
Bank of America Corp. 150,000 7,528,125
- ---------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 180,000 13,983,750
- ---------------------------------------------------------------------------------------------------------
FleetBoston Financial Corp. 272,908 9,500,610
-----------
31,012,485
- ---------------------------------------------------------------------------------------------------------
Diversified Financial--4.9%
C.I.T. Group, Inc., Cl. A 150,000 3,168,750
- ---------------------------------------------------------------------------------------------------------
Citigroup, Inc. 377,748 20,988,623
- ---------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 95,000 8,947,813
- ---------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 105,000 8,767,500
- ---------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 135,000 19,271,250
- ---------------------------------------------------------------------------------------------------------
Price (T. Rowe) Associates, Inc. 70,000 2,585,625
- ---------------------------------------------------------------------------------------------------------
Schwab (Charles) Corp. 155,000 5,948,125
-----------
69,677,686
- ---------------------------------------------------------------------------------------------------------
Insurance--1.2%
American International Group, Inc. 27,500 2,973,438
- ---------------------------------------------------------------------------------------------------------
AXA Financial, Inc. 250,000 8,468,750
- ---------------------------------------------------------------------------------------------------------
Progressive Corp. 80,000 5,850,000
-----------
17,292,188
- ---------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--0.5%
Boston Properties, Inc. 245,000 7,625,625
- ---------------------------------------------------------------------------------------------------------
Healthcare--4.9%
- ---------------------------------------------------------------------------------------------------------
Healthcare/Drugs--4.4%
Amgen, Inc.(1) 400,000 24,025,000
- ---------------------------------------------------------------------------------------------------------
Elan Corp. plc, ADR(1) 400,000 11,800,000
- ---------------------------------------------------------------------------------------------------------
IDEC Pharmaceuticals Corp. 108,400 10,650,300
- ---------------------------------------------------------------------------------------------------------
Pfizer, Inc. 90,000 2,919,375
- ---------------------------------------------------------------------------------------------------------
Schering-Plough Corp. 120,000 5,062,500
- ---------------------------------------------------------------------------------------------------------
Warner Lambert Co. 100,000 8,193,750
-----------
62,650,925
- ---------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.5%
Baxter International, Inc. 90,000 5,653,125
- ---------------------------------------------------------------------------------------------------------
Medtronic, Inc. 60,000 2,186,250
-----------
7,839,375
</TABLE>
8 Oppenheimer Capital Appreciation Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Technology--38.0%
- ---------------------------------------------------------------------------------------------------------
Computer Hardware--2.0%
Compaq Computer Corp. 65,000 $ 1,759,063
- ---------------------------------------------------------------------------------------------------------
EMC Corp.(1) 15,000 1,638,750
- ---------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 65,000 7,405,938
- ---------------------------------------------------------------------------------------------------------
MMC Networks, Inc.(1) 60,000 2,062,500
- ---------------------------------------------------------------------------------------------------------
Seagate Technology, Inc.(1) 350,000 16,296,875
------------
29,163,126
- ---------------------------------------------------------------------------------------------------------
Computer Services--0.9%
Applied Micro Circuits Corp.(1) 75,500 9,607,375
- ---------------------------------------------------------------------------------------------------------
CGI Group, Inc.(1) 70,700 3,016,462
------------
12,623,837
- ---------------------------------------------------------------------------------------------------------
Computer Software--13.8%
BEA Systems, Inc.(1) 112,400 7,860,975
- ---------------------------------------------------------------------------------------------------------
BMC Software, Inc.(1) 300,000 23,981,250
- ---------------------------------------------------------------------------------------------------------
I2 Technologies, Inc.(1) 120,000 23,400,000
- ---------------------------------------------------------------------------------------------------------
Microsoft Corp.(1) 530,000 61,877,500
- ---------------------------------------------------------------------------------------------------------
Novell, Inc.(1) 650,000 25,959,375
- ---------------------------------------------------------------------------------------------------------
Oracle Corp.(1) 230,000 25,774,375
- ---------------------------------------------------------------------------------------------------------
Sybase, Inc.(1) 180,000 3,060,000
- ---------------------------------------------------------------------------------------------------------
Veritas Software Corp.(1) 170,000 24,331,250
------------
196,244,725
- ---------------------------------------------------------------------------------------------------------
Communications Equipment--11.4%
Antec Corp.(1) 50,000 1,825,000
- ---------------------------------------------------------------------------------------------------------
CIENA Corp.(1) 150,000 8,625,000
- ---------------------------------------------------------------------------------------------------------
Cisco Systems, Inc.(1) 450,000 48,206,250
- ---------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc. 130,000 9,725,625
- ---------------------------------------------------------------------------------------------------------
Nokia Corp., A Shares, Sponsored ADR(1) 335,000 63,650,000
- ---------------------------------------------------------------------------------------------------------
QUALCOMM, Inc.(1) 84,000 14,794,500
- ---------------------------------------------------------------------------------------------------------
Tellabs, Inc.(1) 150,000 9,628,125
- ---------------------------------------------------------------------------------------------------------
Williams Communications Group, Inc.(1) 190,000 5,498,125
------------
161,952,625
</TABLE>
Oppenheimer Capital Appreciation Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Electronics--9.9%
Analog Devices, Inc.(1) 80,000 $ 7,440,000
- ---------------------------------------------------------------------------------------------------------
Atmel Corp.(1) 320,000 9,460,000
- ---------------------------------------------------------------------------------------------------------
Cypress Semiconductor Corp.(1) 230,000 7,446,250
- ---------------------------------------------------------------------------------------------------------
Flextronics International Ltd.(1) 260,000 11,960,000
- ---------------------------------------------------------------------------------------------------------
LSI Logic Corp.(1) 115,000 7,762,500
- ---------------------------------------------------------------------------------------------------------
Micron Technology, Inc.(1) 180,000 13,995,000
- ---------------------------------------------------------------------------------------------------------
National Semiconductor Corp.(1) 310,000 13,271,875
- ---------------------------------------------------------------------------------------------------------
Novellus Systems, Inc.(1) 60,000 7,351,875
- ---------------------------------------------------------------------------------------------------------
PMC-Sierra, Inc.(1) 7,000 1,122,188
- ---------------------------------------------------------------------------------------------------------
RF Micro Devices, Inc.(1) 170,000 11,634,375
- ---------------------------------------------------------------------------------------------------------
Texas Instruments, Inc. 150,000 14,531,250
- ---------------------------------------------------------------------------------------------------------
Vitesse Semiconductor Corp.(1) 510,000 26,743,125
- ---------------------------------------------------------------------------------------------------------
Waters Corp.(1) 160,000 8,480,000
--------------
141,198,438
- ---------------------------------------------------------------------------------------------------------
Transportation--1.1%
- ---------------------------------------------------------------------------------------------------------
Railroads & Truckers--1.1%
Canadian Pacific Ltd. 180,000 3,881,250
- ---------------------------------------------------------------------------------------------------------
Kansas City Southern Industries, Inc. 160,000 11,940,000
--------------
15,821,250
- ---------------------------------------------------------------------------------------------------------
Utilities--0.7%
- ---------------------------------------------------------------------------------------------------------
Electric Utilities--0.3%
Potomac Electric Power Co. 180,000 4,128,750
- ---------------------------------------------------------------------------------------------------------
Gas Utilities--0.4%
Williams Cos., Inc. (The) 180,000 5,501,250
--------------
Total Common Stocks (Cost $846,317,127) 1,313,130,020
Principal
Amount
=========================================================================================================
Repurchase Agreements--8.0%
- ---------------------------------------------------------------------------------------------------------
Repurchase agreement with Deutsche Bank Securities Inc., 3.20%, dated
12/31/99, to be repurchased at $114,130,427 on 1/3/00, collateralized
by U.S. Treasury Bonds, 6.375%, 8/15/27, with a value of $31,418,622
and U.S. Treasury Nts., 6.125%, 12/31/01, with a value of $85,361,063
(Cost $114,100,000) $114,100,000 114,100,000
- ---------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $960,417,127) 100.1% 1,427,230,020
- ---------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (0.1) (2,032,604)
------------ --------------
Net Assets 100.0% $1,425,197,416
============ ==============
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements
10 Oppenheimer Capital Appreciation Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
=======================================================================================================
<S> <C>
Assets
Investments, at value (cost $960,417,127)--see accompanying statement $1,427,230,020
- -------------------------------------------------------------------------------------------------------
Cash 735,078
- -------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 2,665,747
Shares of beneficial interest sold 1,431,324
Interest and dividends 540,095
Other 10,113
--------------
Total assets 1,432,612,377
=======================================================================================================
Liabilities
Payables and other liabilities:
Investments purchased 6,076,984
Shares of beneficial interest redeemed 1,213,744
Trustees' compensation 484
Transfer and shareholder servicing agent fees 186
Other 123,563
--------------
Total liabilities 7,414,961
=======================================================================================================
Net Assets $1,425,197,416
==============
=======================================================================================================
Composition of Net Assets
Paid-in capital $ 847,994,816
- -------------------------------------------------------------------------------------------------------
Undistributed net investment income 2,056,707
- -------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 108,335,322
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 466,810,571
--------------
Net assets--applicable to 28,592,995 shares of beneficial interest outstanding $1,425,197,416
==============
=======================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $49.84
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Capital Appreciation Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
=======================================================================================================
<S> <C>
Investment Income
Dividends $ 5,736,352
- -------------------------------------------------------------------------------------------------------
Interest 3,289,528
------------
Total income 9,025,880
=======================================================================================================
Expenses
Management fees 6,845,473
- -------------------------------------------------------------------------------------------------------
Custodian fees and expenses 17,921
- -------------------------------------------------------------------------------------------------------
Trustees' compensation 4,059
- -------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,107
- -------------------------------------------------------------------------------------------------------
Other 105,419
------------
Total expenses 6,974,979
Less expenses paid indirectly (10,397)
------------
Net expenses 6,964,582
=======================================================================================================
Net Investment Income 2,061,298
=======================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 109,110,788
Foreign currency transactions (385,246)
------------
Net realized gain 108,725,542
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 275,400,704
Translation of assets and liabilities denominated in foreign currencies 226,469
------------
Net change 275,627,173
------------
Net realized and unrealized gain 384,352,715
=======================================================================================================
Net Increase in Net Assets Resulting from Operations $386,414,013
============
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Capital Appreciation Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 2,061,298 $ 3,036,249
- ----------------------------------------------------------------------------------------------------------------
Net realized gain 108,725,542 32,507,950
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 275,627,173 99,933,565
-------------- ------------
Net increase in net assets resulting from operations 386,414,013 135,477,764
================================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (2,974,252) (3,939,379)
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (32,671,363) (47,530,889)
================================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions 305,879,322 190,636,226
================================================================================================================
Net Assets
Total increase 656,647,720 274,643,722
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 768,549,696 493,905,974
-------------- ------------
End of period (including undistributed net investment
income of $2,056,707 and $2,959,139, respectively) $1,425,197,416 $768,549,696
============== ============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Capital Appreciation Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
=========================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $36.67 $32.44 $27.24 $23.55 $17.68
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .06 .13 .25 .15 .25
Net realized and unrealized gain 14.68 7.28 6.62 5.46 6.10
- -------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 14.74 7.41 6.87 5.61 6.35
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.13) (.24) (.15) (.25) (.22)
Distributions from net realized gain (1.44) (2.94) (1.52) (1.67) (.26)
- -------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (1.57) (3.18) (1.67) (1.92) (.48)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $49.84 $36.67 $32.44 $27.24 $23.55
====== ====== ====== ====== ======
=========================================================================================================================
Total Return, at Net Asset Value(1) 41.66% 24.00% 26.68% 25.20% 36.65%
=========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,425 $769 $494 $286 $118
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,003 $609 $390 $152 $ 89
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 0.21% 0.50% 1.02% 1.08% 1.46%
Expenses 0.70% 0.75%(3) 0.75%(3) 0.81%(3)(4) 0.79%(3)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 56% 56% 66% 65% 58%
</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. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. The expense ratio was 0.79% net of the voluntary reimbursement by
the Manager.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $751,087,611 and $525,369,517, respectively.
See accompanying Notes to Financial Statements.
14 Oppenheimer Capital Appreciation Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Capital Appreciation Fund/VA (the Fund), formerly known as
Oppenheimer Growth Fund, is a separate series of Oppenheimer Variable Account
Funds (the Trust), a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek capital appreciation by investing in securities
of well-known established companies. The Fund'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 price 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
Oppenheimer Capital Appreciation Fund/VA 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of 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.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect an
increase in undistributed net investment income of $10,522. Accumulated net
realized gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
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. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
--------------------------------- --------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Sold 13,631,886 $ 546,735,927 8,866,513 $293,095,063
Dividends and/or distributions reinvested 958,989 35,645,615 1,565,397 51,470,268
Redeemed (6,954,081) (276,502,220) (4,699,071) (153,929,105)
---------- ------------- ---------- ------------
Net increase 7,636,794 $ 305,879,322 5,732,839 $190,636,226
========== ============= ========== ============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$466,812,893 was composed of gross appreciation of $520,306,180, and gross
depreciation of $53,493,287.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. 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 and
0.60% of average annual net assets over $800 million. The Fund's management fee
for the year ended December 31, 1999 was 0.68% of average annual net assets.
- --------------------------------------------------------------------------------
Transfer Agent Fees. 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 for cost.
16 Oppenheimer Capital Appreciation Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
5. Foreign Currency Contracts
A foreign currency 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 contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer High Income Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer High Income Fund/VA (which is a
series of Oppenheimer Variable Account Funds) as of December 31, 1999, the
related statement of operations for the year then ended, the statements of
changes in net assets for the years ended December 31, 1999 and 1998 and the
financial highlights for the period January 1, 1995, to December 31, 1999. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
High Income Fund/VA as of December 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- ---------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
================================================================================================================================
Mortgage-Backed Obligations--1.9%
AMRESCO Commercial Mortgage Funding I Corp., Multiclass Mtg. Pass-Through
Certificates, Series 1997-C1, Cl. H, 7%, 6/17/29(2) $ 200,000 $ 131,750
- --------------------------------------------------------------------------------------------------------------------------------
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1997-D4, Cl. B1, 7.525%, 4/14/29(3) 167,000 119,092
Series 1997-D4, Cl. B2, 7.525%, 4/14/29(3) 167,000 115,856
Series 1997-D4, Cl. B3, 7.525%, 4/14/29(3) 166,000 104,580
- --------------------------------------------------------------------------------------------------------------------------------
CBA Mortgage Corp., Mtg. Pass-Through Certificates:
Series 1993-C1, Cl. E, 6.72%, 12/25/03(2)(3) 250,000 214,922
Series 1993-C1, Cl. F, 6.72%, 12/25/03(2)(3) 700,000 584,500
- --------------------------------------------------------------------------------------------------------------------------------
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates:
Series 1997, Cl. D, 8.126%, 5/25/08(2)(3) 300,000 234,000
Series 1997, Cl. E, 8.126%, 2/25/11(2)(3) 1,500,000 1,005,000
- --------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates,
Series 1996-C1, Cl. E, 7.421%, 3/15/06(2)(3) 835,342 684,850
- --------------------------------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., Commercial Mtg. Pass-Through Certificates,
Series 1997-MC1, Cl. F, 7.452%, 5/20/07(2) 254,890 192,840
- --------------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1994-C1, Cl. E, 8%, 6/25/26 619,807 595,742
Series 1994-C2, Cl. G, 8%, 4/25/25 672,810 639,591
Series 1995-C1, Cl. F, 6.90%, 2/25/27 458,833 412,735
- --------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 6.581%, 4/25/26(2) 1,420,875 937,334
- --------------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through Certificates,
Series 1996-C3, Cl. E, 8.256%, 6/25/30(4) 650,000 645,937
----------
Total Mortgage-Backed Obligations (Cost $7,051,518) 6,618,729
================================================================================================================================
Foreign Government Obligations--0.8%
- --------------------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Bonds, Bonos de Consolidacion de Deudas,
Series I, 2.868%, 4/1/07(3)ARP 1,417,740 992,552
- --------------------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of) Interest Arrears Bonds, 6.50%, 7/28/11(3) 1,450,000 1,147,312
- --------------------------------------------------------------------------------------------------------------------------------
Panama (Republic of) Interest Reduction Bonds, 4.25%, 7/17/14(3) 275,000 215,875
- --------------------------------------------------------------------------------------------------------------------------------
Peru (Republic of) Past Due Interest Bonds, Series 20 yr., 4.25%, 3/7/17(3) 400,000 277,000
- --------------------------------------------------------------------------------------------------------------------------------
PT Hutama Karya Promissory Nts., Zero Coupon, 2/10/98(2)(5)(8)IDR 1,000,000,000 39,356
----------
Total Foreign Government Obligations (Cost $2,588,032) 2,672,095
================================================================================================================================
Loan Participations--1.8%
- --------------------------------------------------------------------------------------------------------------------------------
Central Bank of Indonesia Gtd. Nts., Series 2 yr., 8.906%, 8/25/00(2)(3) 1,000,000 970,000
- --------------------------------------------------------------------------------------------------------------------------------
Shoshone Partners Loan Trust Sr. Nts., 7.955%, 4/28/02
(representing a basket of reference loans and a total return swap between
Chase Manhattan Bank and the Trust)(2)(3) 5,360,000 5,266,377
----------
Total Loan Participations (Cost $6,313,570) 6,236,377
</TABLE>
Oppenheimer High Income Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
================================================================================================================================
Corporate Bonds and Notes--83.1%
- --------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--2.6%
Amtran, Inc.:
9.625% Nts., 12/15/05 $ 800,000 $ 772,000
10.50% Sr. Nts., 8/1/04 700,000 703,500
10.75% Sr. Nts., 8/1/05 700,000 717,500
- --------------------------------------------------------------------------------------------------------------------------------
Atlas Air, Inc.:
9.25% Sr. Nts., 4/15/08 1,325,000 1,272,000
9.375% Sr. Unsec. Nts., 11/15/06 1,000,000 970,000
- --------------------------------------------------------------------------------------------------------------------------------
BE Aerospace, Inc., 9.50% Sr. Unsec. Sub. Nts., 11/1/08 900,000 850,500
- --------------------------------------------------------------------------------------------------------------------------------
Constellation Finance LLC, 9.80% Airline Receivable Asset-Backed Nts.,
Series 1997-1, 1/1/01(2) 800,000 744,000
- --------------------------------------------------------------------------------------------------------------------------------
Decrane Aircraft Holdings, Inc., 12% Sr. Unsec. Sub. Nts.,
Series B, 9/30/08 1,750,000 1,618,750
- --------------------------------------------------------------------------------------------------------------------------------
Fairchild Corp., 10.75% Sr. Unsec. Sub. Nts., 4/15/09 1,000,000 853,750
- --------------------------------------------------------------------------------------------------------------------------------
Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts.,
Series 1997-A, Cl. B, 6/15/04(2) 288,566 294,886
----------
8,796,886
- --------------------------------------------------------------------------------------------------------------------------------
Chemicals--2.7%
ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 500,000 127,500
- --------------------------------------------------------------------------------------------------------------------------------
Georgia Gulf Corp., 10.375% Sr. Sub. Nts., 11/1/07(4) 300,000 314,625
- --------------------------------------------------------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc:
10.125% Sr. Unsec. Sub. Nts., 7/1/09(4) 800,000 832,000
10.125% Sr. Unsec. Sub. Nts., 7/1/09EUR 500,000 534,650
Zero Coupon Sr. Disc. Nts., 13.09%, 12/31/09(4)(6) 1,500,000 459,375
- --------------------------------------------------------------------------------------------------------------------------------
Lyondell Chemical Co.:
9.875% Sec. Nts., Series B, 5/1/07 500,000 512,500
10.875% Sr. Sub. Nts., 5/1/09 100,000 103,500
- --------------------------------------------------------------------------------------------------------------------------------
PCI Chemicals Canada, Inc., 9.25% Sec. Nts., 10/15/07 500,000 387,500
- --------------------------------------------------------------------------------------------------------------------------------
Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07 400,000 318,000
- --------------------------------------------------------------------------------------------------------------------------------
Polymer Group, Inc.:
8.75% Sr. Sub. Nts., 3/1/08 1,500,000 1,447,500
9% Sr. Sub. Nts., 7/1/07 250,000 243,750
- --------------------------------------------------------------------------------------------------------------------------------
Royster-Clark, Inc., 10.25% First Mtg. Nts., 4/1/09(4) 650,000 591,500
- --------------------------------------------------------------------------------------------------------------------------------
Sovereign Specialty Chemicals, Inc., 9.50% Sr. Unsec. Sub. Nts., Series B, 8/1/07 795,000 802,950
- --------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals Holdings, Inc., 0%/13.50% Sr. Disc. Nts., 8/15/08(7) 650,000 167,375
- --------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc.:
11.25% Sr. Sub. Nts., 4/1/07 250,000 185,000
11.75% Sr. Unsec. Sub. Nts., 8/15/06 750,000 566,250
12.375% Sr. Sec. Nts., Series B, 7/15/06 600,000 624,000
- --------------------------------------------------------------------------------------------------------------------------------
ZSC Specialty Chemical plc, 11% Sr. Nts., 7/1/09(4) 800,000 834,000
----------
9,051,975
- --------------------------------------------------------------------------------------------------------------------------------
Consumer Durables--0.2%
Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07 425,000 312,375
- --------------------------------------------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(2) 350,000 383,803
----------
696,178
</TABLE>
6 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--1.8%
AKI Holdings, Inc.:
0%/13.50% Sr. Disc. Debs., 7/1/09(7) $1,080,000 $ 515,700
10.50% Sr. Unsec. Nts., 7/1/08 1,000,000 895,000
- --------------------------------------------------------------------------------------------------------------------------------
Bell Sports, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 8/15/08 1,100,000 1,105,500
- --------------------------------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., 8.875% Sr. Unsec. Nts., 4/15/06(8) 600,000 33,000
- --------------------------------------------------------------------------------------------------------------------------------
Globe Manufacturing Corp., 10% Sr. Unsec. Sub. Nts., Series B, 8/1/08 900,000 436,500
- --------------------------------------------------------------------------------------------------------------------------------
Phillips-Van Heusen Corp., 9.50% Sr. Unsec. Sub. Nts., 5/1/08 620,000 579,700
- --------------------------------------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp.:
8.625% Sr. Unsec. Sub. Nts., 2/1/08 250,000 126,250
9% Sr. Nts., 11/1/06 1,185,000 894,675
- --------------------------------------------------------------------------------------------------------------------------------
Salton, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/05 1,200,000 1,233,000
- --------------------------------------------------------------------------------------------------------------------------------
Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08(2) 600,000 213,000
- --------------------------------------------------------------------------------------------------------------------------------
William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 235,000 212,675
-----------
6,245,000
- --------------------------------------------------------------------------------------------------------------------------------
Energy--4.5%
Chesapeake Energy Corp.:
9.125% Sr. Unsec. Nts., 4/15/06 1,000,000 917,500
9.625% Sr. Unsec. Nts., Series B, 5/1/05 1,000,000 947,500
- --------------------------------------------------------------------------------------------------------------------------------
Clark Refinancing & Marketing, Inc., 8.875% Sr. Sub. Nts., 11/15/07 1,040,000 546,000
- --------------------------------------------------------------------------------------------------------------------------------
Clark USA, Inc., 10.875% Sr. Nts., Series B, 12/1/05 275,000 111,375
- --------------------------------------------------------------------------------------------------------------------------------
Denbury Management, Inc., 9% Sr. Sub. Nts., 3/1/08 800,000 732,000
- --------------------------------------------------------------------------------------------------------------------------------
Empresa Electric Del Norte, 10.50% Sr. Debs., 6/15/05(2) 1,000,000 470,933
- --------------------------------------------------------------------------------------------------------------------------------
Forcenergy, Inc., 8.50% Sr. Sub. Nts., Series B, 2/15/07(5)(8) 700,000 573,125
- --------------------------------------------------------------------------------------------------------------------------------
Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 400,000 396,000
- --------------------------------------------------------------------------------------------------------------------------------
Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(4) 2,000,000 1,710,000
- --------------------------------------------------------------------------------------------------------------------------------
Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08 1,025,000 650,875
- --------------------------------------------------------------------------------------------------------------------------------
Leviathan Gas Pipeline Partners, LP/Leviathan Finance Corp.,
10.375% Sr. Unsec. Sub. Nts., Series B, 6/1/09 500,000 517,500
- --------------------------------------------------------------------------------------------------------------------------------
National Energy Group, Inc., 10.75% Sr. Nts., Series D, 11/1/06(5)(8) 810,000 425,250
- --------------------------------------------------------------------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 1,420,000 1,185,700
- --------------------------------------------------------------------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub. Nts., Series B, 5/15/07 800,000 764,000
- --------------------------------------------------------------------------------------------------------------------------------
R&B Falcon Corp., 12.25% Sr. Unsec. Nts., 3/15/06 1,000,000 1,095,000
- --------------------------------------------------------------------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 1,060,000 492,900
- --------------------------------------------------------------------------------------------------------------------------------
RBF Finance Co.:
11% Sr. Sec. Nts., 3/15/06 1,000,000 1,070,000
11.375% Sr. Sec. Nts., 3/15/09 500,000 537,500
- --------------------------------------------------------------------------------------------------------------------------------
Statia Terminals International/Statia Terminals (Canada), Inc., 11.75% First Mtg. Nts.,
Series B, 11/15/03 225,000 230,344
- --------------------------------------------------------------------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 735,000 720,300
- --------------------------------------------------------------------------------------------------------------------------------
Universal Compression Holdings, Inc.:
0%/9.875% Sr. Disc. Nts., 2/15/08(7) 1,325,000 828,125
0%/11.375% Sr. Disc. Nts., 2/15/09(7) 720,000 385,200
-----------
15,307,127
</TABLE>
Oppenheimer High Income Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Financial--1.7%
AMRESCO, Inc., 9.875% Sr. Sub. Nts., Series 98-A, 3/15/05 $ 700,000 $ 444,500
- --------------------------------------------------------------------------------------------------------------------------------
ASAT Finance LLC, Units (each unit consists of $1,000 principal amount of 12.50%
sr. nts., 11/1/06 and one warrant to purchase shares of common stock)(4)(9) 500,000 540,000
- --------------------------------------------------------------------------------------------------------------------------------
Bakrie Investindo, Zero Coupon Promissory Nts., 3/26/98(2)(5)(8)IDR 1,000,000,000 21,467
- --------------------------------------------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 517,000 411,015
- --------------------------------------------------------------------------------------------------------------------------------
Local Financial Corp., 11% Sr. Nts., 9/8/04(4) 800,000 836,000
- --------------------------------------------------------------------------------------------------------------------------------
Ocwen Capital Trust I, 10.875% Capital Nts., 8/1/27(2) 450,000 290,250
- --------------------------------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa, 24% Nts., 6/19/03(5)(8)IDR 657,200,000 12,227
- --------------------------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08 2,165,000 1,989,094
- --------------------------------------------------------------------------------------------------------------------------------
Southern Pacific Funding Corp., 11.50% Sr. Nts., 11/1/04(5)(8) 240,000 114,000
- --------------------------------------------------------------------------------------------------------------------------------
Sovereign Bankcorp, 10.50% Sr. Unsec. Nts., 11/15/06 600,000 615,000
- --------------------------------------------------------------------------------------------------------------------------------
Veritas Capital Trust, 10% Nts., 1/1/28 550,000 413,875
----------
5,687,428
- --------------------------------------------------------------------------------------------------------------------------------
Food & Drug--0.7%
Family Restaurants, Inc.:
9.75% Sr. Nts., 2/1/02 1,300,000 617,500
10.875% Sr. Sub. Disc. Nts., 2/1/04 100,000 45,500
- --------------------------------------------------------------------------------------------------------------------------------
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., Series B, 7/31/07 1,135,000 1,030,012
- --------------------------------------------------------------------------------------------------------------------------------
Pathmark Stores, Inc.:
10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03 2,710,000 338,750
12.625% Sub. Nts., 6/15/02 900,000 301,500
----------
2,333,262
- --------------------------------------------------------------------------------------------------------------------------------
Food/Tobacco--1.8%
Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 520,000 497,900
- --------------------------------------------------------------------------------------------------------------------------------
Del Monte Foods Co., 0%/12.50% Sr. Disc. Nts., Series B, 12/15/07(7) 501,000 388,275
- --------------------------------------------------------------------------------------------------------------------------------
New World Pasta Co., 9.25% Sr. Nts., 2/15/09 1,200,000 1,086,000
- --------------------------------------------------------------------------------------------------------------------------------
Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05 1,600,000 1,472,000
- --------------------------------------------------------------------------------------------------------------------------------
Purina Mills, Inc., 9% Sr. Unsec. Sub. Nts., 3/15/10(8) 400,000 102,000
- --------------------------------------------------------------------------------------------------------------------------------
SmithField Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08 925,000 837,125
- --------------------------------------------------------------------------------------------------------------------------------
Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 1,175,000 957,625
- --------------------------------------------------------------------------------------------------------------------------------
Triarc Consumer Products Group LLC, 10.25% Sr. Sub. Nts., 2/15/09(4) 750,000 731,250
----------
6,072,175
</TABLE>
8 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Forest Products/Containers--2.3%
American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05(8) $ 400,000 $ 46,000
- --------------------------------------------------------------------------------------------------------------------------------
Ball Corp.:
7.75% Sr. Unsec. Nts., 8/1/06 700,000 686,000
8.25% Sr. Unsec. Sub. Nts., 8/1/08 800,000 772,000
- --------------------------------------------------------------------------------------------------------------------------------
Gaylord Container Corp., 9.75% Sr. Nts., 6/15/07 500,000 473,750
- --------------------------------------------------------------------------------------------------------------------------------
Packaging Corp. of America, 9.625% Sr. Unsec. Sub. Nts., 4/1/09 750,000 769,687
- --------------------------------------------------------------------------------------------------------------------------------
Repap New Brunswick, Inc.:
9% First Priority Sr. Sec. Nts., 6/1/04 250,000 246,250
10.625% Second Priority Sr. Sec. Nts., 4/15/05 700,000 654,500
- --------------------------------------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07 1,130,000 1,169,550
10.875% Sr. Sub. Nts., 4/1/08 750,000 742,500
- --------------------------------------------------------------------------------------------------------------------------------
SD Warren Co., 14% Unsec. Nts., 12/15/06(10) 1,158,749 1,303,593
- --------------------------------------------------------------------------------------------------------------------------------
Tembec Industries, Inc., 8.625% Sr. Nts., 6/30/09 800,000 802,000
-----------
7,665,830
- --------------------------------------------------------------------------------------------------------------------------------
Gaming/Leisure--5.0%
AP Holdings, Inc., 0%/11.25% Sr. Disc. Nts., 3/15/08(7) 450,000 182,250
- --------------------------------------------------------------------------------------------------------------------------------
Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 940,000 662,700
- --------------------------------------------------------------------------------------------------------------------------------
Aztar Corp., 8.875% Sr. Unsec. Sub. Nts., 5/15/07 550,000 530,750
- --------------------------------------------------------------------------------------------------------------------------------
Capital Gaming International, Inc., 11.50% Promissory Nts., 8/1/95(5) 9,500 ---
- --------------------------------------------------------------------------------------------------------------------------------
Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 840,000 778,050
- --------------------------------------------------------------------------------------------------------------------------------
Coast Hotel & Casinos, Inc., 9.50% Sr. Unsec. Sub. Nts., 4/1/09 500,000 480,000
- --------------------------------------------------------------------------------------------------------------------------------
Empress Entertainment, Inc., 8.125% Sr. Sub. Nts., 7/1/06 500,000 507,500
- --------------------------------------------------------------------------------------------------------------------------------
Florida Panthers Holdings, Inc., 9.875% Sr. Sub. Nts., 4/15/09 800,000 780,000
- --------------------------------------------------------------------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 700,000 500,500
- --------------------------------------------------------------------------------------------------------------------------------
Harveys Casino Resorts, 10.625% Sr. Unsec. Sub. Nts., 6/1/06 120,000 124,500
- --------------------------------------------------------------------------------------------------------------------------------
Hollywood Casino Corp., 11.25% Sr. Sec. Nts., 5/1/07 500,000 525,000
- --------------------------------------------------------------------------------------------------------------------------------
Hollywood Park, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 2/15/07 1,000,000 996,250
- --------------------------------------------------------------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 1,300,000 1,300,000
- --------------------------------------------------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08 1,500,000 1,477,500
- --------------------------------------------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 8.75% Sr. Unsec. Nts., 4/15/09 1,200,000 1,110,000
- --------------------------------------------------------------------------------------------------------------------------------
Jupiters Ltd., 8.50% Sr. Unsec. Nts., 3/1/06 1,000,000 960,000
- --------------------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 8.75% Sr. Unsec. Sub. Nts., 1/1/09 1,500,000 1,485,000
- --------------------------------------------------------------------------------------------------------------------------------
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts., 4/1/08(7) 1,200,000 834,000
9.25% Sr. Nts., 4/1/06 600,000 592,500
9.75% Sr. Nts., 6/15/07 750,000 750,000
- --------------------------------------------------------------------------------------------------------------------------------
Six Flags Entertainment Corp., 8.875% Sr. Nts., 4/1/06 1,000,000 981,250
- --------------------------------------------------------------------------------------------------------------------------------
Station Casinos, Inc.:
9.75% Sr. Sub. Nts., 4/15/07 800,000 808,000
10.125% Sr. Sub. Nts., 3/15/06 800,000 820,000
-----------
17,185,750
</TABLE>
Oppenheimer High Income Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Healthcare--2.5%
Charles River Labs ONC, Units (each unit consists of $1,000 principal amount of 13.50%
sr. sub. nts., 10/1/09 and one warrant to purchase 3.942 shares of common stock)(4)(9) $1,100,000 $1,149,500
- --------------------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 2,525,000 2,335,625
- --------------------------------------------------------------------------------------------------------------------------------
ICN Pharmaceutical, Inc., 8.75% Sr. Nts., 11/15/08(4) 1,365,000 1,310,400
- --------------------------------------------------------------------------------------------------------------------------------
King Pharmaceuticals, Inc., 10.75% Sr. Unsec. Sub. Nts., 2/15/09 1,250,000 1,331,250
- --------------------------------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 9% Sr. Sub. Nts., 2/15/08 1,000,000 815,000
- --------------------------------------------------------------------------------------------------------------------------------
Oxford Health Plans, Inc., 11% Sr. Unsec. Nts., 5/15/05 450,000 434,250
- --------------------------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
8.125% Sr. Unsec. Sub. Nts., Series B, 12/1/08 250,000 233,750
8.625% Sr. Sub. Nts., 1/15/07 300,000 291,000
- --------------------------------------------------------------------------------------------------------------------------------
Unilab Finance Corp., 12.75% Sr. Sub. Nts., 10/1/09(4) 450,000 468,000
----------
8,368,775
- --------------------------------------------------------------------------------------------------------------------------------
Housing--2.1%
CB Richard Ellis Services, Inc., 8.875% Sr. Unsec. Sub. Nts., 6/1/06 900,000 805,500
- --------------------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 500,000 460,000
- --------------------------------------------------------------------------------------------------------------------------------
Del Webb Corp., 10.25% Sr. Unsec. Sub. Nts., 2/15/10 600,000 586,500
- --------------------------------------------------------------------------------------------------------------------------------
Engle Homes, Inc., 9.25% Sr. Unsec. Nts., Series C, 2/1/08 1,300,000 1,176,500
- --------------------------------------------------------------------------------------------------------------------------------
Formica Corp., 10.875% Sr. Unsec. Sub. Nts., Series B, 3/1/09 1,000,000 925,000
- --------------------------------------------------------------------------------------------------------------------------------
Nortek, Inc.:
8.875% Sr. Unsec. Nts., Series B, 8/1/08 250,000 238,750
9.125% Sr. Nts., Series B, 9/1/07 1,400,000 1,361,500
9.25% Sr. Nts., Series B, 3/15/07 625,000 612,500
- --------------------------------------------------------------------------------------------------------------------------------
Panolam Industries International, Inc., 11.50% Sr. Sub. Nts., 2/15/09(4) 1,000,000 1,022,500
----------
7,188,750
- --------------------------------------------------------------------------------------------------------------------------------
Information Technology--1.8%
Amkor Technologies, Inc.:
9.25% Sr. Nts., 5/1/06(4) 800,000 784,000
10.50% Sr. Sub. Nts., 5/1/09(4) 500,000 500,000
- --------------------------------------------------------------------------------------------------------------------------------
Cherokee International LLC, 10.50% Sr. Sub. Nts., 5/1/09 1,000,000 885,000
- --------------------------------------------------------------------------------------------------------------------------------
Chippac International Ltd., 12.75% Sr. Sub. Nts., 8/1/09(4) 250,000 262,500
- --------------------------------------------------------------------------------------------------------------------------------
Details, Inc., 10% Sr. Sub. Nts., Series B, 11/15/05 500,000 462,500
- --------------------------------------------------------------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 625,000 552,344
- --------------------------------------------------------------------------------------------------------------------------------
Fairchild Semiconductor International, Inc., 10.375% Sr. Unsec. Nts., 10/1/07 850,000 877,625
- --------------------------------------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/08 1,115,000 1,074,581
- --------------------------------------------------------------------------------------------------------------------------------
Unisys Corp., 11.75% Sr. Nts., 10/15/04 275,000 301,812
- --------------------------------------------------------------------------------------------------------------------------------
Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07 500,000 413,125
----------
6,113,487
</TABLE>
10 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Manufacturing--2.2%
American Standard Cos., Inc., 7.625% Sr. Nts., 2/15/10 $1,500,000 $1,376,250
- --------------------------------------------------------------------------------------------------------------------------------
Applied Power, Inc., 8.75% Sr. Sub. Nts., 4/1/09 350,000 344,312
- --------------------------------------------------------------------------------------------------------------------------------
Axia, Inc., 10.75% Sr. Sub. Nts., 7/15/08 420,000 386,925
- --------------------------------------------------------------------------------------------------------------------------------
Blount, Inc., 13% Sr. Sub. Nts., 8/1/09(4) 800,000 848,000
- --------------------------------------------------------------------------------------------------------------------------------
Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07 400,000 166,000
- --------------------------------------------------------------------------------------------------------------------------------
Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08 850,000 743,750
- --------------------------------------------------------------------------------------------------------------------------------
Grove Worldwide LLC, 9.25% Sr. Sub. Nts., 5/1/08 800,000 228,000
- --------------------------------------------------------------------------------------------------------------------------------
Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 250,000 215,625
- --------------------------------------------------------------------------------------------------------------------------------
Insilco Corp., 12% Sr. Sub. Nts., 8/15/07 765,000 757,350
- --------------------------------------------------------------------------------------------------------------------------------
International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 500,000 518,750
- --------------------------------------------------------------------------------------------------------------------------------
Jordan Industries, Inc., 10.375% Sr. Unsec. Nts., Series D, 8/1/07 700,000 703,500
- --------------------------------------------------------------------------------------------------------------------------------
Moll Industries, Inc., 10.50% Sr. Unsec. Sub. Nts., 7/1/08 560,000 226,800
- --------------------------------------------------------------------------------------------------------------------------------
Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 560,000 509,600
- --------------------------------------------------------------------------------------------------------------------------------
Terex Corp., 8.875% Sr. Unsec. Sub. Nts., 4/1/08 630,000 598,500
----------
7,623,362
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Broadcasting--2.1%
AMFM Operating, Inc., 12.625% Debs., 10/31/06(10) 148,500 169,290
- --------------------------------------------------------------------------------------------------------------------------------
Chancellor Media Corp.:
8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 975,000 987,187
9% Sr. Unsec. Sub. Nts., 10/1/08 1,700,000 1,776,500
10.50% Sr. Sub. Nts., Series B, 1/15/07 450,000 490,500
- --------------------------------------------------------------------------------------------------------------------------------
Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 1,500,000 1,432,500
- --------------------------------------------------------------------------------------------------------------------------------
Radio One, Inc., 7% Sr. Sub. Nts., Series B, 5/15/04(3) 400,000 428,000
- --------------------------------------------------------------------------------------------------------------------------------
RCN Corp., 10.125% Sr. Unsec. Nts., 1/15/10 1,250,000 1,250,000
- --------------------------------------------------------------------------------------------------------------------------------
Spanish Broadcasting System, Inc., 9.625% Sr. Sub. Nts., 11/1/09 600,000 606,000
----------
7,139,977
</TABLE>
Oppenheimer High Income Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Cable/Wireless Video--4.9%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 $ 360,000 $ 324,900
8.125% Sr. Nts., Series B, 7/15/03 1,000,000 965,000
8.375% Sr. Nts., Series B, 2/1/08 1,000,000 932,500
9.25% Sr. Nts., 10/1/02 390,000 390,000
9.875% Sr. Nts., Series B, 3/1/07 140,000 142,800
10.50% Sr. Unsec. Nts., Series B, 7/15/04 340,000 354,450
- --------------------------------------------------------------------------------------------------------------------------------
Bresnan Communications, Inc.:
0%/9.25% Sr. Disc. Nts., 2/1/09(7) 810,000 562,950
8% Sr. Nts., 2/1/09 250,000 252,812
- --------------------------------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.:
0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(7) 2,200,000 1,300,750
8.25% Sr. Unsec. Nts., 4/1/07 350,000 324,625
8.625% Sr. Unsec. Nts., 4/1/09 250,000 232,187
- --------------------------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc.:
7.875% Sr. Unsec. Debs., 2/15/18 1,000,000 957,500
9.875% Sr. Sub. Nts., 5/15/06 350,000 371,000
10.50% Sr. Sub. Debs., 5/15/16 250,000 278,750
- --------------------------------------------------------------------------------------------------------------------------------
Diva Systems Corp., 0%/12.625% Sr. Disc. Nts., Series B, 3/1/08(7) 500,000 197,500
- --------------------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 3,500,000 3,535,000
- --------------------------------------------------------------------------------------------------------------------------------
Falcon Holding Group LP:
0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(7) 1,300,000 979,875
8.375% Sr. Unsec. Debs., Series B, 4/15/10 2,200,000 2,230,250
- --------------------------------------------------------------------------------------------------------------------------------
Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09(4) 700,000 726,250
- --------------------------------------------------------------------------------------------------------------------------------
NTL Communications Corp., 9.875% Sr. Nts., 11/15/09(4)EUR 600,000 608,369
- --------------------------------------------------------------------------------------------------------------------------------
Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07CAD 500,000 348,062
- --------------------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts., Series B, 2/15/08(7) 1,040,000 670,800
-----------
16,686,330
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Diversified Media--3.1%
Ackerley Group, Inc., 9% Sr. Unsec. Sub. Nts., Series B, 1/15/09 1,250,000 1,225,000
- --------------------------------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 1,100,000 979,000
- --------------------------------------------------------------------------------------------------------------------------------
GSP I Corp., 10.15% First Mtg. Bonds, 6/24/10(4) 446,433 415,335
- --------------------------------------------------------------------------------------------------------------------------------
IPC Magazines Group plc, 0%/10.75% Bonds, 3/15/08(7)GBP 1,200,000 751,208
- --------------------------------------------------------------------------------------------------------------------------------
Lamar Media Corp., 9.625% Sr. Unsec. Sub. Nts., 12/1/06 815,000 835,375
- --------------------------------------------------------------------------------------------------------------------------------
Metromedia International Group, Inc., 0%/10.50% Sr. Unsec. Disc. Nts., 9/30/07(2)(7) 214,074 101,685
- --------------------------------------------------------------------------------------------------------------------------------
Premier Graphics, Inc., 11.50% Sr. Unsec. Nts., 12/1/05 700,000 493,500
- --------------------------------------------------------------------------------------------------------------------------------
Regal Cinemas, Inc.:
8.875% Sr. Unsec. Sub. Nts., 12/15/10 750,000 532,500
9.50% Sr. Unsec. Sub. Nts., 6/1/08 800,000 608,000
</TABLE>
12 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Diversified Media (continued)
SFX Entertainment, Inc.:
9.125% Sr. Unsec. Sub. Nts., 12/1/08 $ 900,000 $ 859,500
9.125% Sr. Unsec. Sub. Nts., Series B, 2/1/08 1,800,000 1,705,500
- --------------------------------------------------------------------------------------------------------------------------------
TV Guide, Inc., 8.125% Sr. Unsec. Sub. Nts., 3/1/09 250,000 250,625
- --------------------------------------------------------------------------------------------------------------------------------
World Color Press, Inc., 7.75% Sr. Unsec. Sub. Nts., 2/15/09 1,000,000 955,000
- --------------------------------------------------------------------------------------------------------------------------------
WRC Media Corp., Units (each unit consists of $1,000 principal amount of 12.75%
sr. sub. nts., 11/15/09 and one warrant to purchase 1.353 shares of common stock)(4)(9) 1,000,000 997,500
-----------
10,709,728
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications--20.1%
Adelphia Business Solutions, Inc., 12% Sr. Sub. Nts., 11/1/07 1,200,000 1,284,000
- --------------------------------------------------------------------------------------------------------------------------------
Amazon.com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08(7) 3,200,000 2,048,000
- --------------------------------------------------------------------------------------------------------------------------------
COLT Telecom Group plc:
0%/12% Sr. Unsec. Disc. Nts., 12/15/06(7) 225,000 194,625
7.625% Bonds, 7/31/08DEM 1,925,000 991,774
8.875% Sr. Nts., 11/30/07DEM 250,000 134,430
10.125% Sr. Nts., 11/30/07GBP 400,000 678,510
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)(7)(9) 1,775,000 1,801,625
- --------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07 800,000 846,000
- --------------------------------------------------------------------------------------------------------------------------------
Convergent Communications, Inc., 13% Sr. Nts., 4/1/08 200,000 141,500
- --------------------------------------------------------------------------------------------------------------------------------
Covad Communications Group, Inc., 0%/13.50% Sr. Disc. Nts., 3/15/08(7) 1,500,000 952,500
- --------------------------------------------------------------------------------------------------------------------------------
Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts., 12/15/05(7) 2,350,000 2,232,500
- --------------------------------------------------------------------------------------------------------------------------------
Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08 400,000 398,000
- --------------------------------------------------------------------------------------------------------------------------------
Equinix, Inc., Units (each unit consists of $1,000 principal amount of 13% sr. nts.,
12/1/07 and one warrant to purchase 11.255 shares of common stock)(4)(9) 1,000,000 1,025,000
- --------------------------------------------------------------------------------------------------------------------------------
ESAT Telecom Group plc, 11.875% Sr. Unsec. Unsub. Nts., 11/1/09EUR 500,000 568,264
- --------------------------------------------------------------------------------------------------------------------------------
Exodus Communications, Inc.:
10.75% Sr. Nts., 12/15/09(4) 250,000 255,625
10.75% Sr. Nts., 12/15/09(4)EUR 1,000,000 1,025,270
11.25% Sr. Nts., 7/1/08 1,900,000 1,971,250
- --------------------------------------------------------------------------------------------------------------------------------
FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08(7) 500,000 277,500
- --------------------------------------------------------------------------------------------------------------------------------
Focal Communications Corp., 0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08(7) 500,000 327,500
- --------------------------------------------------------------------------------------------------------------------------------
Global Crossing Ltd., 9.625% Sr. Nts., 5/15/08 950,000 954,750
- --------------------------------------------------------------------------------------------------------------------------------
Global Telesystems Group, Inc., 10.50% Sr. Unsec. Bonds, 12/1/06(4)EUR 350,000 356,643
- --------------------------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc.:
0%/12.75% Sr. Sub. Nts., 11/15/07(7) 1,250,000 1,192,187
0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(4)(7) 178,000 199,360
- --------------------------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 0%/12.50% Sr. Sec. Disc. Nts., 5/1/06(7) 115,000 86,537
- --------------------------------------------------------------------------------------------------------------------------------
ICG Services, Inc., 0%/10% Sr. Exchangeable Unsec. Disc. Nts., 2/15/08(7) 1,220,000 649,650
- --------------------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.:
0%/12.25% Sr. Disc. Nts., Series B, 3/1/09(7) 800,000 481,000
8.50% Sr. Nts., Series B, 1/15/08 660,000 607,200
8.60% Sr. Unsec. Nts., Series B, 6/1/08 300,000 276,000
8.875% Sr. Nts., 11/1/07 460,000 430,100
</TABLE>
Oppenheimer High Income Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications (continued)
ITC Deltacom, Inc.:
8.875% Sr. Nts., 3/1/08 $1,000,000 $ 962,500
11% Sr. Nts., 6/1/07 750,000 795,000
- --------------------------------------------------------------------------------------------------------------------------------
Jazztel plc, 13.25% Sr. Nts., 12/15/09(4)EUR 2,000,000 2,026,637
- --------------------------------------------------------------------------------------------------------------------------------
KMC Telecom Holdings, Inc.:
0%/12.50% Sr. Unsec. Disc. Nts., 2/15/08(7) 1,250,000 718,750
13.50% Sr. Nts., 5/15/09(4) 200,000 201,000
- --------------------------------------------------------------------------------------------------------------------------------
Level 3 Communications, Inc.:
0%/10.50% Sr. Disc. Nts., 12/1/08(7) 900,000 549,000
9.125% Sr. Unsec. Nts., 5/1/08 700,000 663,250
- --------------------------------------------------------------------------------------------------------------------------------
McLeodUSA, Inc., 8.125% Sr. Unsec. Nts., 2/15/09 300,000 281,250
- --------------------------------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Inc.:
10% Sr. Nts., 12/15/09 750,000 772,500
10% Sr. Nts., 12/15/09EUR 500,000 525,215
10% Sr. Unsec. Nts., Series B, 11/15/08 1,600,000 1,644,000
- --------------------------------------------------------------------------------------------------------------------------------
Netia Holdings BV, 0%/11% Sr. Disc. Nts., 11/1/07(7)DEM 700,000 235,928
- --------------------------------------------------------------------------------------------------------------------------------
Netia Holdings II BV, 13.125% Sr. Nts., 6/15/09 1,350,000 1,360,125
- --------------------------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc.:
9% Sr. Nts., 3/15/08 800,000 756,000
9.625% Sr. Nts., 10/1/07 1,210,000 1,185,800
10.75% Sr. Unsec. Nts., 6/1/09 200,000 206,500
10.75% Sr. Unsec. Nts., 11/15/08 1,200,000 1,242,000
- --------------------------------------------------------------------------------------------------------------------------------
NTL Communications Corp.:
0%/9.78% Sr. Nts., 11/15/09(4)(7)EUR 500,000 296,259
0%/12.375% Sr. Unsec. Nts., Series B, 10/1/08(7) 1,000,000 712,500
11.50% Sr. Unsec. Nts., Series B, 10/1/08 1,600,000 1,744,000
- --------------------------------------------------------------------------------------------------------------------------------
NTL, Inc.:
0%/9.75% Sr. Deferred Coupon Nts., Series B, 4/1/08(7) 350,000 243,250
0%/9.75% Sr. Nts., Series B, 4/15/09(7)GBP 3,225,000 3,012,026
7% Cv. Unsec. Sub. Nts., 12/15/08 550,000 1,454,750
10% Sr. Nts., Series B, 2/15/07 1,055,000 1,089,287
- --------------------------------------------------------------------------------------------------------------------------------
Optel, Inc., 13% Sr. Nts., Series B, 2/15/05(8) 1,000,000 745,000
- --------------------------------------------------------------------------------------------------------------------------------
PSINet, Inc.:
10% Sr. Unsec. Nts., Series B, 2/15/05 750,000 745,312
10.50% Sr. Nts., 12/1/06(4)EUR 1,250,000 1,273,725
- --------------------------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(7) 1,000,000 815,000
- --------------------------------------------------------------------------------------------------------------------------------
RSL Communications plc:
9.125% Sr. Unsec. Nts., 3/1/08 500,000 440,000
10.50% Gtd. Sr. Nts., 11/15/08 1,450,000 1,370,250
- --------------------------------------------------------------------------------------------------------------------------------
Tele1 Europe BV, 11.875% Sr. Nts., 12/1/09(4)EUR 1,200,000 1,218,247
- --------------------------------------------------------------------------------------------------------------------------------
Telewest Communications plc:
0%/9.25% Sr. Nts., 4/15/09(4)(7) 1,500,000 952,500
0%/9.875% Sr. Nts., 4/15/09(4)(7)GBP 1,300,000 1,333,596
0%/11% Sr. Disc. Debs., 10/1/07(7) 990,000 928,125
11.25% Sr. Nts., 11/1/08 1,990,000 2,169,100
- --------------------------------------------------------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 400,000 388,000
- --------------------------------------------------------------------------------------------------------------------------------
Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08 700,000 724,500
</TABLE>
14 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications (continued)
United Pan-Europe Communications NV:
0%/13.375% Sr. Disc. Nts., 11/1/09(4)(7) $1,000,000 $ 565,000
0%/13.375% Sr. Disc. Nts., 11/1/09(4)(7)EUR 500,000 288,711
10.875% Sr. Nts., 8/1/09EUR 250,000 255,059
10.875% Sr. Nts., 8/1/09 2,500,000 2,543,750
11.25% Sr. Nts., 11/1/09(4)EUR 500,000 514,522
- --------------------------------------------------------------------------------------------------------------------------------
Verio, Inc.:
10.375% Sr. Unsec. Nts., 4/1/05 1,480,000 1,517,000
10.625% Sr. Nts., 11/15/09(4) 500,000 515,000
11.25% Sr. Unsec. Nts., 12/1/08 700,000 738,500
13.50% Sr. Unsec. Nts., 6/15/04 385,000 424,463
- --------------------------------------------------------------------------------------------------------------------------------
Versatel Telecom International BV:
11.875% Sr. Nts., 7/15/09 800,000 816,000
11.875% Sr. Nts., 7/15/09EUR 150,000 160,772
- --------------------------------------------------------------------------------------------------------------------------------
Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08 830,000 827,925
- --------------------------------------------------------------------------------------------------------------------------------
WAM!NET, Inc., 0%/13.25% Sr. Unsec. Disc. Nts., Series B, 3/1/05(7) 1,750,000 1,023,750
- --------------------------------------------------------------------------------------------------------------------------------
Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(4) 200,000 207,000
-----------
68,565,634
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications--8.7%
Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07 200,000 159,250
- --------------------------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/14% Sr. Disc. Nts., 10/1/07(7) 1,834,000 199,448
- --------------------------------------------------------------------------------------------------------------------------------
Centennial Cellular Corp., 10.75% Sr. Sub. Nts., 12/15/08 800,000 860,000
- --------------------------------------------------------------------------------------------------------------------------------
Crown Castle International Corp.:
0%/10.375% Sr. Disc. Nts., 5/15/11(7) 700,000 441,000
0%/10.625% Sr. Unsec. Disc. Nts., 11/15/07(7) 940,000 710,875
9% Sr. Nts., 5/15/11 750,000 735,938
- --------------------------------------------------------------------------------------------------------------------------------
CTI Holdings SA, 0%/11.50% Sr. Deferred Coupon Nts., 4/15/08(7) 1,000,000 577,500
- --------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp., 11.75% Sr. Nts., 4/15/07 240,000 272,400
- --------------------------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc., 0%/15% Sr. Sec. Disc. Nts., Series B, 7/15/05(5)(7)(8) 226,000 91,530
- --------------------------------------------------------------------------------------------------------------------------------
ICO Global Communications (Holdings) Ltd., Units (each unit consists of $1,000
principal amount of 15% sr. nts., 8/1/05 and one warrant to purchase 19.85 shares
of common stock)(8)(9) 700,000 325,500
- --------------------------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 700,000 633,500
- --------------------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc.:
0%/12% Sr. Unsec. Disc. Nts., 6/1/09(7) 1,000,000 648,750
0%/14% Sr. Disc. Nts., Series B, 6/1/06(7) 700,000 621,250
- --------------------------------------------------------------------------------------------------------------------------------
Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(7) 300,000 241,500
- --------------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc.:
0%/9.75% Sr. Disc. Nts., 10/31/07(7) 250,000 180,000
0%/10.65% Sr. Disc. Nts., 9/15/07(7) 1,000,000 750,000
9.375% Sr. Nts., 11/15/09(4) 1,000,000 985,000
- --------------------------------------------------------------------------------------------------------------------------------
Omnipoint Corp.:
11.50% Sr. Nts., 9/15/09(4) 2,200,000 2,376,000
11.625% Sr. Nts., 8/15/06 1,000,000 1,065,000
11.625% Sr. Nts., Series A, 8/15/06 1,900,000 2,023,500
- --------------------------------------------------------------------------------------------------------------------------------
Orange plc, 8% Sr. Nts., 8/1/08 2,600,000 2,635,750
</TABLE>
Oppenheimer High Income Fund/VA 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications (continued)
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 $ 600,000 $ 435,000
- --------------------------------------------------------------------------------------------------------------------------------
Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(7) 1,150,000 534,750
- --------------------------------------------------------------------------------------------------------------------------------
Pinnacle Holdings, Inc., 0%/10% Sr. Unsec. Disc. Nts., 3/15/08(7) 2,400,000 1,584,000
- --------------------------------------------------------------------------------------------------------------------------------
Polska Telefoniz Cyfrowa International Financial II SA, 11.25% Sr. Sub. Nts., 12/1/09(4)EUR 400,000 407,592
- --------------------------------------------------------------------------------------------------------------------------------
Price Communications Wireless, Inc.:
9.125% Sr. Sec. Nts., Series B, 12/15/06 800,000 814,000
11.75% Sr. Sub. Nts., 7/15/07 425,000 465,375
- --------------------------------------------------------------------------------------------------------------------------------
Real Time Data Co., 11% Disc. Nts., 5/31/09(4)(10) 394,554 379,419
- --------------------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 1,900,000 1,952,250
- --------------------------------------------------------------------------------------------------------------------------------
SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(7) 2,720,000 1,618,400
- --------------------------------------------------------------------------------------------------------------------------------
Spectrasite Holdings, Inc.:
0%/11.25% Sr. Unsec. Disc. Nts., 4/15/09(7) 675,000 362,813
0%/12% Sr. Disc. Nts., 7/15/08(7) 1,640,000 988,100
- --------------------------------------------------------------------------------------------------------------------------------
Voicestream Wireless Corp., 10.375% Sr. Nts., 11/15/09(4) 3,500,000 3,622,500
-----------
29,697,890
- --------------------------------------------------------------------------------------------------------------------------------
Metals/Minerals--2.3%
AEI Resources, Inc., 11.50% Sr. Sub. Nts., 12/15/06(4) 750,000 489,375
- --------------------------------------------------------------------------------------------------------------------------------
AK Steel Corp.:
7.875% Sr. Unsec. Nts., 2/15/09 500,000 475,000
9.125% Sr. Nts., 12/15/06 1,200,000 1,227,000
- --------------------------------------------------------------------------------------------------------------------------------
California Steel Industries Corp., 8.50% Sr. Unsec. Nts., Series B, 4/1/09 500,000 482,500
- --------------------------------------------------------------------------------------------------------------------------------
Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 1,500,000 1,432,500
- --------------------------------------------------------------------------------------------------------------------------------
International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08 400,000 338,000
- --------------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 410,000 412,050
- --------------------------------------------------------------------------------------------------------------------------------
Metallurg Holdings, Inc., 0%/12.75% Sr. Disc. Nts., 7/15/08(7) 2,000,000 650,000
- --------------------------------------------------------------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07 540,000 488,700
- --------------------------------------------------------------------------------------------------------------------------------
National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 600,000 621,000
- --------------------------------------------------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 800,000 792,000
- --------------------------------------------------------------------------------------------------------------------------------
Republic Technologies International Holdings LLC/RTI Capital Corp., Units (each unit
consists of $1,000 principal amount of 13.75% sr. nts., 7/15/09 and one warrant to
purchase Cl. D common stock at $0.01 per share)(9) 800,000 532,000
-----------
7,940,125
- --------------------------------------------------------------------------------------------------------------------------------
Retail--1.5%
Boyds Collection Ltd. (The), 9% Sr. Unsec. Sub. Nts., Series B, 5/15/08 752,000 718,160
- --------------------------------------------------------------------------------------------------------------------------------
Dura Operating Corp., 9% Sr. Sub. Nts., Series B, 5/1/09 1,300,000 1,231,750
- --------------------------------------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 1,100,000 775,500
- --------------------------------------------------------------------------------------------------------------------------------
Finlay Enterprises, Inc., 9% Debs., 5/1/08 900,000 823,500
- --------------------------------------------------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 600,000 558,000
- --------------------------------------------------------------------------------------------------------------------------------
Home Interiors & Gifts, Inc., 10.125% Sr. Sub. Nts., 6/1/08 700,000 602,000
- --------------------------------------------------------------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 325,000 316,875
-----------
5,025,785
</TABLE>
16 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Service--3.3%
Allied Waste North America, Inc.:
7.875% Sr. Unsec. Nts., Series B, 1/1/09 $1,000,000 $ 888,750
10% Sr. Sub. Nts., 8/1/09(4) 1,300,000 1,170,000
- --------------------------------------------------------------------------------------------------------------------------------
American Plumbing & Mechanical, Inc., 11.625% Gtd. Sr. Sub. Nts., 10/15/08(4) 500,000 478,750
- --------------------------------------------------------------------------------------------------------------------------------
Comforce Operating, Inc., 12% Sr. Nts., Series B, 12/1/07 750,000 463,125
- --------------------------------------------------------------------------------------------------------------------------------
Dura Operating Corp., 9% Sr. Sub. Nts., Series B, 5/1/09EUR 300,000 284,560
- --------------------------------------------------------------------------------------------------------------------------------
Integrated Electric Services, Inc., 9.375% Sr. Sub. Nts., Series B, 2/1/09 600,000 591,750
- --------------------------------------------------------------------------------------------------------------------------------
IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts., Series B, 4/1/09 650,000 633,750
- --------------------------------------------------------------------------------------------------------------------------------
Norse CBO Ltd., 9.342% Sub. Bonds, Series 1A, Cl. C2, 8/13/10(2) 1,500,000 1,177,500
- --------------------------------------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc.:
6.75% Cv. Sr. Sub. Nts., 9/15/03 950,000 456,000
7.375% Gtd. Sr. Unsec. Nts., 8/15/05 1,800,000 1,440,000
- --------------------------------------------------------------------------------------------------------------------------------
Stericycle, Inc., 12.375% Sr. Sub. Nts., 11/15/09(4) 700,000 720,125
- --------------------------------------------------------------------------------------------------------------------------------
United Rentals, Inc.:
9% Sr. Unsec. Sub. Nts., Series B, 4/1/09 350,000 332,500
9.25% Sr. Unsec. Sub. Nts., Series B, 1/15/09 1,700,000 1,640,500
- --------------------------------------------------------------------------------------------------------------------------------
US Unwired, Inc., 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(7) 1,750,000 1,032,500
-----------
11,309,810
- --------------------------------------------------------------------------------------------------------------------------------
Transportation--4.6%
America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 1,000,000 976,250
- --------------------------------------------------------------------------------------------------------------------------------
Amtran, Inc., 10.50% Sr. Nts., 8/1/04(4) 500,000 502,500
- --------------------------------------------------------------------------------------------------------------------------------
Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06 600,000 561,000
- --------------------------------------------------------------------------------------------------------------------------------
Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 915,000 960,750
- --------------------------------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 600,000 630,000
- --------------------------------------------------------------------------------------------------------------------------------
HDA Parts System, Inc., 12% Sr. Sub. Nts., 8/1/05 950,000 869,250
- --------------------------------------------------------------------------------------------------------------------------------
Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 25,000 9,625
- --------------------------------------------------------------------------------------------------------------------------------
Millenium Seacarriers, Inc., Units (each unit consists of $1,000 principal amount of 11.63%
first priority ship mtg. sr. sec. nts., 7/15/05 and one warrant to purchase five shares of
common stock)(2)(3)(9) 700,000 402,500
- --------------------------------------------------------------------------------------------------------------------------------
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts., 6/30/07(4) 1,175,000 546,375
Units (each unit consists of $1,000 principal amount of 12% second priority ship mtg. nts.,
6/30/07 and 7.66 warrants)(4)(9) 500,000 37,500
- --------------------------------------------------------------------------------------------------------------------------------
Newcor, Inc., 9.875% Sr. Unsec. Sub. Nts., Series B, 3/1/08 1,500,000 787,500
- --------------------------------------------------------------------------------------------------------------------------------
Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., Series D, 6/15/07(2) 2,125,000 2,008,125
- --------------------------------------------------------------------------------------------------------------------------------
Pacific & Atlantic Holdings, Inc., 11.50% First Preferred Ship Mtg. Nts., 5/30/08(8) 700,000 269,500
- --------------------------------------------------------------------------------------------------------------------------------
Sea Containers Ltd., 7.875% Sr. Nts., 2/15/08 1,500,000 1,301,250
- --------------------------------------------------------------------------------------------------------------------------------
Tenneco, Inc., 11.625% Sr. Sub. Nts., 10/15/09(4) 1,000,000 1,025,000
- --------------------------------------------------------------------------------------------------------------------------------
Terex Corp., 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08 400,000 380,000
- --------------------------------------------------------------------------------------------------------------------------------
Trans World Airlines Lease, 14% Equipment Trust, 7/2/08(2) 818,437 736,594
- --------------------------------------------------------------------------------------------------------------------------------
Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04 1,700,000 1,102,875
- --------------------------------------------------------------------------------------------------------------------------------
Transtar Holdings LP/Transtar Capital Corp., 13.375% Sr. Disc. Nts., Series B, 12/15/03 2,600,000 2,665,000
-----------
15,771,594
</TABLE>
Oppenheimer High Income Fund/VA 17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Utility--0.6%
Calpine Corp.:
8.75% Sr. Nts., 7/15/07 $ 545,000 $ 549,088
10.50% Sr. Nts., 5/15/06 25,000 26,500
- --------------------------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Sec. Nts., Series E, 5/1/11(11) 555,000 594,266
- --------------------------------------------------------------------------------------------------------------------------------
ESI Tractebel Acquisition Corp., 7.99% Sec. Bonds, Series B, 12/30/11 1,000,000 894,694
------------
2,064,548
------------
Total Corporate Bonds and Notes (Cost $308,366,702) 283,247,406
<CAPTION>
Shares
================================================================================================================================
<S> <C> <C>
Preferred Stocks--5.1%
- --------------------------------------------------------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg.(10) 16,509 301,289
- --------------------------------------------------------------------------------------------------------------------------------
CGA Group Ltd., Series A(2)(10) 76,590 1,914,750
- --------------------------------------------------------------------------------------------------------------------------------
Clark USA, Inc., 11.50% Cum. Sr. Exchangeable, Non-Vtg.(10) 480 130,800
- --------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp., 13.50% Sr. Redeemable Exchangeable, Series B, Non-Vtg.(10) 607 602,447
- --------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp.:
12.25% Sr. Exchangeable, Non-Vtg.(10) 1,272 1,281,540
13% Sr. Exchangeable, Non-Vtg.(10) 1,065 1,163,512
- --------------------------------------------------------------------------------------------------------------------------------
e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg.(10) 425 86,062
- --------------------------------------------------------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg.(2)(5) 8,000 370,000
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity Federal Bank FSB Glendale California, l2% Non-Cum. Exchangeable Perpetual, Series A(2) 20 300
- --------------------------------------------------------------------------------------------------------------------------------
Global Crossing Ltd., 10.50% Sr. Exchangeable(10) 7,500 755,625
- --------------------------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.(10) 307 280,138
- --------------------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 13.50% Exchangeable, Series B(10) 905 889,163
- --------------------------------------------------------------------------------------------------------------------------------
Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable Exchangeable Preferred Stock, Non-Vtg.(10) 7,274 81,833
- --------------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 11.125% Exchangeable, Series E, Non-Vtg.(10) 1,285 1,288,213
- --------------------------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc., 14% Cum., Non-Vtg.(10) 32,136 1,727,310
- --------------------------------------------------------------------------------------------------------------------------------
Packaging Corp. of America, 12.375%(5)(10) 2,116 232,231
- --------------------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg.(10) 48 492,000
- --------------------------------------------------------------------------------------------------------------------------------
PRIMEDIA, Inc.:
8.625% Exchangeable, Series H, Non-Vtg. 10,000 872,500
9.20% Exchangeable, Series F, Non-Vtg. 2,500 229,375
- --------------------------------------------------------------------------------------------------------------------------------
R&B Falcon Corp., 13.875% Cum., Non-Vtg.(10) 1,288 1,362,060
- --------------------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum. Sr., Series B, Non-Vtg.(10) 1,182 1,214,505
- --------------------------------------------------------------------------------------------------------------------------------
SF Holdings Group, Inc.:
13.75% Cum. Nts., Series B, 3/15/09, Non-Vtg.(10) 196 984,900
13.75% Exchangeable(4) 46 231,150
- --------------------------------------------------------------------------------------------------------------------------------
Star Gas Partners, LP 517 6,850
- --------------------------------------------------------------------------------------------------------------------------------
Walden Residential Properties, Inc.:
9.16% Cv., Series B, Non-Vtg. 30,000 723,750
9.20% Sr. 8,950 139,284
------------
Total Preferred Stocks (Cost $20,061,434) 17,361,587
</TABLE>
18 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
================================================================================================================================
Common Stocks--0.3%
- --------------------------------------------------------------------------------------------------------------------------------
Celcaribe SA(4)(5) 121,950 $198,169
- --------------------------------------------------------------------------------------------------------------------------------
ECM Fund, LPI(2) 150 131,438
- --------------------------------------------------------------------------------------------------------------------------------
Equitable Bag, Inc.(2)(5) 3,723 3,723
- --------------------------------------------------------------------------------------------------------------------------------
Gulfstream Holding, Inc.(5) 56 --
- --------------------------------------------------------------------------------------------------------------------------------
Horizon Group Properties, Inc.(5) 851 2,872
- --------------------------------------------------------------------------------------------------------------------------------
Optel, Inc.(5) 945 9
- --------------------------------------------------------------------------------------------------------------------------------
Price Communications Corp. 15,000 417,199
- --------------------------------------------------------------------------------------------------------------------------------
SF Holdings Group, Inc., Cl. C(5) 7,252 73
- --------------------------------------------------------------------------------------------------------------------------------
Weatherford International, Inc. 5,000 199,687
--------
Total Common Stocks (Cost $501,343) 953,170
<CAPTION>
Units
================================================================================================================================
<S> <C> <C>
Rights, Warrants and Certificates--0.7%
- --------------------------------------------------------------------------------------------------------------------------------
Ames Department Stores, Inc., Litigation Trust Wts., Exp. 1/31/00(2) 39,658 397
- --------------------------------------------------------------------------------------------------------------------------------
Australis Holdings PTY Ltd./Australia Media Ltd. Wts., Exp. 5/15/00(2) 125 1
- --------------------------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc. Wts., Exp. 10/1/07(4) 1,434 5,557
- --------------------------------------------------------------------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 6/16/07(2) 62,000 18,600
- --------------------------------------------------------------------------------------------------------------------------------
Clearnet Communications, Inc. Wts., Exp. 9/15/05 660 14,824
- --------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/15/07(2) 750 198,844
- --------------------------------------------------------------------------------------------------------------------------------
Covergent Communications, Inc. Wts., Exp. 4/1/08 2,000 24,500
- --------------------------------------------------------------------------------------------------------------------------------
Decrane Aircraft Holdings, Inc. Wts., Exp. 9/30/08 1,750 --
- --------------------------------------------------------------------------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08(2) 1,500 12,000
- --------------------------------------------------------------------------------------------------------------------------------
e.spire Communications, Inc. Wts., Exp. 11/1/05 475 2,583
- --------------------------------------------------------------------------------------------------------------------------------
FirstWorld Communications, Inc. Wts., Exp. 4/15/08(2) 500 75,062
- --------------------------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc. Wts., Exp. 7/15/05(2) 52,500 525
- --------------------------------------------------------------------------------------------------------------------------------
Globix Corp. Wts., Exp. 5/1/05 1,800 432,000
- --------------------------------------------------------------------------------------------------------------------------------
Golden State Bancorp, Inc. Wts., Exp. 1/1/01 15,626 13,673
- --------------------------------------------------------------------------------------------------------------------------------
Gothic Energy Corp. Wts.:
Exp. 1/23/03 8,351 --
Exp. 1/23/03(2) 4,766 48
Exp. 9/1/04(2) 14,000 14,882
- --------------------------------------------------------------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp. 9/15/05 5,940 73,300
- --------------------------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/31/02 950 --
- --------------------------------------------------------------------------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/15/07(2) 765 --
- --------------------------------------------------------------------------------------------------------------------------------
KMC Telecom Holdings, Inc. Wts., Exp. 4/15/08(2) 2,455 7,520
- --------------------------------------------------------------------------------------------------------------------------------
Long Distance International, Inc. Wts., Exp. 4/13/08(2) 800 400
- --------------------------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. Wts., Exp. 1/15/07(2) 800 9,700
- --------------------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(2) 3,200 213,424
- --------------------------------------------------------------------------------------------------------------------------------
Millenium Seacarriers, Inc. Wts., Exp. 7/15/05(2) 1,500 1,687
- --------------------------------------------------------------------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/29/00(2) 7,500 904,687
</TABLE>
Oppenheimer High Income Fund/VA 19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Units Note 1
<S> <C> <C>
================================================================================================================================
Rights, Warrants and Certificates (continued)
PLD Telekom, Inc., 9% Cv. Sub. Nts. Wts., Exp. 3/31/03(2) 170 $ 8
- --------------------------------------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc. Wts.:
Exp. 11/1/03(2) 28,000 49,000
Exp. 6/30/05(2) 1,600 160
- --------------------------------------------------------------------------------------------------------------------------------
R&B Falcon Corp. Wts., Exp. 5/1/09(2) 1,200 300,000
- --------------------------------------------------------------------------------------------------------------------------------
Real Time Data Co. Wts., Exp. 5/31/04(2) 121,440 1,214
- --------------------------------------------------------------------------------------------------------------------------------
WAM!NET, Inc. Wts., Exp. 3/1/05(4) 5,250 117,469
------------
Total Rights, Warrants and Certificates (Cost $198,136) 2,492,065
<CAPTION>
Principal
Amount(1)
================================================================================================================================
<S> <C> <C>
Structured Instruments--0.5%
- --------------------------------------------------------------------------------------------------------------------------------
Deutsche Morgan Grenfell, Lehman High Yield Index Linked Nts.,
8.75%, 5/5/00 (Cost $1,500,000) $ 1,500,000 1,514,867
================================================================================================================================
Repurchase Agreements--3.7%
- --------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%,
dated 12/31/99, to be repurchased at $12,702,910 on 1/3/00, collateralized
by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value
of $4,984,619 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07,
with a value of $7,976,752 (Cost $12,700,000) 12,700,000 12,700,000
- --------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $359,280,735) 97.9% 333,796,296
- --------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 2.1 7,032,302
----------- ------------
Net Assets 100.0% $340,828,598
=========== ============
</TABLE>
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP -- Argentine Peso EUR -- Euro
CAD -- Canadian Dollar GBP -- British Pound Sterling
DEM -- German Mark IDR -- Indonesian Rupiah
2. Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
3. Represents the current interest rate for a variable or increasing rate
security.
4. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $43,166,117 or 12.67% of the Fund's net
assets as of December 31, 1999.
5. Non-income producing security.
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
8. Issuer is in default.
9. 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.
10. Interest or dividend is paid in kind.
11. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of Notes to Financial Statements.
See accompanying Notes to Financial Statements.
20 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
==================================================================================================
Assets
Investments, at value (cost $359,280,735)--see accompanying statement $333,796,296
- --------------------------------------------------------------------------------------------------
Cash 1,071,946
- --------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 6,544,568
Shares of beneficial interest sold 178,609
Other 5,047
------------
Total assets 341,596,466
==================================================================================================
Liabilities
Unrealized depreciation on foreign currency contracts 85,050
- --------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 604,732
Investments purchased 38,914
Trustees' compensation 210
Transfer and shareholder servicing agent fees 184
Other 38,778
------------
Total liabilities 767,868
==================================================================================================
Net Assets $340,828,598
============
==================================================================================================
Composition of Net Assets
Paid-in capital $344,149,980
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 32,932,864
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (10,681,554)
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (25,572,692)
------------
Net assets--applicable to 31,781,566 shares of beneficial interest outstanding $340,828,598
============
==================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $10.72
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer High Income Fund/VA 21
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
==================================================================================================
Investment Income
Interest $ 33,187,927
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $61) 2,090,889
------------
Total income 35,278,816
==================================================================================================
Expenses
Management fees 2,511,521
- --------------------------------------------------------------------------------------------------
Custodian fees and expenses 8,866
- --------------------------------------------------------------------------------------------------
Trustees' compensation 3,792
- --------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,104
- --------------------------------------------------------------------------------------------------
Other 26,642
------------
Total expenses 2,552,925
Less expenses paid indirectly (12,847)
------------
Net expenses 2,540,078
==================================================================================================
Net Investment Income 32,738,738
==================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (6,397,480)
Closing of futures contracts 138,192
Foreign currency transactions 262,847
------------
Net realized loss (5,996,441)
- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (11,265,255)
Translation of assets and liabilities denominated in foreign currencies (840,842)
------------
Net change (12,106,097)
------------
Net realized and unrealized loss (18,102,538)
==================================================================================================
Net Increase in Net Assets Resulting from Operations $ 14,636,200
============
</TABLE>
See accompanying Notes to Financial Statements.
22 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
==================================================================================================================
<S> <C> <C>
Operations
Net investment income $ 32,738,738 $ 27,929,383
- ------------------------------------------------------------------------------------------------------------------
Net realized loss (5,996,441) (2,889,367)
- ------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (12,106,097) (24,125,468)
------------ ------------
Net increase in net assets resulting from operations 14,636,200 914,548
==================================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (23,246,834) (6,694,100)
- ------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (8,113,249)
==================================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions 20,876,575 51,132,667
==================================================================================================================
Net Assets
Total increase 12,265,941 37,239,866
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 328,562,657 291,322,791
------------ ------------
End of period (including undistributed net investment
income of $32,932,864 and $23,046,774, respectively) $340,828,598 $328,562,657
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer High Income Fund/VA 23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $11.02 $11.52 $11.13 $10.63 $ 9.79
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 1.01 .95 .94 .97 .98
Net realized and unrealized gain (loss) (.55) (.90) .37 .58 .94
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations .46 .05 1.31 1.55 1.92
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.76) (.25) (.91) (1.05) (1.08)
Distributions from net realized gain -- (.30) (.01) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.76) (.55) (.92) (1.05) (1.08)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.72 $11.02 $11.52 $11.13 $10.63
====== ====== ====== ====== ======
===========================================================================================================================
Total Return, at Net Asset Value(1) 4.29% 0.31% 12.21% 15.26% 20.37%
===========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $340,829 $328,563 $291,323 $191,293 $133,451
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $340,519 $322,748 $223,617 $157,203 $115,600
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 9.61% 8.65% 8.88% 9.18% 9.81%
Expenses 0.75% 0.78%(3) 0.82%(3) 0.81%(3) 0.81%(3)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 33% 161% 168% 125% 107%
</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. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $147,560,583 and $101,280,643, respectively.
See accompanying Notes to Financial Statements.
24 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer High Income Fund/VA (the Fund) is a separate series of Oppenheimer
Variable Account Funds (the Trust), a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek a high level of current
income from investment in high yield fixed income securities. The Fund'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 price 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 December 31, 1999, the market value of these
securities comprised 1.99% of the Fund's net assets and resulted in realized and
unrealized losses of $1,583,690. The Fund also hedges a portion of the foreign
currency exposure generated by these securities, as discussed in Note 5.
- --------------------------------------------------------------------------------
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 December 31, 1999, securities with an
aggregate market value of $2,797,955, representing 0.82% 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.
Oppenheimer High Income Fund/VA 25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
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,
1999, the Fund had available for federal income tax purposes an unused capital
loss carryover of approximately $8,335,000, which expires between 2006 and 2007.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect an
increase in undistributed net investment income of $394,186. Accumulated net
realized loss on investments was increased by the same amount.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and options
written and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
----------------------------- ----------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 13,810,332 $ 149,141,858 15,303,847 $ 171,699,925
Dividends and/or distributions reinvested 2,201,405 23,246,834 1,300,031 14,807,349
Redeemed (14,037,090) (151,512,117) (12,094,532) (135,374,607)
----------- ------------- ----------- -------------
Net increase 1,974,647 $ 20,876,575 4,509,346 $ 51,132,667
=========== ============= =========== =============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized depreciation on securities of
$25,484,439 was composed of gross appreciation of $8,906,207, and gross
depreciation of $34,390,646.
26 Oppenheimer High Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management Fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust. The annual fees are 0.75% of the
first $200 million of average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the
next $200 million and 0.50% of average annual net assets over $1 billion. The
Fund's management fee for the year ended December 31, 1999, was 0.74% of average
annual net assets.
- --------------------------------------------------------------------------------
Transfer Agent Fees. 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 for cost.
================================================================================
5. Foreign Currency Contracts
A foreign currency 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 contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
As of December 31, 1999, the Fund had outstanding foreign currency contracts as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized
Contract Description Date Amount (000s) December 31, 1999 Depreciation
- ------------------------------------------------------------------------------------------------------------
Contracts to Sell
- -----------------
<S> <C> <C> <C> <C>
British Pound Sterling (GBP) 6/2/00-6/5/00 3,545 GBP $5,725,037 $78,449
Canadian Dollar (CAD) 6/1/00 540 CAD 374,449 6,601
-------
Total Unrealized Depreciation $85,050
=======
</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.
Oppenheimer High Income Fund/VA 27
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
6. Futures Contracts (continued)
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the 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.
================================================================================
7. Illiquid or Restricted Securities
As of December 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of December 31, 1999, was $21,334,042,
which represents 6.26% of the Fund's net assets, of which $4,091,086 is
considered restricted. Information concerning restricted securities is as
follows:
<TABLE>
<CAPTION>
Valuation Per
Acquisition Cost Per Unit as of
Security Date Unit December 31, 1999
- ---------------------------------------------------------------------------------------------------------------------------
Bonds
- -----
<S> <C> <C> <C>
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05 12/8/95-8/13/96 100.00%-105.75% 109.66%
- ---------------------------------------------------------------------------------------------------------------------------
Trans World Airlines Lease, 14% Equipment Trust, 7/2/08 3/19/98 101.00 90.00
Stocks and Warrants
- -------------------
CGA Group Ltd. Wts., Exp. 6/16/07 6/17/97 $ -- $ 0.30
- ---------------------------------------------------------------------------------------------------------------------------
CGA Group Ltd., Preferred Stock, Series A 6/17/98-12/29/98 24.97-25.03 25.00
- ---------------------------------------------------------------------------------------------------------------------------
ECM Fund, LPI 4/14/92 1,000.00 876.25
- ---------------------------------------------------------------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/29/00 11/29/95 -- 120.63
- ---------------------------------------------------------------------------------------------------------------------------
Real Time Data Wts., Exp. 5/31/04 6/30/99 0.01 0.01
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Aggressive Growth
Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Aggressive Growth Fund/VA (which is
a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the
related statement of operations for the year then ended, the statements of
changes in net assets for the years ended December 31, 1999 and 1998 and the
financial highlights for the period January 1, 1995, to December 31, 1999. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Aggressive Growth Fund/VA as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
__________________________
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
===============================================================================================================
Common Stocks--88.9%
- ---------------------------------------------------------------------------------------------------------------
Capital Goods--5.4%
- ---------------------------------------------------------------------------------------------------------------
Electrical Equipment--3.4%
E-Tek Dynamics, Inc.(1) 537,400 $ 72,347,475
- ---------------------------------------------------------------------------------------------------------------
Manufacturing--2.0%
Tyco International Ltd. 1,095,000 42,568,125
- ---------------------------------------------------------------------------------------------------------------
Communication Services--2.5%
- ---------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--2.5%
Copper Mountain Networks, Inc.(1) 17,400 848,250
- ---------------------------------------------------------------------------------------------------------------
Exodus Communications, Inc.(1) 250,000 22,203,125
- ---------------------------------------------------------------------------------------------------------------
Global Crossing Ltd.(1) 593,899 29,694,950
------------
52,746,325
- ---------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--9.9%
- ---------------------------------------------------------------------------------------------------------------
Consumer Services--1.2%
Young & Rubicam, Inc. 351,300 24,854,475
- ---------------------------------------------------------------------------------------------------------------
Retail: General--1.2%
Kohl's Corp.(1) 360,000 25,987,500
- ---------------------------------------------------------------------------------------------------------------
Retail: Specialty--7.5%
Abercrombie & Fitch Co., Cl. A(1) 480,000 12,810,000
- ---------------------------------------------------------------------------------------------------------------
Best Buy Co., Inc.(1) 630,000 31,618,125
- ---------------------------------------------------------------------------------------------------------------
Linens 'N Things, Inc.(1) 669,000 19,819,125
- ---------------------------------------------------------------------------------------------------------------
Tandy Corp. 915,000 45,006,562
- ---------------------------------------------------------------------------------------------------------------
Tiffany & Co. 519,300 46,347,525
- ---------------------------------------------------------------------------------------------------------------
Williams-Sonoma, Inc.(1) 25,000 1,150,000
------------
156,751,337
- ---------------------------------------------------------------------------------------------------------------
Consumer Staples--4.0%
- ---------------------------------------------------------------------------------------------------------------
Broadcasting--2.0%
Charter Communications, Inc., Cl. A(1) 983,500 21,514,062
- ---------------------------------------------------------------------------------------------------------------
Spanish Broadcasting System, Inc., Cl. A(1) 280,600 11,294,150
- ---------------------------------------------------------------------------------------------------------------
Univision Communications, Inc., Cl. A(1) 96,900 9,901,969
------------
42,710,181
- ---------------------------------------------------------------------------------------------------------------
Entertainment--1.6%
Royal Caribbean Cruises Ltd. 674,000 33,236,625
- ---------------------------------------------------------------------------------------------------------------
Household Goods--0.4%
Dial Corp. (The) 325,000 7,901,563
- ---------------------------------------------------------------------------------------------------------------
Financial--1.4%
- ---------------------------------------------------------------------------------------------------------------
Diversified Financial--1.4%
Schwab (Charles) Corp. 770,000 29,548,750
</TABLE>
4 Oppenheimer Aggressive Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Healthcare--4.6%
- ---------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--4.6%
Biogen, Inc.(1) 636,600 $ 53,792,700
- ---------------------------------------------------------------------------------------------------------------
Genentech, Inc.(1) 72,200 9,710,900
- ---------------------------------------------------------------------------------------------------------------
Immunex Corp.(1) 300,000 32,850,000
------------
96,353,600
- ---------------------------------------------------------------------------------------------------------------
Technology--60.7%
- ---------------------------------------------------------------------------------------------------------------
Computer Hardware--7.1%
Dell Computer Corp.(1) 250,000 12,750,000
- ---------------------------------------------------------------------------------------------------------------
EMC Corp.(1) 603,000 65,877,750
- ---------------------------------------------------------------------------------------------------------------
Gateway, Inc.(1) 350,000 25,221,875
- ---------------------------------------------------------------------------------------------------------------
Juniper Networks, Inc. 28,000 9,520,000
- ---------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A(1) 400,000 36,200,000
------------
149,569,625
- ---------------------------------------------------------------------------------------------------------------
Computer Services--0.5%
Finisar Corp(1) 39,800 3,577,025
- ---------------------------------------------------------------------------------------------------------------
Foundry Networks, Inc.(1) 18,200 5,490,713
- ---------------------------------------------------------------------------------------------------------------
High Speed Access Corp.(1) 114,800 2,023,350
------------
11,091,088
- ---------------------------------------------------------------------------------------------------------------
Computer Software--11.6%
Citrix Systems, Inc.(1) 693,000 85,239,000
- ---------------------------------------------------------------------------------------------------------------
Microsoft Corp.(1) 550,000 64,212,500
- ---------------------------------------------------------------------------------------------------------------
VeriSign, Inc.(1) 50,000 9,546,875
- ---------------------------------------------------------------------------------------------------------------
Veritas Software Corp.(1) 600,000 85,875,000
------------
244,873,375
- ---------------------------------------------------------------------------------------------------------------
Communications Equipment--14.2%
Antec Corp.(1) 392,800 14,337,200
- ---------------------------------------------------------------------------------------------------------------
Audiocodes Ltd.(1) 237,100 21,813,200
- ---------------------------------------------------------------------------------------------------------------
Cisco Systems, Inc.(1) 450,000 48,206,250
- ---------------------------------------------------------------------------------------------------------------
Harmonic, Inc(1) 1,000,000 94,937,500
- ---------------------------------------------------------------------------------------------------------------
Optical Coating Laboratory, Inc. 335,000 99,160,000
- ---------------------------------------------------------------------------------------------------------------
Scientific-Atlanta, Inc. 375,000 20,859,375
------------
299,313,525
- ---------------------------------------------------------------------------------------------------------------
Electronics--27.3%
Gemstar International Group Ltd.(1) 200,000 14,250,000
- ---------------------------------------------------------------------------------------------------------------
GlobeSpan, Inc.(1) 6,300 410,288
- ---------------------------------------------------------------------------------------------------------------
Intel Corp. 372,000 30,620,250
- ---------------------------------------------------------------------------------------------------------------
JDS Uniphase Corp.(1) 1,561,332 251,862,367
- ---------------------------------------------------------------------------------------------------------------
LSI Logic Corp.(1) 545,700 36,834,750
- ---------------------------------------------------------------------------------------------------------------
QLogic Corp.(1) 450,000 71,943,750
- ---------------------------------------------------------------------------------------------------------------
SDL, Inc.(1) 350,000 76,300,000
- ---------------------------------------------------------------------------------------------------------------
Vitesse Semiconductor Corp.(1) 1,040,000 54,535,000
- ---------------------------------------------------------------------------------------------------------------
Waters Corp.(1) 690,000 36,570,000
------------
573,326,405
</TABLE>
Oppenheimer Aggressive Growth Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Utilities--0.4%
- ---------------------------------------------------------------------------------------------------------------
Electric Utilities--0.4%
Calpine Corp.(1) 126,800 $ 8,115,200
--------------
Total Common Stocks (Cost $771,289,353) 1,871,295,174
Principal
Amount
===============================================================================================================
Repurchase Agreements--10.7%
- ---------------------------------------------------------------------------------------------------------------
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated
12/31/99, to be repurchased at $225,151,585 on 1/3/00, collateralized
by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value
of $88,349,431 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07,
with a value of $141,383,210 (Cost $225,100,000) $225,100,000 225,100,000
- ---------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $996,389,353) 99.6% 2,096,395,174
- ---------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.4 7,732,586
------------ --------------
Net Assets 100.0% $2,104,127,760
============ ==============
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
6 Oppenheimer Aggressive Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
===============================================================================================================
Assets
Investments, at value (including repurchase agreement of $225,100,000)
(cost $996,389,353)--see accompanying statement $2,096,395,174
- ---------------------------------------------------------------------------------------------------------------
Cash 1,032,385
- ---------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 7,087,097
Shares of beneficial interest sold 3,244,267
Interest and dividends 138,944
Other 11,681
--------------
Total assets 2,107,909,548
===============================================================================================================
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed 3,716,257
Trustees' compensation 1,697
Transfer and shareholder servicing agent fees 201
Other 63,633
--------------
Total liabilities 3,781,788
===============================================================================================================
Net Assets $2,104,127,760
==============
===============================================================================================================
Composition of Net Assets
Paid-in capital $ 904,071,695
- ---------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 100,050,244
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 1,100,005,821
--------------
Net assets--applicable to 25,564,825 shares of beneficial interest outstanding $2,104,127,760
==============
===============================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $82.31
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Aggressive Growth Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
===============================================================================================================
<S> <C>
Investment Income
Interest $ 4,468,423
- ---------------------------------------------------------------------------------------------------------------
Dividends 2,049,968
------------
Total income 6,518,391
===============================================================================================================
Expenses
Management fees 8,700,904
- ---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 24,681
- ---------------------------------------------------------------------------------------------------------------
Trustees' compensation 10,056
- ---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,127
- ---------------------------------------------------------------------------------------------------------------
Other 24,249
------------
Total expenses 8,762,017
Less expenses paid indirectly (11,539)
------------
Net expenses 8,750,478
===============================================================================================================
Net Investment Loss (2,232,087)
===============================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain on:
Investments (including premiums on options exercised) 169,730,345
Closing and expiration of option contracts written 428,019
Foreign currency transactions 130,388
------------
Net realized gain 170,288,752
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 750,572,210
Translation of assets and liabilities denominated in foreign currencies (791,294)
------------
Net change 749,780,916
------------
Net realized and unrealized gain 920,069,668
===============================================================================================================
Net Increase in Net Assets Resulting from Operations $917,837,581
============
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Aggressive Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
================================================================================================================================
Operations
Net investment loss $ (2,232,087) $ (1,162,585)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 170,288,752 (67,125,014)
- --------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 749,780,916 183,484,620
-------------- --------------
Net increase in net assets resulting from operations 917,837,581 115,197,021
================================================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income -- (2,267,793)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain -- (23,288,487)
================================================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from
beneficial interest transactions 108,330,019 110,511,946
================================================================================================================================
Net Assets
Total increase 1,026,167,600 200,152,687
- --------------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,077,960,160 877,807,473
-------------- --------------
End of period $2,104,127,760 $1,077,960,160
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Aggressive Growth Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
=============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $44.83 $40.96 $38.71 $34.21 $25.95
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.09) (.05) .10 .09 .11
Net realized and unrealized gain 37.57 5.09 4.01 6.59 8.29
- -----------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 37.48 5.04 4.11 6.68 8.40
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- (.10) (.09) (.11) (.09)
Distributions from net realized gain -- (1.07) (1.77) (2.07) (.05)
- -----------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- (1.17) (1.86) (2.18) (.14)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $82.31 $44.83 $40.96 $38.71 $34.21
====== ====== ====== ====== ======
=============================================================================================================================
Total Return, at Net Asset Value(1) 83.60% 12.36% 11.67% 20.22% 32.52%
=============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $2,104 $1,078 $878 $617 $325
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,314 $ 955 $754 $467 $241
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (0.17)% (0.12)% 0.31% 0.32% 0.47%
Expenses 0.67% 0.71%(3) 0.73%(3) 0.75%(3) 0.78%(3)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 66% 80% 88% 100% 126%
</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. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $821,119,876 and $835,938,199, respectively.
See accompanying Notes to Financial Statements.
10 Oppenheimer Aggressive Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Aggressive Growth Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to achieve capital
appreciation by investing in "growth-type" companies. The Fund'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 price 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
Oppenheimer Aggressive Growth Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Stateaments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of 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.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect a
decrease in paid-in capital of $2,255,042, a decrease in accumulated net
investment loss of $2,232,087, and an increase in accumulated net realized gain
on investments of $22,955.
- --------------------------------------------------------------------------------
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. 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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
-------------------------------- ------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Sold 9,866,210 $ 549,485,112 13,376,589 $556,408,810
Dividends and/or distributions reinvested -- -- 580,166 25,556,280
Redeemed (8,345,187) (441,155,093) (11,344,620) (471,453,144)
---------- ------------- ----------- ------------
Net increase 1,521,023 $ 108,330,019 2,612,135 $110,511,946
========== ============= =========== ============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$1,100,005,821 was composed of gross appreciation of $1,116,099,786, and gross
depreciation of $16,093,965.
12 Oppenheimer Aggressive Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust. The annual fees are 0.75% of the
first $200 million of average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the
next $700 million and 0.58% of average annual net assets over $1.5 billion. The
Fund's management fee for the year ended December 31, 1999, was 0.66% of average
annual net assets.
- --------------------------------------------------------------------------------
Transfer Agent Fees. 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 for cost.
================================================================================
5. 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.
Written option activity for the year ended December 31, 1999, was as follows:
<TABLE>
<CAPTION>
Call Options
---------------------------
Number of Amount of
Options Premiums
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 1998 138 $ 34,764
Options written 2,500 640,611
Options closed or expired (1,700) (428,019)
Options exercised (938) (247,356)
------ ---------
Options outstanding as of December 31, 1999 -- $ --
====== =========
</TABLE>
<PAGE>
Oppenheimer Multiple Strategies Fund/VA 23
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Multiple
Strategies Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Multiple Strategies Fund/VA (which
is a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the
related statement of operations for the year then ended, the statements of
changes in net assets for the years ended December 31, 1999 and 1998, and the
financial highlights for the period January 1, 1995, to December 31, 1999. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Multiple Strategies Fund/VA as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
- ---------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
=========================================================================================================
Common Stocks--50.3%
- ---------------------------------------------------------------------------------------------------------
Basic Materials--1.8%
- ---------------------------------------------------------------------------------------------------------
Chemicals--0.8%
Bayer AG, Sponsored ADR 34,000 $1,601,682
- ---------------------------------------------------------------------------------------------------------
Du Pont (E.I.) De Nemours & Co.(1) 7,672 505,393
- ---------------------------------------------------------------------------------------------------------
Potash Corp. of Saskatchewan, Inc. 29,500 1,421,531
- ---------------------------------------------------------------------------------------------------------
Praxair, Inc.(1) 23,000 1,157,187
----------
4,685,793
- ---------------------------------------------------------------------------------------------------------
Metals--0.3%
De Beers Consolidated Mines Ltd., ADR 68,000 1,967,750
- ---------------------------------------------------------------------------------------------------------
Paper--0.7%
Pactiv Corp.(2) 50,000 531,250
- ---------------------------------------------------------------------------------------------------------
Sonoco Products Co. 9,500 216,125
- ---------------------------------------------------------------------------------------------------------
Wausau-Mosinee Paper Corp. 76,400 892,925
- ---------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 36,647 2,631,713
----------
4,272,013
- ---------------------------------------------------------------------------------------------------------
Capital Goods--1.5%
- ---------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.4%
Goodrich (B.F.) Co. 80,000 2,200,000
- ---------------------------------------------------------------------------------------------------------
Industrial Services--0.1%
Service Corp. International 125,000 867,187
- ---------------------------------------------------------------------------------------------------------
Manufacturing--1.0%
Hexcel Corp.(2) 140,000 778,750
- ---------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 19,687 1,135,694
- ---------------------------------------------------------------------------------------------------------
Pall Corp. 115,000 2,479,687
- ---------------------------------------------------------------------------------------------------------
Tyco International Ltd. 37,500 1,457,812
----------
5,851,943
- ---------------------------------------------------------------------------------------------------------
Communication Services--1.8%
- ---------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--1.0%
Intermedia Communications, Inc.(2) 3,812 147,953
- ---------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.(2)(3) 201 6,241
- ---------------------------------------------------------------------------------------------------------
MCI WorldCom, Inc.(2) 108,750 5,770,547
----------
5,924,741
- ---------------------------------------------------------------------------------------------------------
Telephone Utilities--0.7%
GTE Corp. 17,500 1,234,844
- ---------------------------------------------------------------------------------------------------------
SBC Communications, Inc. 44,000 2,145,000
- ---------------------------------------------------------------------------------------------------------
Tele Norte Leste Participacoes SA (Telemar) 26,250,000 472,253
- ---------------------------------------------------------------------------------------------------------
Telesp Tele de Sao Paulo 19,200,000 265,813
----------
4,117,910
- ---------------------------------------------------------------------------------------------------------
Telecommunications: Wireless--0.1%
Telesp Celular Participacoes SA 49,150,000 465,245
</TABLE>
4 Oppenheimer Multiple Strategies Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Consumer Cyclicals--7.0%
- ---------------------------------------------------------------------------------------------------------
Autos & Housing--1.7%
Dana Corp. 75,000 $ 2,245,312
- ---------------------------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA 292,230 946,920
- ---------------------------------------------------------------------------------------------------------
Lear Corp.(2) 55,000 1,760,000
- ---------------------------------------------------------------------------------------------------------
Owens Corning 140,000 2,703,750
- ---------------------------------------------------------------------------------------------------------
Southdown, Inc. 17,500 903,437
- ---------------------------------------------------------------------------------------------------------
Toll Brothers, Inc.(2) 61,000 1,136,125
-----------
9,695,544
- ---------------------------------------------------------------------------------------------------------
Consumer Services--0.2%
Alterra Healthcare Corp.(2) 115,000 955,937
- ---------------------------------------------------------------------------------------------------------
Leisure & Entertainment--2.3%
Berjaya Sports Toto Berhad 200,000 431,579
- ---------------------------------------------------------------------------------------------------------
Brunswick Corp. 56,000 1,246,000
- ---------------------------------------------------------------------------------------------------------
Callaway Golf Co. 140,000 2,476,250
- ---------------------------------------------------------------------------------------------------------
Host Marriott Corp. 130,000 1,072,500
- ---------------------------------------------------------------------------------------------------------
International Game Technology 192,500 3,910,156
- ---------------------------------------------------------------------------------------------------------
Mattel, Inc. 115,000 1,509,378
- ---------------------------------------------------------------------------------------------------------
Mirage Resorts, Inc.(2) 62,000 949,375
- ---------------------------------------------------------------------------------------------------------
Shimano, Inc. 100,000 1,760,736
-----------
13,355,974
- ---------------------------------------------------------------------------------------------------------
Media--0.7%
South China Morning Post Holdings Ltd. 1,694,000 1,460,063
- ---------------------------------------------------------------------------------------------------------
Time Warner, Inc.(1) 32,000 2,318,000
-----------
3,778,063
- ---------------------------------------------------------------------------------------------------------
Retail: General--0.8%
Federated Department Stores, Inc.(2) 42,500 2,148,906
- ---------------------------------------------------------------------------------------------------------
Neiman Marcus Group, Inc. (The), Cl. A(2) 40,000 1,117,500
- ---------------------------------------------------------------------------------------------------------
Saks, Inc.(2) 93,000 1,447,312
-----------
4,713,718
- ---------------------------------------------------------------------------------------------------------
Retail: Specialty--0.7%
- ---------------------------------------------------------------------------------------------------------
Abercrombie & Fitch Co., Cl. A(2) 35,000 934,063
- ---------------------------------------------------------------------------------------------------------
AutoZone, Inc.(2) 43,000 1,389,438
- ---------------------------------------------------------------------------------------------------------
Borders Group, Inc.(2) 70,000 1,124,375
- ---------------------------------------------------------------------------------------------------------
Gap, Inc.(1) 14,500 667,000
-----------
4,114,876
- ---------------------------------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--0.6%
Jones Apparel Group, Inc.(2) 77,000 2,088,625
- ---------------------------------------------------------------------------------------------------------
Tommy Hilfiger Corp.(2) 48,500 1,130,656
-----------
3,219,281
- ---------------------------------------------------------------------------------------------------------
Consumer Staples--4.8%
- ---------------------------------------------------------------------------------------------------------
Beverages--0.3%
Coca-Cola Enterprises, Inc. 41,800 841,225
- ---------------------------------------------------------------------------------------------------------
Diageo plc 125,800 1,012,086
-----------
1,853,311
</TABLE>
Oppenheimer Multiple Strategies Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Broadcasting--1.8%
CBS Corp.(1)(2) 110,000 $ 7,033,125
- ---------------------------------------------------------------------------------------------------------
MediaOne Group, Inc.(1)(2) 35,000 2,688,438
- ---------------------------------------------------------------------------------------------------------
RCN Corp.(2) 12,500 606,250
-----------
10,327,813
- ---------------------------------------------------------------------------------------------------------
Entertainment--0.9%
Brinker International, Inc.(2) 35,000 840,000
- ---------------------------------------------------------------------------------------------------------
Disney (Walt) Co. 32,500 950,625
- ---------------------------------------------------------------------------------------------------------
Luby's, Inc. 90,000 1,023,750
- ---------------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 14,400 2,391,783
-----------
5,206,158
- ---------------------------------------------------------------------------------------------------------
Food--0.4%
Groupe Danone 7,500 1,766,231
- ---------------------------------------------------------------------------------------------------------
Nestle SA, Sponsored ADR 6,000 546,688
-----------
2,312,919
- ---------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.1%
Cia Brasileira de Distribuicao Grupo Pao de Acucar, Sponsored ADR 14,000 452,375
- ---------------------------------------------------------------------------------------------------------
Household Goods--0.9%
- ---------------------------------------------------------------------------------------------------------
Avon Products, Inc.(1) 45,000 1,485,000
- ---------------------------------------------------------------------------------------------------------
Fort James Corp. 45,000 1,231,875
- ---------------------------------------------------------------------------------------------------------
Rexall Sundown, Inc.(2) 125,000 1,289,063
- ---------------------------------------------------------------------------------------------------------
Wella AG 55,900 1,147,658
- ---------------------------------------------------------------------------------------------------------
Wella AG, Preference 5,200 114,085
-----------
5,267,681
- ---------------------------------------------------------------------------------------------------------
Tobacco--0.4%
Philip Morris Cos., Inc. 100,000 2,318,750
- ---------------------------------------------------------------------------------------------------------
Energy--3.1%
- ---------------------------------------------------------------------------------------------------------
Energy Services--1.0%
Input/Output, Inc.(2) 193,000 977,063
- ---------------------------------------------------------------------------------------------------------
Santa Fe International Corp. 87,000 2,251,125
- ---------------------------------------------------------------------------------------------------------
Schlumberger Ltd. 22,500 1,265,625
- ---------------------------------------------------------------------------------------------------------
Transocean Sedco Forex, Inc. 43,356 1,460,555
-----------
5,954,368
- ---------------------------------------------------------------------------------------------------------
Oil: Domestic--1.3%
Comstock Resources, Inc.(2) 175,000 492,188
- ---------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl. B 24,567 611,104
- ---------------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 28,501 2,296,112
- ---------------------------------------------------------------------------------------------------------
Kerr-McGee Corp. 35,000 2,170,000
- ---------------------------------------------------------------------------------------------------------
Unocal Corp. 65,000 2,181,563
-----------
7,750,967
- ---------------------------------------------------------------------------------------------------------
Oil: International--0.8%
Petroleo Brasileiro SA, Preference 3,330,000 847,938
- ---------------------------------------------------------------------------------------------------------
Talisman Energy, Inc.(2) 105,510 2,690,057
- ---------------------------------------------------------------------------------------------------------
Total Fina SA, Sponsored ADR 16,000 1,108,000
-----------
4,645,995
</TABLE>
6 Oppenheimer Multiple Strategies Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Financial--9.7%
- ---------------------------------------------------------------------------------------------------------
Banks--5.7%
ABN Amro Holding NV 62,700 $ 1,564,911
- ---------------------------------------------------------------------------------------------------------
Banco Frances del Rio de la Plata SA 95,000 750,575
- ---------------------------------------------------------------------------------------------------------
Bank of America Corp.(1) 160,000 8,030,000
- ---------------------------------------------------------------------------------------------------------
Bank One Corp. 50,000 1,603,125
- ---------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 133,000 10,332,438
- ---------------------------------------------------------------------------------------------------------
Societe Generale 20,000 4,649,567
- ---------------------------------------------------------------------------------------------------------
UBS AG 4,175 1,128,875
- ---------------------------------------------------------------------------------------------------------
UniCredito Italiano SpA 414,000 2,033,249
- ---------------------------------------------------------------------------------------------------------
Wells Fargo Co. 70,000 2,830,625
-----------
32,923,365
- ---------------------------------------------------------------------------------------------------------
Diversified Financial--0.9%
Finova Group, Inc. 26,000 923,000
- ---------------------------------------------------------------------------------------------------------
ICICI Ltd., Sponsored ADR(2) 35,500 523,625
- ---------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 16,000 1,336,000
- ---------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 12,500 1,784,375
- ---------------------------------------------------------------------------------------------------------
Simon Property Group, Inc. 37,500 860,156
-----------
5,427,156
- ---------------------------------------------------------------------------------------------------------
Insurance--1.0%
ACE Ltd. 140,000 2,336,250
- ---------------------------------------------------------------------------------------------------------
Skandia Forsakrings AB 115,000 3,472,769
-----------
5,809,019
- ---------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--2.1%
Archstone Communities Trust 52,000 1,066,000
- ---------------------------------------------------------------------------------------------------------
Avalonbay Communities, Inc. 30,732 1,054,492
- ---------------------------------------------------------------------------------------------------------
Brandywine Realty Trust 56,000 917,000
- ---------------------------------------------------------------------------------------------------------
Camden Property Trust 40,000 1,095,000
- ---------------------------------------------------------------------------------------------------------
CarrAmerica Realty Corp. 48,000 1,014,000
- ---------------------------------------------------------------------------------------------------------
Chastain Capital Corp.(2) 134,000 58,625
- ---------------------------------------------------------------------------------------------------------
Chelsea GCA Realty, Inc. 32,000 952,000
- ---------------------------------------------------------------------------------------------------------
Cornerstone Properties, Inc. 68,000 994,500
- ---------------------------------------------------------------------------------------------------------
Developers Diversified Realty Corp. 62,000 798,250
- ---------------------------------------------------------------------------------------------------------
JDN Realty Corp. 60,000 967,500
- ---------------------------------------------------------------------------------------------------------
Manufactured Home Communities, Inc. 44,000 1,069,750
- ---------------------------------------------------------------------------------------------------------
Post Properties, Inc. 28,000 1,071,000
- ---------------------------------------------------------------------------------------------------------
Shurgard Storage Centers, Inc. 44,000 1,020,250
-----------
12,078,367
</TABLE>
Oppenheimer Multiple Strategies Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Healthcare--4.7%
- ---------------------------------------------------------------------------------------------------------
Healthcare/Drugs--3.4%
Abbott Laboratories 38,000 $ 1,379,875
- ---------------------------------------------------------------------------------------------------------
American Home Products Corp. 48,500 1,912,719
- ---------------------------------------------------------------------------------------------------------
AstraZeneca Group plc 60,540 2,560,884
- ---------------------------------------------------------------------------------------------------------
Elan Corp. plc, ADR(2) 32,000 944,000
- ---------------------------------------------------------------------------------------------------------
Johnson & Johnson(1) 33,867 3,153,864
- ---------------------------------------------------------------------------------------------------------
Merck & Co., Inc. 30,000 2,011,875
- ---------------------------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 110,000 2,770,625
- ---------------------------------------------------------------------------------------------------------
Novartis AG 1,700 2,499,277
- ---------------------------------------------------------------------------------------------------------
Pliva d.d., Sponsored GDR(4) 20,000 261,000
- ---------------------------------------------------------------------------------------------------------
SmithKline Beecham plc, Cl. A, Sponsored ADR 30,000 1,933,125
-----------
19,427,244
- ---------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.3%
Acuson Corp.(2) 180,000 2,261,250
- ---------------------------------------------------------------------------------------------------------
Innovasive Devices, Inc.(2) 110,000 880,000
- ---------------------------------------------------------------------------------------------------------
Manor Care, Inc.(2) 75,000 1,200,000
- ---------------------------------------------------------------------------------------------------------
McKesson HBOC, Inc. 20,000 451,250
- ---------------------------------------------------------------------------------------------------------
St. Jude Medical, Inc.(2) 30,000 920,625
- ---------------------------------------------------------------------------------------------------------
United Healthcare Corp. 32,800 1,742,500
-----------
7,455,625
- ---------------------------------------------------------------------------------------------------------
Technology--14.5%
- ---------------------------------------------------------------------------------------------------------
Computer Hardware--2.8%
Canon, Inc. 50,000 1,985,718
- ---------------------------------------------------------------------------------------------------------
Hewlett-Packard Co.(1) 10,000 1,139,375
- ---------------------------------------------------------------------------------------------------------
International Business Machines Corp.(1) 120,000 12,960,000
-----------
16,085,093
- ---------------------------------------------------------------------------------------------------------
Computer Services--0.1%
barnesandnoble.com, inc.(2) 36,100 512,169
- ---------------------------------------------------------------------------------------------------------
Computer Software--2.4%
Computer Associates International, Inc.(1) 48,599 3,398,928
- ---------------------------------------------------------------------------------------------------------
Compuware Corp.(1)(2) 49,100 1,828,975
- ---------------------------------------------------------------------------------------------------------
Novell, Inc.(2) 126,000 5,032,125
- ---------------------------------------------------------------------------------------------------------
Oracle Corp.(1)(2) 12,500 1,400,781
- ---------------------------------------------------------------------------------------------------------
Rational Software Corp.(1)(2) 7,700 378,263
- ---------------------------------------------------------------------------------------------------------
Sabre Holdings Corp.(2) 34,500 1,768,125
- ---------------------------------------------------------------------------------------------------------
Structural Dynamics Research Corp.(2) 167 2,129
-----------
13,809,326
- ---------------------------------------------------------------------------------------------------------
Communications Equipment--1.7%
Cisco Systems, Inc.(1)(2) 41,000 4,392,125
- ---------------------------------------------------------------------------------------------------------
Optical Coating Laboratory, Inc.(1) 18,000 5,328,000
-----------
9,720,125
</TABLE>
8 Oppenheimer Multiple Strategies Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Electronics--6.9%
Analog Devices, Inc.(1)(2) 67,200 $ 6,249,600
- ---------------------------------------------------------------------------------------------------------
ASM Lithography Holding NV 13,400 1,524,250
- ---------------------------------------------------------------------------------------------------------
Cognex Corp.(2) 50,000 1,950,000
- ---------------------------------------------------------------------------------------------------------
Coherent, Inc.(1)(2) 70,000 1,872,500
- ---------------------------------------------------------------------------------------------------------
General Motors Corp., Cl. H(1)(2) 30,200 2,899,200
- ---------------------------------------------------------------------------------------------------------
Grainger (W.W.), Inc. 21,000 1,004,063
- ---------------------------------------------------------------------------------------------------------
Intel Corp. 156,000 12,840,750
- ---------------------------------------------------------------------------------------------------------
Keyence Corp. 8,000 3,247,579
- ---------------------------------------------------------------------------------------------------------
Methode Electronics, Inc., Cl. A(1) 104,000 3,341,000
- ---------------------------------------------------------------------------------------------------------
STMicroelectronics NV, NY Registered Shares(1) 22,400 3,392,200
- ---------------------------------------------------------------------------------------------------------
Teradyne, Inc.(1)(2) 28,000 1,848,000
------------
40,169,142
- ---------------------------------------------------------------------------------------------------------
Photography--0.6%
Eastman Kodak Co. 26,500 1,755,625
- ---------------------------------------------------------------------------------------------------------
Xerox Corp.(1) 67,500 1,531,406
------------
3,287,031
- ---------------------------------------------------------------------------------------------------------
Transportation--0.5%
- ---------------------------------------------------------------------------------------------------------
Air Transportation--0.2%
Alaska Air Group, Inc.(2) 29,500 1,036,188
- ---------------------------------------------------------------------------------------------------------
Railroads & Truckers--0.3%
Burlington Northern Santa Fe Corp. 67,000 1,624,750
- ---------------------------------------------------------------------------------------------------------
Shipping--0.0%
Stolt-Nielsen SA 20,000 285,000
- ---------------------------------------------------------------------------------------------------------
Utilities--0.9%
- ---------------------------------------------------------------------------------------------------------
Electric Utilities--0.9%
Allegheny Energy, Inc. 50,500 1,360,344
- ---------------------------------------------------------------------------------------------------------
Reliant Energy, Inc. 80,000 1,830,000
- ---------------------------------------------------------------------------------------------------------
Southern Co. 90,000 2,115,000
------------
5,305,344
------------
Total Common Stocks (Cost $201,240,567) 291,231,256
=========================================================================================================
Preferred Stocks--0.6%
- ---------------------------------------------------------------------------------------------------------
ICG Communications, Inc., 6.75% Cum. Cv., Non-Vtg. 45,000 2,041,875
- ---------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 7% Cv.(4) 5,000 134,375
- ---------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., Depositary Shares Representing one
one-hundredth 7% Cum. Cv. Jr., Series D, Non-Vtg. 30,000 1,522,500
------------
Total Preferred Stocks (Cost $4,472,031) 3,698,750
=========================================================================================================
Other Securities--1.0%
- ---------------------------------------------------------------------------------------------------------
Budget Group, Inc., 6.25% Cum. Cv. Term Income Deferred Equity
Securities, Non-Vtg.(4) 20,000 615,000
- ---------------------------------------------------------------------------------------------------------
Monsanto Co., 6.50% Cv. Adjustable Conversion-rate Equity Security 35,000 1,159,375
- ---------------------------------------------------------------------------------------------------------
Qwest Trends Trust, 5.75% Cv.(4) 55,000 3,884,375
------------
Total Other Securities (Cost $5,245,203) 5,658,750
</TABLE>
Oppenheimer Multiple Strategies Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
=========================================================================================================
Rights, Warrants and Certificates--0.0%
- ---------------------------------------------------------------------------------------------------------
Covergent Communications, Inc. Wts., Exp. 4/1/08 1,000 $ 12,250
- ---------------------------------------------------------------------------------------------------------
Gaylord Container Corp. Wts., Exp. 11/1/02 9,232 60,008
- ---------------------------------------------------------------------------------------------------------
HF Holdings, Inc. Wts., Exp. 9/27/00(3) 2,592 38,888
- ---------------------------------------------------------------------------------------------------------
PE Corp. Cl. G Wts., Exp. 9/11/03 249 12,699
- ---------------------------------------------------------------------------------------------------------
Terex Corp. Rts., Exp. 5/15/02(3) 4,000 56,500
-----------
Total Rights, Warrants and Certificates (Cost $59,660) 180,345
Principal
Amount(5)
=========================================================================================================
Mortgage-Backed Obligations--2.0%
- ---------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation
Certificates, 7%, 5/1/29 $ 4,769,214 4,615,694
- ---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.50%, 11/1/27-12/1/27 4,205,093 3,971,206
- ---------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 8%, 7/15/22-4/15/23 2,084,740 2,112,922
- ---------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1994-C2, Cl. E, 8%, 4/25/25 635,799 620,104
-----------
Total Mortgage-Backed Obligations (Cost $11,602,003) 11,319,926
=========================================================================================================
U.S. Government Obligations--11.7%
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
8.875%, 8/15/17 2,900,000 3,505,375
STRIPS, 6.30%, 8/15/25(6) 12,900,000 2,438,332
STRIPS, 6.53%, 8/15/15(6) 7,100,000 2,450,210
STRIPS, 7.10%, 11/15/18(6) 16,000,000 4,449,696
STRIPS, 7.26%, 11/15/18(6) 10,000,000 2,786,070
STRIPS, 7.31%, 8/15/19(6) 18,000,000 4,766,058
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.875%, 9/30/02 15,000,000 14,845,320
6.125%, 9/30/00 15,000,000 15,018,750
6.25%, 2/15/07 8,800,000 8,662,500
6.375%, 8/15/02 5,000,000 5,010,940
6.50%, 10/15/06 3,710,000 3,700,725
-----------
Total U.S. Government Obligations (Cost $68,185,746) 67,633,976
=========================================================================================================
Foreign Government Obligations--23.7%
- ---------------------------------------------------------------------------------------------------------
Argentina--6.4%
Argentina (Republic of) Bonds:
Series BT06, 11.25%, 5/24/04 1,178,000 1,169,165
Series L, 6.812%, 3/31/05(7) 8,096,000 7,387,600
- ---------------------------------------------------------------------------------------------------------
Argentina (Republic of) Nts., 14.25%, 11/30/02(7) 13,125,000 12,993,750
- ---------------------------------------------------------------------------------------------------------
Argentina (Republic of) Par Bonds, 6%, 3/31/23(7) 23,750,000 15,645,312
-----------
37,195,827
- ---------------------------------------------------------------------------------------------------------
Australia--0.6%
New South Wales Treasury Corp. Gtd. Bonds, 7%, 4/1/04AUD 3,160,000 2,076,929
- ---------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Exchangeable Gtd. Nts., 10.50%, 5/15/03AUD 1,800,000 1,313,947
-----------
3,390,876
</TABLE>
10 Oppenheimer Multiple Strategies Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(5) Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Brazil--5.2%
Brazil (Federal Republic of) Capitalization Bonds, 6.916%, 4/15/14 $21,716,459 $ 16,368,781
- ---------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Eligible Interest Bonds, 6.937%, 4/15/06(7) 15,463,000 13,646,097
------------
30,014,878
- ---------------------------------------------------------------------------------------------------------
Canada--2.9%
Canada (Government of) Bonds:
8.50%, 4/1/02CAD 1,500,000 1,090,721
8.75%, 12/1/05CAD 12,200,000 9,469,183
9.75%, 12/1/01-6/1/01CAD 5,000,000 3,672,397
Series WL43, 5.75%, 6/1/29CAD 3,670,000 2,389,240
------------
16,621,541
- ---------------------------------------------------------------------------------------------------------
Denmark--0.9%
Denmark (Kingdom of) Bonds, 8%, 3/15/06DKK 32,100,000 4,905,143
- ---------------------------------------------------------------------------------------------------------
Great Britain--1.2%
United Kingdom Treasury Bonds, 6.75%, 11/26/04GBP 2,680,000 4,446,440
- ---------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 13%, 7/14/00GBP 1,590,000 2,662,916
------------
7,109,356
- ---------------------------------------------------------------------------------------------------------
Ireland--0.3%
Ireland (Government of) Bonds, 9.25%, 7/11/03(3)EUR 1,409,409 1,628,357
- ---------------------------------------------------------------------------------------------------------
Mexico--0.6%
United Mexican States Collateralized Fixed Rate Par Bonds,
Series W-A, 6.25%, 12/31/19 4,450,000 3,515,500
- ---------------------------------------------------------------------------------------------------------
New Zealand--5.1%
New Zealand (Government of) Bonds:
8%, 2/15/01NZD 19,440,000 10,391,131
10%, 3/15/02NZD 16,800,000 9,395,771
- ---------------------------------------------------------------------------------------------------------
New Zealand (Government of) Nts., 6.50%, 2/15/00NZD 18,600,000 9,753,559
------------
29,540,461
- ---------------------------------------------------------------------------------------------------------
Philippines--0.2%
Philippines (Republic of) Bonds, 8.60%, 6/15/27 1,500,000 1,267,994
- ---------------------------------------------------------------------------------------------------------
South Africa--0.3%
Eskom Depositary Receipts, Series E168, 11%, 6/1/08ZAR 12,570,000 1,734,295
------------
Total Foreign Government Obligations (Cost $137,782,080) 136,924,228
=========================================================================================================
Non-Convertible Corporate Bonds and Notes--6.7%
- ---------------------------------------------------------------------------------------------------------
Basic Materials--1.3%
- ---------------------------------------------------------------------------------------------------------
Chemicals--0.5%
Huntsman Corp./ICI Chemical Co. plc, Zero Coupon Sr. Disc. Nts.,
13.08%, 12/31/09(4)(6) 1,000,000 306,250
- ---------------------------------------------------------------------------------------------------------
Lyondell Chemical Co., 10.875% Sr. Sub. Nts., 5/1/09 500,000 517,500
- ---------------------------------------------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 85,000 88,400
- ---------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07 500,000 487,500
- ---------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc.:
11.75% Sr. Unsec. Sub. Nts., 8/15/06 535,000 403,925
12.375% Sr. Sec. Nts., Series B, 7/15/06 250,000 260,000
- ---------------------------------------------------------------------------------------------------------
ZSC Specialty Chemical plc, 11% Sr. Nts., 7/1/09(4) 500,000 521,250
------------
2,584,825
</TABLE>
Oppenheimer Multiple Strategies Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(5) Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Metals--0.4%
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 $1,015,000 $1,037,837
- ---------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 1,000,000 1,005,000
- ---------------------------------------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07 450,000 407,250
----------
2,450,087
- ---------------------------------------------------------------------------------------------------------
Paper--0.4%
Aracruz Celulose SA, 10.375% Debs., 1/31/02(4) 430,000 431,075
- ---------------------------------------------------------------------------------------------------------
Repap New Brunswick, Inc., 10.625% Second Priority Sr. Sec. Nts., 300,000 280,500
- ---------------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07 500,000 517,500
10.875% Sr. Sub. Nts., 4/1/08 250,000 247,500
- ---------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., Series B, 12/15/04 750,000 785,625
----------
2,262,200
- ---------------------------------------------------------------------------------------------------------
Capital Goods--0.4%
- ---------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.1%
Amtran, Inc., 10.50% Sr. Nts., 8/1/04 500,000 502,500
- ---------------------------------------------------------------------------------------------------------
Industrial Services--0.1%
Allied Waste North America, Inc., 10% Sr. Sub. Nts., 8/1/09(4) 750,000 675,000
- ---------------------------------------------------------------------------------------------------------
Manufacturing--0.2%
Blount, Inc., 13% Sr. Sub. Nts., 8/1/09(4) 700,000 742,000
- ---------------------------------------------------------------------------------------------------------
International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 500,000 518,750
----------
1,260,750
- ---------------------------------------------------------------------------------------------------------
Communication Services--2.1%
- ---------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--1.3%
Exodus Communications, Inc., 11.25% Sr. Nts., 7/1/08 500,000 518,750
- ---------------------------------------------------------------------------------------------------------
Global Crossing Ltd., 9.625% Sr. Nts., 5/15/08 750,000 753,750
- ---------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 8.50% Sr. Nts., Series B, 1/15/08 500,000 460,000
- ---------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Inc.:
10% Sr. Nts., 12/15/09 250,000 257,500
10% Sr. Unsec. Nts., Series B, 11/15/08 750,000 770,625
- ---------------------------------------------------------------------------------------------------------
NTL Communications Corp., 0%/12.375% Sr. Unsec. Nts., Series B, 10/1/08(8) 500,000 356,250
- ---------------------------------------------------------------------------------------------------------
NTL, Inc., 0%/9.75% Sr. Deferred Coupon Nts., Series B, 4/1/08(8) 500,000 347,500
- ---------------------------------------------------------------------------------------------------------
PSINet, Inc., 10% Sr. Unsec. Nts., Series B, 2/15/05 1,000,000 993,750
- ---------------------------------------------------------------------------------------------------------
Telewest Communications plc:
0%/11% Sr. Disc. Debs., 10/1/07(8) 1,000,000 937,500
9.625% Sr. Debs., 10/1/06 500,000 507,500
- ---------------------------------------------------------------------------------------------------------
United Pan-Europe Communications NV, 10.875% Sr. Nts., 8/1/09 400,000 407,000
- ---------------------------------------------------------------------------------------------------------
Verio, Inc., 11.25% Sr. Unsec. Nts., 12/1/08 600,000 633,000
- ---------------------------------------------------------------------------------------------------------
Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(4) 400,000 414,000
----------
7,357,125
- ---------------------------------------------------------------------------------------------------------
Telecommunications: Wireless--0.8%
Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 200,000 181,000
- ---------------------------------------------------------------------------------------------------------
Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(8) 750,000 603,750
- ---------------------------------------------------------------------------------------------------------
Omnipoint Corp.:
11.50% Sr. Nts., 9/15/09(4) 250,000 270,000
11.625% Sr. Nts., 8/15/06 535,000 569,775
11.625% Sr. Nts., Series A, 8/15/06 590,000 628,350
</TABLE>
12 Oppenheimer Multiple Strategies Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(5) Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Telecommunications: Wireless (continued)
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 $ 200,000 $ 145,000
- ---------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 750,000 770,625
- ---------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 9.50% Sr. Nts., 2/1/04 1,000,000 821,250
- ---------------------------------------------------------------------------------------------------------
Voicestream Wireless Corp., 10.375% Sr. Nts., 11/15/09(4) 400,000 414,000
----------
4,403,750
- ---------------------------------------------------------------------------------------------------------
Consumer Cyclicals--0.8%
- ---------------------------------------------------------------------------------------------------------
Autos & Housing--0.4%
Building Materials Corp. of America, 8.625% Sr. Nts., Series B, 12/15/06 100,000 95,500
- ---------------------------------------------------------------------------------------------------------
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07 300,000 117,750
- ---------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 500,000 525,000
- ---------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc., 12% Unsec. Nts., 7/15/05(3) 270,840 148,962
- ---------------------------------------------------------------------------------------------------------
Kaufman & Broad Home Corp., 7.75% Sr. Nts., 10/15/04 400,000 378,000
- ---------------------------------------------------------------------------------------------------------
Nortek, Inc., 8.875% Sr. Unsec. Nts., Series B, 8/1/08 750,000 716,250
- ---------------------------------------------------------------------------------------------------------
Tenneco, Inc., 11.625% Sr. Sub. Nts., 10/15/09(4) 400,000 410,000
----------
2,391,462
- ---------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.2%
Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 250,000 178,750
- ---------------------------------------------------------------------------------------------------------
Meristar Hospitality Corp., 8.75% Sr. Unsec. Sub. Nts., 8/15/07 500,000 462,500
- ---------------------------------------------------------------------------------------------------------
Premier Parks, Inc., 9.75% Sr. Nts., 6/15/07 500,000 500,000
----------
1,141,250
- ---------------------------------------------------------------------------------------------------------
Media--0.2%
Lamar Media Corp., 9.625% Sr. Unsec. Sub. Nts., 12/1/06 150,000 153,750
- ---------------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 10.15% Sr. Nts., 5/1/12 500,000 589,339
- ---------------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.125% Debs., 1/15/13 500,000 549,601
----------
1,292,690
Consumer Staples--1.4%
- ---------------------------------------------------------------------------------------------------------
Beverages--0.1%
Canadaiqua Brands, Inc., 8.625% Sr. Unsec. Nts., 8/1/06 700,000 700,875
- ---------------------------------------------------------------------------------------------------------
Broadcasting--1.1%
Aldelphia Communications Corp., 9.375% Sr. Nts., 11/15/09 750,000 738,750
- ---------------------------------------------------------------------------------------------------------
Chancellor Media Corp., 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 1,000,000 1,012,500
- ---------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication Holdings
Capital Corp., 8.625% Sr. Unsec. Nts., 4/1/09 750,000 696,563
- ---------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 9.875% Sr. Sub. Nts., 5/15/06 250,000 265,000
- ---------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 700,000 707,000
- ---------------------------------------------------------------------------------------------------------
Falcon Holding Group LP, 0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(8) 600,000 452,250
- ---------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec. Debs., 12/1/07 1,000,000 1,071,250
- ---------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8.75% Sr. Sub. Nts., 12/15/07 500,000 463,750
9% Sr. Unsec. Sub. Nts., 7/15/07 375,000 353,438
- ---------------------------------------------------------------------------------------------------------
Young Broadcasting, Inc., 8.75% Sr. Sub. Debs., 6/15/07 900,000 857,250
----------
6,617,751
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(5) Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.1%
Fleming Cos., Inc.:
10.50% Sr. Sub. Nts., Series B, 12/1/04 $ 300,000 $ 276,750
10.625% Sr. Sub. Nts., Series B, 7/31/07 560,000 508,200
------------
784,950
- ---------------------------------------------------------------------------------------------------------
Household Goods--0.1%
Revlon Consumer Products Corp.:
8.625% Sr. Unsec. Sub. Nts., 2/1/08 400,000 202,000
9% Sr. Nts., 11/1/06 70,000 52,850
------------
254,850
- ---------------------------------------------------------------------------------------------------------
Energy--0.1%
- ---------------------------------------------------------------------------------------------------------
Energy Services--0.1%
Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(4) 950,000 812,250
- ---------------------------------------------------------------------------------------------------------
Financial--0.1%
- ---------------------------------------------------------------------------------------------------------
Banks--0.1%
First Chicago Corp., 11.25% Sub. Nts., 2/20/01 250,000 261,387
- ---------------------------------------------------------------------------------------------------------
Healthcare--0.0%
- ---------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.0%
Sun Healthcare Group, Inc., 9.375% Sr. Sub. Nts., 5/1/08(2)(4)(9) 1,000,000 65,000
- ---------------------------------------------------------------------------------------------------------
Transportation--0.1%
- ---------------------------------------------------------------------------------------------------------
Air Transportation--0.1%
Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04 1,000,000 648,750
- ---------------------------------------------------------------------------------------------------------
Shipping--0.0%
Navigator Gas Transport plc, 10.50% First Priority Ship Mtg. Nts.,
6/30/07(4) 500,000 232,500
- ---------------------------------------------------------------------------------------------------------
Utilities--0.4%
- ---------------------------------------------------------------------------------------------------------
Electric Utilities--0.2%
Calpine Corp.:
8.75% Sr. Nts., 7/15/07 400,000 403,000
10.50% Sr. Nts., 5/15/06 800,000 848,000
------------
1,251,000
- ---------------------------------------------------------------------------------------------------------
Gas Utilities--0.2%
Beaver Valley II Funding Corp., 9% Second Lease Obligation Bonds, 6/1/17 989,000 987,764
------------
Total Non-Convertible Corporate Bonds and Notes (Cost $41,563,563) 38,938,716
=========================================================================================================
Repurchase Agreements--3.5%
- ---------------------------------------------------------------------------------------------------------
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%,
dated 12/31/99, to be repurchased at $20,504,698 on 1/3/00,
collateralized by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28,
with a value of $8,046,039 and U.S. Treasury Nts., 5%-7.50%,
12/31/00-2/15/07, with a value of $12,875,859 (Cost $20,500,000) 20,500,000 20,500,000
- ---------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $490,650,853) 99.5% 576,085,947
- ---------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.5 2,696,887
----------- ------------
Net Assets 100.0% $578,782,834
=========== ============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
1. A sufficient amount of liquid assets has been designated to cover outstanding written call options, as follows:
<CAPTION>
Shares Expiration Exercise Premium Market Value
Subject to Call Date Price Received Note 1
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Analog Devices, Inc. 6,700 6/19/00 $ 95.00 $ 41,670 $ 102,175
Avon Products, Inc. 10,000 7/24/00 40.00 43,450 26,875
Bank of America Corp. 22,000 1/24/00 90.00 59,838 --
CBS Corp. 33,000 1/24/00 55.00 93,885 305,250
Cisco Systems, Inc. 6,000 1/24/00 67.50 38,819 237,750
Cisco Systems, Inc. 5,000 4/24/00 70.00 40,474 195,000
Coherent, Inc. 4,000 5/22/00 35.00 8,380 4,500
Computer Associates International, Inc. 10,000 1/24/00 65.00 37,199 62,500
Computer Associates International, Inc. 6,000 5/22/00 75.00 44,820 42,750
Compuware Corp. 8,000 1/24/00 35.00 40,759 34,000
Du Pont (E.I.) De Nemours & Co. 7,000 1/24/00 75.00 41,789 1,750
Gap, Inc. 14,500 6/19/00 60.00 28,564 33,531
General Motors Corp., Cl. H 4,500 3/20/00 95.00 29,115 41,625
Hewlett-Packard Co. 10,000 2/22/00 125.00 55,948 52,500
International Business Machines Corp. 5,000 1/24/00 150.00 46,098 313
International Business Machines Corp. 4,000 4/24/00 110.00 43,879 40,000
Johnson & Johnson 15,000 1/18/00 60.00 61,423 23,437
MediaOne Group, Inc. 7,000 4/24/00 90.00 14,228 5,250
Methode Electronics, Inc., Cl. A 15,000 4/24/00 35.00 40,799 45,000
Optical Coating Laboratory, Inc. 6,000 5/22/00 250.00 249,562 445,500
Oracle Corp. 1,800 3/20/00 100.00 9,171 40,050
Praxair, Inc. 4,000 1/24/00 55.00 13,597 250
Rational Software Corp. 7,700 1/24/00 40.00 39,458 74,113
STMicroelectronics NV 3,000 4/24/00 140.00 49,033 76,125
Teradyne, Inc. 4,000 1/24/00 37.50 26,689 113,500
Time Warner, Inc. 6,400 6/19/00 80.00 19,007 32,000
Xerox Corp. 9,600 1/24/00 70.00 34,511 600
---------- ----------
$1,252,165 $2,036,344
========== ==========
</TABLE>
2. Non-income producing security.
3. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
4. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $10,188,075 or 1.76% of the Fund's net
assets as of December 31, 1999.
5. Principal amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
AUD -- Australian Dollar GBP -- British Pound Sterling
CAD -- Canadian Dollar NZD -- New Zealand Dollar
DKK -- Danish Krone ZAR -- South African Rand
EUR -- Euro
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Represents the current interest rate for a variable or increasing rate
security.
8. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
9. Issuer is in default.
See accompanying Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
=========================================================================================================
Assets
Investments, at value (cost $490,650,853)--see accompanying statement $576,085,947
- ---------------------------------------------------------------------------------------------------------
Cash 1,043,942
- ---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest 5,069,984
Shares of beneficial interest sold 34,787
Other 6,374
------------
Total assets 582,241,034
=========================================================================================================
Liabilities
Options written, at value (premiums received $1,252,165)--see accompanying statement 2,036,344
- ---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 734,934
Investments purchased 664,056
Transfer and shareholder servicing agent fees 184
Trustees' compensation 49
Other 22,633
------------
Total liabilities 3,458,200
=========================================================================================================
Net Assets $578,782,834
============
=========================================================================================================
Composition of Net Assets
Paid-in capital $432,093,512
- ---------------------------------------------------------------------------------------------------------
Undistributed net investment income 25,784,656
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 36,252,948
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 84,651,718
------------
Net assets--applicable to 33,148,390 shares of beneficial interest outstanding $578,782,834
============
=========================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $17.46
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Multiple Strategies Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
=========================================================================================================
Investment Income
Interest $25,857,230
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $24,091) 4,941,295
-----------
Total income 30,798,525
=========================================================================================================
Expenses
Management fees 4,271,996
- ---------------------------------------------------------------------------------------------------------
Custodian fees and expenses 60,945
- ---------------------------------------------------------------------------------------------------------
Trustees' compensation 6,600
- ---------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,105
- ---------------------------------------------------------------------------------------------------------
Other 7,362
-----------
Total expenses 4,349,008
Less expenses paid indirectly (5,741)
-----------
Net expenses 4,343,267
=========================================================================================================
Net Investment Income 26,455,258
=========================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (including premiums on options exercised) 36,754,035
Closing and expiration of option contracts written 853,989
Foreign currency transactions (1,215,313)
-----------
Net realized gain 36,392,711
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 3,765,208
Translation of assets and liabilities denominated in foreign currencies (624,794)
-----------
Net change 3,140,414
-----------
Net realized and unrealized gain 39,533,125
=========================================================================================================
Net Increase in Net Assets Resulting from Operations $65,988,383
===========
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Multiple Strategies Fund/VA 17
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
==============================================================================================================================
Operations
Net investment income $ 26,455,258 $ 25,911,095
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain 36,392,711 29,540,227
- ------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 3,140,414 (15,895,873)
------------ ------------
Net increase in net assets resulting from operations 65,988,383 39,555,449
==============================================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (20,765,472) (5,964,037)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (30,037,334) (34,591,414)
==============================================================================================================================
Beneficial Interest Transactions
Net decrease in net assets resulting from
beneficial interest transactions (58,736,044) (14,211,527)
==============================================================================================================================
Net Assets
Total decrease (43,550,467) (15,211,529)
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of period 622,333,301 637,544,830
------------ ------------
End of period (including undistributed net investment
income of $25,784,656 and $20,748,181, respectively) $578,782,834 $622,333,301
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
18 Oppenheimer Multiple Strategies Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
================================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $17.05 $17.01 $15.63 $14.55 $12.91
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .82 .71 .62 .72 .66
Net realized and unrealized gain 1.04 .42 1.95 1.45 2.00
- --------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 1.86 1.13 2.57 2.17 2.66
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.59) (.16) (.61) (.74) (.65)
Distributions from net realized gain (.86) (.93) (.58) (.35) (.37)
- --------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.45) (1.09) (1.19) (1.09) (1.02)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.46 $17.05 $17.01 $15.63 $14.55
====== ====== ====== ====== ======
================================================================================================================================
Total Return, at Net Asset Value(1) 11.80% 6.66% 17.22% 15.50% 21.36%
================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $578,783 $622,333 $637,545 $484,285 $381,263
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $593,151 $640,131 $564,369 $428,277 $344,745
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 4.46% 4.05% 3.86% 4.89% 4.81%
Expenses 0.73% 0.76%(3) 0.75%(3) 0.77%(3) 0.77%(3)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 17% 43% 42% 40% 39%
</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. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $94,111,384 and $130,260,786, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer Multiple Strategies Fund/VA 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Multiple Strategies Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek a total investment
return, which includes current income and capital appreciation in the value of
its shares. The Fund'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 price 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.
- --------------------------------------------------------------------------------
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 December 31, 1999, securities with an
aggregate market value of $65,000, representing 0.01% of the Fund's net assets,
were in default.
- --------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
20 Oppenheimer Multiple Strategies Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of 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.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $653,311. Accumulated net
realized gain on investments was increased by the same amount.
- --------------------------------------------------------------------------------
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. 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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
------------------------------ ------------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Sold 1,494,012 $ 25,019,610 3,352,415 $ 56,547,384
Dividends and/or distributions reinvested 3,209,274 50,802,806 2,387,019 40,555,451
Redeemed (8,052,445) (134,558,460) (6,714,957) (111,314,362)
---------- ------------- ---------- -------------
Net decrease (3,349,159) $ (58,736,044) (975,523) $ (14,211,527)
========== ============= ========== =============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities and options
written of $84,650,915 was composed of gross appreciation of $121,520,407, and
gross depreciation of $36,869,492.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust. The annual fees are 0.75% of the
first $200 million of average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of
average annual net assets over $800 million. The Fund's management fee for the
year ended December 31, 1999, was 0.72% of average annual net assets.
- --------------------------------------------------------------------------------
Transfer Agent Fees. 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 for cost.
Oppenheimer Multiple Strategies Fund/VA 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
5. Foreign Currency Contracts
A foreign currency 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 contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transaction. 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.
================================================================================
6. 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.
Written option activity for the year ended December 31, 1999, was as follows:
<TABLE>
<CAPTION>
Call Options
------------------------------
Number of Amount of
Options Premiums
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Options outstanding as of December 31, 1998 5,871 $ 1,686,387
Options written 7,204 3,421,612
Options closed or expired (7,188) (2,544,448)
Options exercised (3,535) (1,311,386)
------ -----------
Options outstanding as of December 31, 1999 2,352 $ 1,252,165
====== ===========
</TABLE>
22 Oppenheimer Multiple Strategies Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
7. Illiquid or Restricted Securities
As of December 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of December 31, 1999, was $1,878,948,
which represents 0.32% of the Fund's net assets, of which $6,241 is considered
restricted. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation Per
Unit as of
Acquisition Cost Per December 31,
Security Date Unit 1999
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc. 9/29/98 $21.69 $31.05
</TABLE>
16 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Global Securities
Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Global Securities Fund/VA (which is
a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the
related statement of operations for the year then ended, the statements of
changes in net assets for the years ended December 31, 1999 and 1998 and the
financial highlights for the period January 1, 1995 to December 31, 1999. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Global Securities Fund/VA as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
- --------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
=======================================================================================
Common Stocks--89.1%
Basic Materials--1.1%
- ---------------------------------------------------------------------------------------
Chemicals--1.1%
- ---------------------------------------------------------------------------------------
International Flavors & Fragrances, Inc. 501,200 $ 18,920,300
- ---------------------------------------------------------------------------------------
Capital Goods--7.8%
- ---------------------------------------------------------------------------------------
Electrical Equipment--1.5%
Toshiba Corp. 3,388,000 25,849,946
- ---------------------------------------------------------------------------------------
Industrial Services--3.8%
Manpower, Inc. 437,800 16,472,225
- ---------------------------------------------------------------------------------------
Rentokil Initial plc 3,216,300 11,729,826
- ---------------------------------------------------------------------------------------
WPP Group plc 2,459,500 38,978,317
------------
67,180,368
- ---------------------------------------------------------------------------------------
Manufacturing--2.5%
Bombardier, Inc., Cl. B 787,500 16,133,058
- ---------------------------------------------------------------------------------------
Sidel SA 123,700 12,760,393
- ---------------------------------------------------------------------------------------
Societe BIC SA 319,437 14,524,525
------------
43,417,976
- ---------------------------------------------------------------------------------------
Communication Services--6.8%
- ---------------------------------------------------------------------------------------
Telecommunications: Long Distance--0.6%
MCI WorldCom, Inc.(1) 200,700 10,649,644
- ---------------------------------------------------------------------------------------
Telephone Utilities--2.7%
DDI Corp.(1) 600 8,216,766
- ---------------------------------------------------------------------------------------
Hellenic Telecommunication Organization SA 182,118 4,327,815
- ---------------------------------------------------------------------------------------
Portugal Telecom SA 719,000 7,880,019
- ---------------------------------------------------------------------------------------
Tele Norte Leste Participacoes SA (Telemar), Preference 791,770,000 21,257,041
- ---------------------------------------------------------------------------------------
Telstra Corp. Ltd. 1,245,400 6,774,926
------------
48,456,567
- ---------------------------------------------------------------------------------------
Telecommunications: Wireless--3.5%
NTT Mobile Communications Network, Inc. 636 24,449,574
- ---------------------------------------------------------------------------------------
Telecel-Comunicacoes Pessoais, S.A. 501,400 8,734,778
- ---------------------------------------------------------------------------------------
Telecom Italia Mobile SpA 2,294,400 25,607,736
- ---------------------------------------------------------------------------------------
Telesp Celular Participacoes SA, ADR 79,100 3,351,862
------------
62,143,950
- ---------------------------------------------------------------------------------------
Consumer Cyclicals--9.9%
- ---------------------------------------------------------------------------------------
Autos & Housing--5.9%
Autoliv, Inc., SDR 301,600 8,824,205
- ---------------------------------------------------------------------------------------
General Motors Corp. 205,300 14,922,744
- ---------------------------------------------------------------------------------------
Hanson plc 1,608,400 13,485,550
- ---------------------------------------------------------------------------------------
IRSA Inversiones y Representaciones SA 1,816,959 5,887,536
- ---------------------------------------------------------------------------------------
Porsche AG, Preference 16,600 43,770,336
- ---------------------------------------------------------------------------------------
Volkswagen AG 295,500 16,585,502
------------
103,475,873
</TABLE>
Oppenheimer Global Securities Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------
Leisure & Entertainment--1.2%
Hasbro, Inc. 478,200 $ 9,115,687
- ---------------------------------------------------------------------------------------
International Game Technology 558,400 11,342,500
------------
20,458,187
- ---------------------------------------------------------------------------------------
Media--1.1%
Reed International plc 1,599,200 11,974,566
- ---------------------------------------------------------------------------------------
Singapore Press Holdings Ltd. 364,000 7,889,763
------------
19,864,329
- ---------------------------------------------------------------------------------------
Retail: Specialty--1.7%
Circuit City Stores-Circuit City Group 274,000 12,347,125
- ---------------------------------------------------------------------------------------
Dixons Group plc 739,194 17,781,172
------------
30,128,297
- ---------------------------------------------------------------------------------------
Consumer Staples--10.5%
- ---------------------------------------------------------------------------------------
Beverages--0.7%
Cadbury Schweppes plc 2,036,400 12,303,876
- ---------------------------------------------------------------------------------------
Broadcasting--7.4%
Canal Plus 282,404 41,068,533
- ---------------------------------------------------------------------------------------
Grupo Televisa SA, Sponsored GDR(1) 424,300 28,958,475
- ---------------------------------------------------------------------------------------
ProSieben Media AG, Preference 235,948 13,416,377
- ---------------------------------------------------------------------------------------
Television Broadcasts Ltd. 1,569,000 10,697,498
- ---------------------------------------------------------------------------------------
Television Francaise 1 56,075 29,345,609
- ---------------------------------------------------------------------------------------
Telewest Communications plc(1) 1,291,058 6,888,043
------------
130,374,535
- ---------------------------------------------------------------------------------------
Entertainment--0.9%
Disney (Walt) Co. 219,700 6,426,225
- ---------------------------------------------------------------------------------------
Nintendo Co. Ltd. 54,000 8,969,187
------------
15,395,412
- ---------------------------------------------------------------------------------------
Food & Drug Retailers--0.4%
Dairy Farm International Holdings Ltd. 8,172,194 7,354,975
- ---------------------------------------------------------------------------------------
Household Goods--1.1%
Wella AG, Preference 910,700 19,980,315
- ---------------------------------------------------------------------------------------
Energy--0.4%
- ---------------------------------------------------------------------------------------
Oil: International--0.4%
BP Amoco plc, ADR 107,288 6,363,519
- ---------------------------------------------------------------------------------------
Financial--9.1%
- ---------------------------------------------------------------------------------------
Banks--1.5%
Australia & New Zealand Banking Group Ltd. 1,958,600 14,259,033
- ---------------------------------------------------------------------------------------
Royal Bank of Scotland Group (The) plc 340,000 6,009,018
- ---------------------------------------------------------------------------------------
UniCredito Italiano SpA 1,303,100 6,399,824
------------
26,667,875
</TABLE>
6 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------
Diversified Financial--5.1%
American Express Co. 99,000 $ 16,458,750
- ---------------------------------------------------------------------------------------
Associates First Capital Corp., Cl. A 139,700 3,833,019
- ---------------------------------------------------------------------------------------
Citigroup, Inc. 295,700 16,429,831
- ---------------------------------------------------------------------------------------
Credit Saison Co. Ltd. 390,000 6,790,570
- ---------------------------------------------------------------------------------------
Fannie Mae 190,000 11,863,125
- ---------------------------------------------------------------------------------------
Housing Development Finance Corp. Ltd. 222,900 1,463,821
- ---------------------------------------------------------------------------------------
ICICI Ltd., Sponsored ADR(1) 1,008,700 14,615,825
- ---------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 226,000 19,139,375
------------
90,594,316
- ---------------------------------------------------------------------------------------
Insurance--2.5%
- ---------------------------------------------------------------------------------------
AEGON NV 143,400 13,840,069
- ---------------------------------------------------------------------------------------
Allied Zurich plc 1,048,600 12,357,835
- ---------------------------------------------------------------------------------------
American International Group, Inc. 56,937 6,156,313
- ---------------------------------------------------------------------------------------
AXA SA 87,300 12,159,643
------------
44,513,860
- ---------------------------------------------------------------------------------------
Healthcare--12.3%
- ---------------------------------------------------------------------------------------
Healthcare/Drugs--10.0%
ALZA Corp., Cl. A(1) 419,900 14,539,037
- ---------------------------------------------------------------------------------------
Amgen, Inc.(1) 294,200 17,670,387
- ---------------------------------------------------------------------------------------
Eisai Co. Ltd. 704,000 13,531,840
- ---------------------------------------------------------------------------------------
Elan Corp. plc, ADR(1) 614,800 18,136,600
- ---------------------------------------------------------------------------------------
Fresenius AG, Preference 142,419 26,086,140
- ---------------------------------------------------------------------------------------
Genset, Sponsored ADR(1) 938,600 17,892,062
- ---------------------------------------------------------------------------------------
Genzyme Corp. (General Division)(1) 177,400 7,983,000
- ---------------------------------------------------------------------------------------
Gilead Sciences, Inc.(1) 172,700 9,347,387
- ---------------------------------------------------------------------------------------
Glaxo Wellcome plc, Sponsored ADR 154,800 8,649,450
- ---------------------------------------------------------------------------------------
Millennium Pharmaceuticals, Inc.(1) 207,800 25,351,600
- ---------------------------------------------------------------------------------------
Pliva d.d., Sponsored GDR(2) 810,300 10,574,415
- ---------------------------------------------------------------------------------------
Taisho Pharmaceutical Co. 210,000 6,162,575
------------
175,924,493
- ---------------------------------------------------------------------------------------
Healthcare/Supplies & Services--2.3%
Affymetrix, Inc.(1) 135,300 22,958,719
- ---------------------------------------------------------------------------------------
Bard (C.R.), Inc. 178,400 9,455,200
- ---------------------------------------------------------------------------------------
Quintiles Transnational Corp.(1) 458,900 8,575,694
------------
40,989,613
- ---------------------------------------------------------------------------------------
Technology--30.7%
- ---------------------------------------------------------------------------------------
Computer Hardware--2.9%
International Business Machines Corp. 145,800 15,746,400
- ---------------------------------------------------------------------------------------
Sun Microsystems, Inc.(1) 447,200 34,630,050
------------
50,376,450
</TABLE>
Oppenheimer Global Securities Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Computer Services--4.0%
Cap Gemini SA 115,600 $ 29,317,631
- ------------------------------------------------------------------------------------------------------------------------
Getronics NV 514,000 40,969,324
--------------
70,286,955
- ------------------------------------------------------------------------------------------------------------------------
Computer Software--5.8%
Cadence Design Systems, Inc.(1) 1,572,600 37,742,400
- ------------------------------------------------------------------------------------------------------------------------
Lernout & Hauspie Speech Products NV(1) 289,800 13,403,250
- ------------------------------------------------------------------------------------------------------------------------
Oracle Corp.(1) 339,000 37,989,187
- ------------------------------------------------------------------------------------------------------------------------
Sybase, Inc.(1) 345,900 5,880,300
- ------------------------------------------------------------------------------------------------------------------------
Synopsys, Inc.(1) 110,700 7,389,225
--------------
102,404,362
- ------------------------------------------------------------------------------------------------------------------------
Communications Equipment--11.1%
Alcatel 133,100 30,541,010
- ------------------------------------------------------------------------------------------------------------------------
Cisco Systems, Inc.(1) 161,350 17,284,619
- ------------------------------------------------------------------------------------------------------------------------
L.M. Ericsson Telephone Co., Cl. B, ADR 596,400 39,176,025
- ------------------------------------------------------------------------------------------------------------------------
Nokia Corp., A Shares, Sponsored ADR(1) 95,900 18,221,000
- ------------------------------------------------------------------------------------------------------------------------
QUALCOMM, Inc.(1) 385,100 67,825,737
- ------------------------------------------------------------------------------------------------------------------------
Scientific-Atlanta, Inc. 402,100 22,366,813
--------------
195,415,204
- ------------------------------------------------------------------------------------------------------------------------
Electronics--6.9%
Hoya Corp. 83,000 6,535,753
- ------------------------------------------------------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics NV 216,600 29,428,134
- ------------------------------------------------------------------------------------------------------------------------
National Semiconductor Corp.(1) 1,167,400 49,979,313
- ------------------------------------------------------------------------------------------------------------------------
STMicroelectronics NV, NY Registered Shares 229,800 34,800,338
--------------
120,743,538
- ------------------------------------------------------------------------------------------------------------------------
Transportation--0.5%
- ------------------------------------------------------------------------------------------------------------------------
Shipping--0.5%
Peninsular & Oriental Steam Navigation Co. 575,100 9,597,341
- ------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,026,351,138) 1,569,832,076
<CAPTION>
Principal
Amount
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements--8.3%
- ------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%, dated 12/31/99,
to be repurchased at $145,933,435 on 1/3/00, collateralized by U.S. Treasury Bonds,
5.25%-12%, 2/15/01-11/15/28, with a value of $57,264,247 and U.S. Treasury Nts.,
5%-7.50%, 12/31/00-2/15/07, with a value of $91,638,429 (Cost $145,900,000) $ 145,900,000 145,900,000
- ------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $1,172,251,138) 97.4% 1,715,732,076
- ------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 2.6 46,634,376
-------------- --------------
Net Assets 100.0% $1,762,366,452
============== ==============
</TABLE>
8 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distribution of investments representing geographic diversification, as a
percentage of total investments at value, is as follows:
<TABLE>
<CAPTION>
Geographic Diversification Market Value Percent
<S> <C> <C>
- ---------------------------------------------------------------------------------------
United States $ 736,854,433 42.8%
- ---------------------------------------------------------------------------------------
France 222,409,744 13.0
- ---------------------------------------------------------------------------------------
Great Britain 156,118,512 9.1
- ---------------------------------------------------------------------------------------
Germany 119,838,669 7.0
- ---------------------------------------------------------------------------------------
Japan 100,506,211 5.9
- ---------------------------------------------------------------------------------------
The Netherlands 84,237,526 4.9
- ---------------------------------------------------------------------------------------
Sweden 48,000,230 2.8
- ---------------------------------------------------------------------------------------
Italy 32,007,560 1.9
- ---------------------------------------------------------------------------------------
Mexico 28,958,475 1.7
- ---------------------------------------------------------------------------------------
Brazil 24,608,904 1.4
- ---------------------------------------------------------------------------------------
Australia 21,033,959 1.2
- ---------------------------------------------------------------------------------------
Finland 18,221,000 1.1
- ---------------------------------------------------------------------------------------
Ireland 18,136,600 1.1
- ---------------------------------------------------------------------------------------
Portugal 16,614,798 1.0
- ---------------------------------------------------------------------------------------
Canada 16,133,058 0.9
- ---------------------------------------------------------------------------------------
Singapore 15,244,737 0.9
- ---------------------------------------------------------------------------------------
Belgium 13,403,250 0.8
- ---------------------------------------------------------------------------------------
India 11,917,146 0.7
- ---------------------------------------------------------------------------------------
Hong Kong 10,697,498 0.6
- ---------------------------------------------------------------------------------------
Croatia 10,574,415 0.6
- ---------------------------------------------------------------------------------------
Argentina 5,887,536 0.3
- ---------------------------------------------------------------------------------------
Greece 4,327,815 0.3
-------------- -----
Total $1,715,732,076 100.0%
============== =====
</TABLE>
1. Non-income producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $10,574,415 or 0.60% of the Fund's net
assets as of December 31, 1999.
See accompanying Notes to Financial Statements.
Oppenheimer Global Securities Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
================================================================================================
Assets
Investments, at value (cost $1,172,251,138)--see accompanying statement $1,715,732,076
- ------------------------------------------------------------------------------------------------
Cash 1,077,591
- ------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency exchange contracts 7,046
- ------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 53,869,505
Shares of beneficial interest sold 1,265,029
Interest, dividends 1,158,012
Other 11,481
--------------
Total assets 1,773,120,740
================================================================================================
Liabilities
Unrealized depreciation on foreign currency exchange contracts 7,821
- ------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 9,066,120
Shares of beneficial interest redeemed 1,537,479
Trustees' compensation 1,967
Transfer and shareholder servicing agent fees 184
Other 140,717
--------------
Total liabilities 10,754,288
================================================================================================
Net Assets $1,762,366,452
==============
================================================================================================
Composition of Net Assets
Paid-in capital $ 924,735,645
- ------------------------------------------------------------------------------------------------
Overdistributed net investment income (567,744)
- ------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 294,753,467
- ------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 543,445,084
--------------
Net assets--applicable to 52,745,360 shares of beneficial interest outstanding $1,762,366,452
==============
================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $33.41
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------
Investment Income
Dividends (net of foreign withholding taxes of $712,662) $ 13,352,150
- ----------------------------------------------------------------------------------------------
Interest 2,466,093
------------
Total income 15,818,243
==============================================================================================
Expenses
Management fees 8,336,850
- ----------------------------------------------------------------------------------------------
Custodian fees and expenses 270,778
- ----------------------------------------------------------------------------------------------
Trustees' compensation 11,193
- ----------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,104
- ----------------------------------------------------------------------------------------------
Other 43,962
------------
Total expenses 8,664,887
Less expenses paid indirectly (6,321)
------------
Net expenses 8,658,566
==============================================================================================
Net Investment Income 7,159,677
==============================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 320,164,650
Foreign currency transactions (29,286,569)
------------
Net realized gain 290,878,081
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 363,894,982
Translation of assets and liabilities denominated in foreign currencies (23,520,911)
------------
Net change 340,374,071
------------
Net realized and unrealized gain 631,252,152
==============================================================================================
Net Increase in Net Assets Resulting from Operations $638,411,829
============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Global Securities Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
===============================================================================================================
Operations
Net investment income $ 7,159,677 $ 12,887,134
- ---------------------------------------------------------------------------------------------------------------
Net realized gain 290,878,081 36,962,992
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 340,374,071 86,460,026
-------------- --------------
Net increase in net assets resulting from operations 638,411,829 136,310,152
===============================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (7,159,677) (21,307,082)
- ---------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income (6,137,505) --
- ---------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (37,262,160) (80,203,951)
===============================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions 39,484,831 141,119,795
===============================================================================================================
Net Assets
Total increase 627,337,318 175,918,914
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 1,135,029,134 959,110,220
-------------- --------------
End of period [including undistributed (overdistributed) net investment
income of $(567,744) and $11,592,206, respectively] $1,762,366,452 $1,135,029,134
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $22.07 $21.37 $17.67 $15.00 $15.09
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .14 .24 .25 .15 .12
Net realized and unrealized gain 12.21 2.64 3.68 2.52 .19
- ---------------------------------------------------------------------------------------------------------------------
Total income from investment operations 12.35 2.88 3.93 2.67 .31
- ---------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.14) (.46) (.23) -- --
Dividends in excess of net investment income (.13) -- -- -- --
Distributions from net realized gain (.74) (1.72) -- -- (.40)
- ---------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (1.01) (2.18) (.23) -- (.40)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.41 $22.07 $21.37 $17.67 $15.00
====== ====== ====== ====== ======
=====================================================================================================================
Total Return, at Net Asset Value(1) 58.48% 14.11% 22.42% 17.80% 2.24%
=====================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in millions) $1,762 $1,135 $959 $582 $361
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,251 $1,055 $802 $467 $332
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 0.57% 1.22% 1.51% 1.09% 0.86%
Expenses 0.69% 0.74%(3) 0.76%(3) 0.81%(3) 0.89%(3)
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 64% 81% 67% 90% 131%
</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. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $772,038,559 and $956,384,357, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer Global Securities Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Global Securities Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek long-term capital
appreciation by investing a substantial portion of assets in securities of
foreign issuers, "growth-type" companies, cyclical industries and special
situations that are considered to have appreciation possibilities. The Fund'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 price 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
14 Oppenheimer Global Securities Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of 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.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect a
decrease in paid-in capital of $6,653, a decrease in undistributed net
investment income of $6,022,445, and an increase in accumulated net realized
gain on investments of $6,029,098.
- --------------------------------------------------------------------------------
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. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
----------------------------- -----------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Sold 14,212,563 $ 365,308,523 11,735,029 $ 248,354,528
Dividends and distributions reinvested 2,349,412 50,559,342 4,877,993 101,511,033
Redeemed (15,245,808) (376,383,034) (10,067,775) (208,745,766)
----------- ------------- ----------- -------------
Net increase 1,316,167 $ 39,484,831 6,545,247 $ 141,119,795
=========== ============= =========== =============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$543,480,938 was composed of gross appreciation of $590,197,031, and gross
depreciation of $46,716,093.
Oppenheimer Global Securities Fund/VA 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. 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 and
0.60% of average annual net assets over $800 million. The Fund's management fee
for the year ended December 31, 1999 was 0.67% of average annual net assets.
================================================================================
Transfer Agent Fees. 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 for cost.
================================================================================
5. Foreign Currency Contracts
A foreign currency 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 contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
As of December 31, 1999, the Fund had outstanding foreign currency contracts as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized Unrealized
Contract Description Dates Amounts (000s) December 31, 1999 Appreciation Depreciation
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
British Pound Sterling (GBP) 1/3/00 164 GBP $ 264,200 $ 554 $ --
British Pound Sterling (GBP) 1/3/00 285 GBP 461,002 -- 860
Euro (EUR) 1/3/00 209 EUR 210,398 538 --
Japanese Yen (JPY) 1/3/00 163,044 JPY 1,596,537 3,186 --
Japanese Yen (JPY) 1/3/00 9,642 JPY 94,379 -- 202
------ ------
4,278 1,062
------ ------
Contracts to Sell
- -----------------
British Pound Sterling (GBP) 1/3/00 2,135 GBP 3,449,810 2,768 --
Euro (EUR) 1/3/00 2,933 EUR 2,959,230 -- 6,759
------ ------
2,768 6,759
------ ------
Total Unrealized Appreciation and Depreciation $7,046 $7,821
====== ======
</TABLE>
Oppenheimer Strategic Bond Fund/VA 35
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Strategic Bond Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Strategic Bond Fund/VA (which is a
series of Oppenheimer Variable Account Funds) as of December 31, 1999, the
related statement of operations for the year then ended, the statements of
changes in net assets for the years ended December 31, 1999 and 1998 and the
financial highlights for the period five years prior, to December 31, 1999.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Strategic Bond Fund/VA as of December 31, 1999, the results of its operations,
the changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- --------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
============================================================================================================
Mortgage-Backed Obligations--22.3%
- ------------------------------------------------------------------------------------------------------------
Government Agency--18.5%
- ------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--8.8%
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 $ 793,067 $ 819,334
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped Mtg.-Backed Security,
Series 194, Cl. IO, 9.40%-9.462%, 4/1/28(2) 20,681,402 6,913,728
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 5/1/29 1,555,497 1,465,559
7%, 1/25/29(3) 6,200,000 5,994,656
7.50%, 1/25/28(3) 3,200,000 3,164,000
7.50%, 8/1/25 405,275 401,730
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Trust 1993-202, Cl. PH, 6.50%, 2/25/22 4,500,000 4,373,415
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 276, Cl. 2, 9.065%, 10/1/24(2) 2,834,208 875,948
Trust 294, Cl. 2, 11.826%, 2/1/28(2) 2,273,267 747,692
-----------
24,756,062
- ------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed--9.7%
Government National Mortgage Assn.:
6.125%, 11/20/25 174,462 177,215
7%, 3/15/28-7/15/28 15,023,969 14,507,447
7.50%, 2/15/27 2,469,631 2,441,848
8%, 11/15/25-5/15/26 2,222,437 2,246,631
- ------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Gtd. Multiclass Mtg.
Participation Certificates, Series 1999-27, Cl. PQ, 7.50%, 8/16/28 8,220,125 8,044,163
-----------
27,417,304
- ------------------------------------------------------------------------------------------------------------
Private--3.8%
- ------------------------------------------------------------------------------------------------------------
Commercial--2.5%
AMMC, Collateralized Bond Obligations, Sub. Bonds,
Series I, Cl. D1, 13.602%, 1/15/12(4) 200,000 200,000
- ------------------------------------------------------------------------------------------------------------
AMRESCO Commercial Mortgage Funding I Corp.,
Multiclass Mtg. Pass-Through Certificates, Series 1997-C1, Cl. G, 7%, 6/17/29(5) 100,000 76,937
- ------------------------------------------------------------------------------------------------------------
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1997-D4, Cl. B1, 7.525%, 4/14/29(6) 375,000 267,422
Series 1997-D5, Cl. B1, 6.93%, 2/14/41 300,000 198,984
Series 1997-D5, Cl. B2, 6.93%, 2/14/41 1,250,000 800,781
- ------------------------------------------------------------------------------------------------------------
CRIIMI MAE Trust I, Collateralized Mtg. Obligations,
Series 1996-C1, Cl. A2, 7.56%, 8/30/05(4) 100,000 93,031
- ------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Series 1994-C1, Cl. 2-G, 8.70%, 9/25/25 153,594 147,546
- ------------------------------------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage Trust,
Commercial Mtg. Pass-Through Certificates, Series 1997-C2, Cl. F, 7.50%, 9/18/15 225,000 165,164
- ------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., Collateralized Mtg. Obligations:
Series 1997-C1, Cl. G, 7.414%, 11/15/11 440,000 309,787
Series 1997-C2, Cl. F, 6.75%, 4/16/29 250,000 150,078
</TABLE>
4 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Commercial (continued)
General Motors Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security,
Series 1997-C1, Cl. X, 8.726%, 7/15/27(2) $4,005,708 $ 301,680
- ------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates,
Series 1995-C2, Cl. D, 7.681%, 6/15/21(6) 236,084 232,304
- ------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates:
Series 1996-C1, Cl. F, 7.421%, 2/15/28(5)(6) 162,744 117,735
Series 1997-HF1, Cl. F, 6.86%, 2/15/10(5) 150,000 114,844
Series 1997-RR, Cl. D, 7.671%, 4/30/39(5) 450,024 316,072
Series 1997-RR, Cl. E, 7.718%, 4/30/39(5)(6) 300,016 185,213
Series 1997-RR, Cl. F, 7.649%, 4/30/39(5) 600,032 306,204
Series 1997-XL1, Cl. G, 7.695%, 10/3/30(5) 390,000 315,656
- ------------------------------------------------------------------------------------------------------------
NationsCommercial Corp., NB Commercial Mtg. Pass-Through Certificates,
Series DMC, Cl. C, 8.921%, 8/12/11(5) 200,000 180,938
- ------------------------------------------------------------------------------------------------------------
NC Finance Trust, Collateralized Mtg. Obligations, Series 1999-I,
Cl. ECFD, 8.75%, 12/25/28 407,527 395,938
- ------------------------------------------------------------------------------------------------------------
Nykredit AS, 7% Cv. Bonds, 10/1/29DKK 6,935,000 927,330
- ------------------------------------------------------------------------------------------------------------
Option One Mortgage Trust, Collateralized Mtg. Obligations,
Series 1999-1A, 10.06%, 3/1/29(5) 291,866 287,671
- ------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1993-C1, Cl. D, 9.45%, 5/25/24 57,792 57,115
Series 1994-C2, Cl. E, 8%, 4/25/25 973,568 949,534
- ------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through Certificates,
Series 1995-C4, Cl. E, 8.703%, 6/25/26(5)(6) 46,290 44,048
-----------
7,142,012
- ------------------------------------------------------------------------------------------------------------
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 48,208
Multifamily Mtg. Pass-Through Certificates, Series 1996-MC1,
Cl. G, 7.15%, 6/15/06(4) 800,000 617,500
- ------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Series 1996-CL,
Cl. F, 9.078%, 1/20/06(6) 1,000,000 738,125
-----------
1,403,833
- ------------------------------------------------------------------------------------------------------------
Residential--0.8%
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates,
Series 1997:
Cl. D, 8.126%, 5/25/08(5)(6) 350,000 273,000
Cl. E, 8.126%, 2/25/11(5)(6) 600,000 402,000
- ------------------------------------------------------------------------------------------------------------
Residential Asset Securitization Trust, Collateralized Mtg. Obligations,
Non-Accelerated Security, Series 1997-A2, Cl. A8, 7.75%, 4/25/27 1,000,000 986,250
- ------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Series 1996-B,
Cl. 1, 6.581%, 4/25/26(5) 378,900 249,956
- ------------------------------------------------------------------------------------------------------------
Salomon, Inc., Commercial Mtg. Pass-Through Certificates,
Series 1998-1A, 5%, 12/25/00(5) 189,699 182,823
-----------
2,094,029
-----------
Total Mortgage-Backed Obligations (Cost $65,313,699) 62,813,240
============================================================================================================
U.S. Government Obligations--15.8%
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
6.50%, 11/15/26(7)(8) 5,200,000 5,070,000
8.125%, 8/15/21 1,415,000 1,624,155
11.875%, 11/15/03 1,000,000 1,180,938
STRIPS, 5.76%, 2/15/19(9) 6,500,000 1,783,704
STRIPS, 5.33%, 5/15/17(9) 6,000,000 1,850,442
STRIPS, 6.24%, 2/15/20(9) 5,704,000 4,028,085
</TABLE>
Oppenheimer Strategic Bond Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
============================================================================================================
U.S. Government Obligations (continued)
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.625%, 11/30/00 $ 9,705,000 $ 9,671,644
5.875%, 8/15/09 2,750,000 2,664,923
6.50%, 10/15/06 13,000,000 12,967,500
7%, 7/15/06 3,590,000 3,678,630
-----------
Total U.S. Government Obligations (Cost $47,265,561) 44,520,021
- ------------------------------------------------------------------------------------------------------------
Foreign Government Obligations--16.3%
- ------------------------------------------------------------------------------------------------------------
Argentina--1.7%
Argentina (Republic of) Bonds:
Bonos de Consolidacion de Deudas, Series I, 2.868%, 4/1/07(6)ARP 1,736,732 1,215,876
Series L, 6.812%, 3/31/05(6) 281,600 256,960
- ------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Global Unsec. Unsub. Bonds, Series BGL5,
11.375%, 1/30/17 789,000 787,027
- ------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Nts.:
11%, 12/4/05 1,015,000 1,002,312
Series REGS, 11.75%, 2/12/07ARP 390,000 355,911
- ------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Unsec. Unsub. Medium-Term Nts., 8.75%, 7/10/02ARP 970,000 875,513
- ------------------------------------------------------------------------------------------------------------
Banco Hipotecario Nacional (Argentina) Medium-Term Unsec. Nts.,
Series 3, 10.625%, 8/7/06(5) 314,000 313,215
- ------------------------------------------------------------------------------------------------------------
City of Buenos Aires Bonds, Series 3, 10.50%, 5/28/04ARP 160,000 133,613
-----------
4,940,427
- ------------------------------------------------------------------------------------------------------------
Australia--0.0%
Australia Postal Corp. Unsec. Unsub. Nts., 6%, 3/25/09AUD 180,000 107,551
- ------------------------------------------------------------------------------------------------------------
Brazil--1.8%
Brazil (Federal Republic of) Bonds:
10.125%, 5/15/27 236,000 199,125
11.625%, 4/15/04 675,000 676,687
- ------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Bonds, Series RG, 5.938%, 4/15/12(6) 1,000,000 747,500
- ------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Capitalization Bonds, 6.916%, 4/15/14 2,387,597 1,799,651
- ------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Debt Conversion Bonds, 7%, 4/15/12(6) 593,000 443,267
- ------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Eligible Interest Bonds, 6.937%, 4/15/06(6) 789,600 696,822
- ------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Gtd. Bonds, 7%, 4/15/09(6) 480,000 391,800
-----------
4,954,852
- ------------------------------------------------------------------------------------------------------------
Bulgaria--0.6%
Bulgaria (Republic of) Disc. Bonds, Tranche A, 6.50%, 7/28/24(6) 908,000 727,535
- ------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of) Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 3%, 7/28/12 (6) 1,359,000 981,877
-----------
1,709,412
- ------------------------------------------------------------------------------------------------------------
Canada--0.3%
Canada (Government of) Bonds, 7.25%, 6/1/03CAD 1,140,000 813,848
- ------------------------------------------------------------------------------------------------------------
Colombia--0.4%
Colombia (Republic of) Bonds, 9.75%, 4/23/09 1,000,000 958,750
- ------------------------------------------------------------------------------------------------------------
Financiera Energetica Nacional SA Nts., 9.375%, 6/15/06 150,000 127,125
-----------
1,085,875
- ------------------------------------------------------------------------------------------------------------
Finland--0.2%
Finland (Republic of) Bonds, 9.50%, 3/15/04EUR 504,563 593,424
</TABLE>
6 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
France--0.2%
France (Government of) Bonds, Obligations Assimilables du Tresor,
5.50%, 10/25/07EUR 566,906 $ 574,528
- -----------------------------------------------------------------------------------------------------------
Germany--0.6%
Germany (Republic of) Bonds:
6.75%, 5/13/04EUR 690,000 743,997
Series 98, 5.25%, 1/4/08EUR 945,000 946,673
----------
1,690,670
- -----------------------------------------------------------------------------------------------------------
Great Britain--0.6%
United Kingdom Treasury Nts., 8%, 6/10/03GBP 1,070,000 1,813,287
- -----------------------------------------------------------------------------------------------------------
Greece--0.3%
Hellenic (Republic of) Bonds, 8.60%, 3/26/08GRD 207,200,000 713,012
- -----------------------------------------------------------------------------------------------------------
Hungary--0.3%
Hungary (Government of) Bonds, Series 01/H, 13.50%, 6/12/01HUF 213,220,000 859,615
- -----------------------------------------------------------------------------------------------------------
Italy--0.9%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali:
6%, 11/1/07EUR 455,000 472,382
8.50%, 1/1/04EUR 964,481 1,067,720
8.75%, 7/1/06EUR 766,330 913,142
10.50%, 4/1/05EUR 90,379 111,433
----------
2,564,677
- -----------------------------------------------------------------------------------------------------------
Ivory Coast--0.1%
Ivory Coast (Government of) Front Loaded Interest Reduction Bonds,
2%, 3/29/18(6) 524,000 96,940
Ivory Coast (Government of) Past Due Interest Bonds, 2%, 3/29/18(4)(6) 564,987 134,185
----------
231,125
- -----------------------------------------------------------------------------------------------------------
Japan--0.6%
Japan (Government of) Unsec. Bonds, Series 137, 6.50%, 3/20/01JPY 157,000,000 1,649,091
- -----------------------------------------------------------------------------------------------------------
Jordan--0.0%
Hashemite (Kingdom of Jordan) Bonds, Series DEF, 5.50%, 12/23/23(6) 60,000 40,650
- -----------------------------------------------------------------------------------------------------------
Hashemite (Kingdom of Jordan) Disc. Bonds, 7%, 12/23/23(6) 116,000 81,780
----------
122,430
- -----------------------------------------------------------------------------------------------------------
Mexico--1.7%
United Mexican States Bonds:
6.63%, 12/31/19FRF 7,500,000 980,959
11.375%, 9/15/16 1,070,000 1,213,487
11.50%, 5/15/26 175,000 209,125
- -----------------------------------------------------------------------------------------------------------
United Mexican States Collateralized Fixed Rate Par Bonds:
Series W-A, 6.25%, 12/31/19 950,000 750,500
Series W-B, 6.25%, 12/31/19 1,900,000 1,501,000
- -----------------------------------------------------------------------------------------------------------
United Mexican States Disc. Bonds, Series C, 6.836%, 12/31/19(6) 250,000 234,687
----------
4,889,758
- -----------------------------------------------------------------------------------------------------------
Nigeria--0.1%
Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 553,759 349,906
- -----------------------------------------------------------------------------------------------------------
Norway--0.8%
Norway (Government of) Bonds, 9.50%, 10/31/02NOK 17,040,000 2,313,165
- -----------------------------------------------------------------------------------------------------------
Panama--0.4%
Panama (Republic of) Interest Reduction Bonds, 4.25%, 7/17/14(6) 843,000 661,755
- -----------------------------------------------------------------------------------------------------------
Panama (Republic of) Past Due Interest Debs., 5.819%, 7/17/16(6) 588,447 465,609
----------
1,127,364
</TABLE>
Oppenheimer Strategic Bond Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Peru--0.7%
Peru (Republic of) Past Due Interest Bonds, Series 20 yr., 4.50%, 3/7/17(6) $ 600,000 $ 415,500
- ------------------------------------------------------------------------------------------------------------
Peru (Republic of) Sr. Nts., Zero Coupon, 4.52%, 2/28/16(9) 3,168,653 1,500,991
-----------
1,916,491
- ------------------------------------------------------------------------------------------------------------
Poland--1.0%
Poland (Republic of) Bonds:
12%, 6/12/01PLZ 4,016,000 936,743
Series 1000, 13%, 10/12/00PLZ 4,111,000 968,844
Series 1003, 12%, 10/12/03PLZ 1,010,000 240,359
Series 2 yr., 14%, 2/12/00PLZ 1,000,000 239,952
- ------------------------------------------------------------------------------------------------------------
Poland (Republic of) Past Due Interest Bonds, 6%, 10/27/14(6) 370,000 328,375
-----------
2,714,273
- ------------------------------------------------------------------------------------------------------------
Russia--1.1%
Russia (Government of) Debs., 6.906%, 12/15/15(11)(15) 24,195 4,385
- ------------------------------------------------------------------------------------------------------------
Russia (Government of) Principal Loan Debs., Series 24 yr., 6.906%,
12/15/20(11)(15) 5,190,000 841,753
- ------------------------------------------------------------------------------------------------------------
Russia (Government of) Sr. Unsec. Unsub. Nts., 11.75%, 6/10/03 849,000 623,750
- ------------------------------------------------------------------------------------------------------------
Russia (Government of) Unsec. Bonds, 11%, 7/24/18 593,000 357,283
- ------------------------------------------------------------------------------------------------------------
Russian Federation Unsec. Unsub. Nts.:
8.75%, 7/24/05 1,180,000 734,550
12.75%, 6/24/28 670,000 450,274
-----------
3,011,995
- ------------------------------------------------------------------------------------------------------------
South Africa--0.5%
South Africa (Republic of) Bonds, Series 153, 13%, 8/31/10ZAR 8,242,000 1,290,887
- ------------------------------------------------------------------------------------------------------------
Spain--0.2%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado:
4.50%, 7/30/04EUR 390,786 385,917
6%, 1/31/08EUR 73,323 76,111
-----------
462,028
- ------------------------------------------------------------------------------------------------------------
Turkey--0.3%
Turkey (Republic of) Sr. Unsub. Bonds, 12.375%, 6/15/09 800,000 860,000
- ------------------------------------------------------------------------------------------------------------
Venezuela--0.9%
Venezuela (Republic of) Bonds, 9.25%, 9/15/27 1,559,000 1,018,651
- ------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Disc. Bonds, Series DL, 7%, 12/18/07(6) 1,481,142 1,170,103
- ------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Front-Loaded Interest Reduction Bonds,
Series B, 6.875%, 3/31/07(6) 42,857 33,643
- ------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) New Money Bonds, Series A, 7.125%, 12/18/05(6) 352,941 276,618
- ------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Unsec. Bonds, 13.625%, 8/15/18 150,000 135,375
-----------
2,634,390
- ------------------------------------------------------------------------------------------------------------
Vietnam--0.0%
Vietnam (Government of) Bonds, 3%, 3/12/28(5)(6) 54,000 18,225
-----------
Total Foreign Government Obligations (Cost $46,664,753) 46,012,306
============================================================================================================
Loan Participations--1.0%
- ------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan Participation Nts.,
Tranche 1, 6.812%, 9/4/06(5)(6) 72,000 55,890
- ------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Trust III Nts., Tranche 3:
1.063%, 3/4/10(5)(6)JPY 76,905,000 387,421
6.812%, 3/4/10(5)(6) 457,000 328,469
- ------------------------------------------------------------------------------------------------------------
Central Bank of Indonesia Gtd. Nts., Series 4, 8.625%, 8/25/02(5)(6) 300,000 265,500
</TABLE>
8 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
==========================================================================================================
Loan Participations (continued)
- ----------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement:
Tranche A, 2%, 1/1/09(5)(6) $ 539,523 $ 488,269
Tranche B, 6.844%, 1/1/09(5)(6) 160,000 153,200
- ----------------------------------------------------------------------------------------------------------
PT Bank Ekspor Impor Indonesia Nts., Series 4 yr., 9.406%, 8/25/02(5)(6) 300,000 265,500
- ----------------------------------------------------------------------------------------------------------
PT Lippo Bank Nts., 9.406%, 8/25/02(5)(6) 250,000 221,250
- ----------------------------------------------------------------------------------------------------------
Shoshone Partners Loan Trust Sr. Nts., 7.955%, 4/28/02 (representing a
basket of reference loans and a total return swap between
Chase Manhattan Bank and the Trust)(5)(6) 750,000 736,900
----------
Total Loan Participations (Cost $2,579,408) 2,902,399
==========================================================================================================
Corporate Bonds and Notes--39.0%
- ----------------------------------------------------------------------------------------------------------
Aerospace/Defense--1.0%
Amtran, Inc.:
9.625% Nts., 12/15/05 100,000 96,500
10.50% Sr. Nts., 8/1/04 150,000 150,750
- ----------------------------------------------------------------------------------------------------------
Atlas Air, Inc.:
9.25% Sr. Nts., 4/15/08 300,000 288,000
9.375% Sr. Unsec. Nts., 11/15/06 300,000 291,000
10.75% Sr. Nts., 8/1/05 125,000 128,125
- ----------------------------------------------------------------------------------------------------------
BE Aerospace, Inc., 9.50% Sr. Unsec. Sub. Nts., 11/1/08 300,000 283,500
Constellation Finance LLC, 9.80% Airline Receivable Asset-Backed Nts.,
Series 1997-1, 1/1/01(5) 175,000 162,750
- ----------------------------------------------------------------------------------------------------------
Fairchild Corp., 10.75% Sr. Unsec. Sub. Nts., 4/15/09 750,000 640,312
- ----------------------------------------------------------------------------------------------------------
Greater Toronto Airports Authority, 5.40% Debs., 12/3/02CAD 240,000 161,911
- ----------------------------------------------------------------------------------------------------------
Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts.,
Series 1997-A, Cl. B, 6/15/04(5) 82,427 84,233
- ----------------------------------------------------------------------------------------------------------
Pentacon, Inc., 12.25% Sr. Unsec. Nts., Series B, 4/1/09 500,000 452,500
- ----------------------------------------------------------------------------------------------------------
SC International Services, Inc., 9.25% Sr. Sub. Nts., Series B, 9/1/07 200,000 189,000
----------
2,928,581
- ----------------------------------------------------------------------------------------------------------
Chemicals--1.4%
ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07 150,000 38,250
- ----------------------------------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc:
10.125% Sr. Unsec. Sub. Nts., 7/1/09(4) 600,000 624,000
10.125% Sr. Unsec. Sub. Nts., 7/1/09EUR 300,000 320,790
Zero Coupon Sr. Disc. Nts., 13.09%, 12/31/09(4)(9) 850,000 260,312
- ----------------------------------------------------------------------------------------------------------
Lyondell Chemical Co., 10.875% Sr. Sub. Nts., 5/1/09 1,000,000 1,035,000
- ----------------------------------------------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 140,000 145,600
- ----------------------------------------------------------------------------------------------------------
PCI Chemicals Canada, Inc., 9.25% Sec. Nts., 10/15/07 175,000 135,625
- ----------------------------------------------------------------------------------------------------------
Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07 150,000 119,250
- ----------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Sub. Nts., 7/1/07 100,000 97,500
- ----------------------------------------------------------------------------------------------------------
Polytama International Finance BV, 11.25% Sec. Nts., 6/15/07(5) 136,248 20,097
- ----------------------------------------------------------------------------------------------------------
Reliance Industries Ltd., 10.50% Bonds, 8/6/46 250,000 236,736
- ----------------------------------------------------------------------------------------------------------
Sovereign Specialty Chemicals, Inc., 9.50% Sr. Unsec. Sub. Nts.,
Series B, 8/1/07 425,000 429,250
- ----------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc.:
11.25% Sr. Sub. Nts., 4/1/07 50,000 37,000
11.75% Sr. Unsec. Sub. Nts., 8/15/06 190,000 143,450
12.375% Sr. Sec. Nts., Series B, 7/15/06 400,000 416,000
----------
4,058,860
</TABLE>
Oppenheimer Strategic Bond Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Consumer Durables--0.1%
Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07 $200,000 $ 147,000
- ------------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc., 12% Unsec. Nts., 7/15/05(5) 55,500 30,525
- ------------------------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(5) 100,000 109,658
-----------
287,183
- ------------------------------------------------------------------------------------------------------------
Consumer Non-Durables--0.5%
AKI Holdings, Inc.:
0%/13.50% Sr. Disc. Debs., 7/1/09(10) 150,000 71,625
10.50% Sr. Unsec. Nts., 7/1/08 100,000 89,500
- ------------------------------------------------------------------------------------------------------------
Bell Sports, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 8/15/08 405,000 407,025
- ------------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., 8.875% Sr. Unsec. Nts., 4/15/06(11) 350,000 19,250
- ------------------------------------------------------------------------------------------------------------
Globe Manufacturing Corp., 10% Sr. Unsec. Sub. Nts., Series B, 8/1/08 315,000 152,775
- ------------------------------------------------------------------------------------------------------------
Indorayon International Finance Co. BV, 10% Gtd. Unsec. Unsub. Nts.,
3/29/01(5)(11)(15) 100,000 25,000
- ------------------------------------------------------------------------------------------------------------
Phillips-Van Heusen Corp., 9.50% Sr. Unsec. Sub. Nts., 5/1/08 200,000 187,000
- ------------------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp.:
8.625% Sr. Unsec. Sub. Nts., 2/1/08 250,000 126,250
9% Sr. Nts., 11/1/06 135,000 101,925
- ------------------------------------------------------------------------------------------------------------
Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts., 7/1/08(5) 70,000 24,850
- ------------------------------------------------------------------------------------------------------------
William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 135,000 122,175
- ------------------------------------------------------------------------------------------------------------
Williams (J. B.) Holdings, Inc., 12% Sr. Nts., 3/1/04 100,000 108,500
-----------
1,435,875
- ------------------------------------------------------------------------------------------------------------
Energy--1.8%
Chesapeake Energy Corp.:
9.125% Sr. Unsec. Nts., 4/15/06 100,000 91,750
9.625% Sr. Unsec. Nts., Series B, 5/1/05 400,000 379,000
- ------------------------------------------------------------------------------------------------------------
Clark Refinancing & Marketing, Inc., 8.875% Sr. Sub. Nts., 11/15/07 245,000 128,625
- ------------------------------------------------------------------------------------------------------------
Clark USA, Inc., 10.875% Sr. Nts., Series B, 12/1/05 125,000 50,625
- ------------------------------------------------------------------------------------------------------------
Denbury Management, Inc., 9% Sr. Sub. Nts., 3/1/08 400,000 366,000
- ------------------------------------------------------------------------------------------------------------
Empresa Electric Del Norte, 10.50% Sr. Debs., 6/15/05(5) 100,000 47,093
- ------------------------------------------------------------------------------------------------------------
Forcenergy, Inc., 9.50% Sr. Sub. Nts., 11/1/06(11)(15) 100,000 81,875
- ------------------------------------------------------------------------------------------------------------
Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 250,000 247,500
- ------------------------------------------------------------------------------------------------------------
Gothic Energy Corp., 0%/14.125% Sr. Disc. Nts., 5/1/06(10)(11) 275,000 96,250
- ------------------------------------------------------------------------------------------------------------
Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(4) 200,000 171,000
- ------------------------------------------------------------------------------------------------------------
Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08 560,000 355,600
- ------------------------------------------------------------------------------------------------------------
Leviathan Gas Pipeline Partners, LP/Leviathan Finance Corp., 10.375%
Sr. Unsec. Sub. Nts., Series B, 6/1/09 400,000 414,000
- ------------------------------------------------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 250,000 208,750
- ------------------------------------------------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub. Nts., Series B, 5/15/07 370,000 353,350
- ------------------------------------------------------------------------------------------------------------
R&B Falcon Corp., 12.25% Sr. Unsec. Nts., 3/15/06 300,000 328,500
- ------------------------------------------------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 630,000 292,950
- ------------------------------------------------------------------------------------------------------------
RBF Finance Co., 11% Sr. Sec. Nts., 3/15/06 375,000 401,250
- ------------------------------------------------------------------------------------------------------------
Statia Terminals International/Statia Terminals (Canada), Inc.,
11.75% First Mtg. Nts., Series B, 11/15/03 175,000 179,156
- ------------------------------------------------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07 270,000 264,600
</TABLE>
10 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Energy (continued)
Universal Compression Holdings, Inc.:
0%/9.875% Sr. Disc. Nts., 2/15/08(10) $ 500,000 $ 312,500
0%/11.375% Sr. Disc. Nts., 2/15/09(10) 400,000 214,000
----------
4,984,374
- -------------------------------------------------------------------------------------------------------------
Financial--3.2%
AB Spintab, 5.50% Bonds, Series 169, 9/17/03SEK 3,200,000 372,103
- -------------------------------------------------------------------------------------------------------------
Allgemeine Hypobk AG, 5% Sec. Nts., Series 501, 9/2/09EUR 1,600,000 1,521,193
- -------------------------------------------------------------------------------------------------------------
AMRESCO, Inc.:
9.875% Sr. Sub. Nts., Series 98-A, 3/15/05 300,000 190,500
10% Sr. Sub. Nts., Series 97-A, 3/15/04 100,000 63,500
- -------------------------------------------------------------------------------------------------------------
ASAT Finance LLC, Units (each unit consists of $1,000 principal amount of
12.50% sr. nts., 11/1/06 and one warrant to purchase shares
of common stock)(4)(12) 250,000 270,000
- -------------------------------------------------------------------------------------------------------------
Bakrie Investindo, Zero Coupon Promissory Nts., 7/10/98 (5)(11)(15)IDR 1,000,000,000 21,467
- -------------------------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 7,000 5,565
- -------------------------------------------------------------------------------------------------------------
Bayerische Vereinsbank AG, 5% Sec. Nts., Series 661, 7/28/04EUR 1,023,288 1,026,233
- -------------------------------------------------------------------------------------------------------------
DePfa Pfandbriefbank AG (DePfa-Bank), 5.50% Sec. Nts., 1/15/00EUR 565,000 558,267
- -------------------------------------------------------------------------------------------------------------
Dresdner Funding Trust II, 5.79% Sub. Nts., 6/30/11(4)EUR 550,000 499,856
- -------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 5.625%, 6/10/03GBP 115,000 178,770
- -------------------------------------------------------------------------------------------------------------
Hypothekenbk in Essen, 3.50% Sec. Debs., 3/17/04EUR 2,915,000 2,759,836
- -------------------------------------------------------------------------------------------------------------
IBJ Preferred Capital Co. (The) LLC, 8.79% Bonds, 12/29/49(4)(6) 400,000 371,446
- -------------------------------------------------------------------------------------------------------------
Local Financial Corp., 11% Sr. Nts., 9/8/04(4) 150,000 156,750
- -------------------------------------------------------------------------------------------------------------
Ocwen Capital Trust I, 10.875% Capital Nts., 8/1/27(5) 150,000 96,750
- -------------------------------------------------------------------------------------------------------------
Ocwen Financial Corp., 11.875% Nts., 10/1/03 150,000 141,750
- -------------------------------------------------------------------------------------------------------------
Ongko International Finance Co. BV, 10.50% Gtd. Nts., 3/29/04(4)(11)(15) 90,000 3,150
- -------------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa:
11% Nts., 6/18/03(5)(11)(15) 100,000 13,000
24% Nts., 6/19/03 (11)(15)IDR 164,300,000 3,057
- -------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08 380,000 349,125
- -------------------------------------------------------------------------------------------------------------
SBS Agro Finance BV, 10.25% Bonds, 7/21/00(5)(11)(15) 339,000 19,492
- -------------------------------------------------------------------------------------------------------------
Southern Pacific Funding Corp., 11.50% Sr. Nts., 11/1/04(11)(15) 80,000 38,000
- -------------------------------------------------------------------------------------------------------------
Sovereign Bankcorp, 10.50% Sr. Unsec. Nts., 11/15/06 250,000 256,250
- -------------------------------------------------------------------------------------------------------------
Veritas Capital Trust, 10% Nts., 1/1/28 100,000 75,250
- -------------------------------------------------------------------------------------------------------------
Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 129,000 125,775
----------
9,117,085
- -------------------------------------------------------------------------------------------------------------
Food & Drug--0.4%
AmeriKing, Inc., 10.75% Sr. Nts., 12/1/06 125,000 115,625
- -------------------------------------------------------------------------------------------------------------
Family Restaurants, Inc., 9.75% Sr. Nts., 2/1/02 500,000 237,500
- -------------------------------------------------------------------------------------------------------------
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., Series B, 7/31/07 560,000 508,200
- -------------------------------------------------------------------------------------------------------------
Pathmark Stores, Inc.:
10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03 260,000 32,500
12.625% Sub. Nts., 6/15/02 150,000 50,250
- -------------------------------------------------------------------------------------------------------------
Shoppers Food Warehouse Corp., 9.75% Sr. Nts., 6/15/04 155,000 165,075
----------
1,109,150
</TABLE>
Oppenheimer Strategic Bond Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Food/Tobacco--0.4%
Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 $150,000 $ 143,625
- -----------------------------------------------------------------------------------------------------------
Del Monte Foods Co., 0%/12.50% Sr. Disc. Nts., Series B, 12/15/07(10) 71,000 55,025
- -----------------------------------------------------------------------------------------------------------
Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05 200,000 184,000
- -----------------------------------------------------------------------------------------------------------
Purina Mills, Inc., 9% Sr. Unsec. Sub. Nts., 3/15/10(11) 200,000 51,000
- -----------------------------------------------------------------------------------------------------------
SmithField Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08 400,000 362,000
- -----------------------------------------------------------------------------------------------------------
Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07 200,000 163,000
- -----------------------------------------------------------------------------------------------------------
Triarc Consumer Products Group LLC, 10.25% Sr. Sub. Nts., 2/15/09(4) 200,000 195,000
----------
1,153,650
- -----------------------------------------------------------------------------------------------------------
Forest Products/Containers--1.3%
American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05(11) 150,000 17,250
- -----------------------------------------------------------------------------------------------------------
Ball Corp.:
7.75% Sr. Unsec. Nts., 8/1/06 125,000 122,500
8.25% Sr. Unsec. Sub. Nts., 8/1/08 125,000 120,625
- -----------------------------------------------------------------------------------------------------------
Consumers International, Inc., 10.25% Sr. Sec. Nts., 4/1/05 250,000 196,250
- -----------------------------------------------------------------------------------------------------------
Fletcher Challenge Finance U.S.A., Inc., 8.05% Debs., 6/15/03NZD 80,000 41,634
- -----------------------------------------------------------------------------------------------------------
Gaylord Container Corp., 9.75% Sr. Nts., 6/15/07 200,000 189,500
- -----------------------------------------------------------------------------------------------------------
Packaging Corp. of America, 9.625% Sr. Unsec. Sub. Nts., 4/1/09 750,000 769,687
- -----------------------------------------------------------------------------------------------------------
Repap New Brunswick, Inc., 10.625% Second Priority Sr. Sec. Nts., 4/15/05 500,000 467,500
- -----------------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07 750,000 776,250
10.875% Sr. Sub. Nts., 4/1/08 250,000 247,500
- -----------------------------------------------------------------------------------------------------------
SD Warren Co.:
12% Sr. Sub. Nts., Series B, 12/15/04 200,000 209,500
14% Unsec. Nts., 12/15/06(13) 417,149 469,293
- -----------------------------------------------------------------------------------------------------------
U.S. Timberlands Co. LP, 9.625% Sr. Nts., 11/15/07 150,000 139,312
----------
3,766,801
- -----------------------------------------------------------------------------------------------------------
Gaming/Leisure--2.0%
AP Holdings, Inc., 0%/11.25% Sr. Disc. Nts., 3/15/08(10) 50,000 20,250
- -----------------------------------------------------------------------------------------------------------
Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 100,000 70,500
- -----------------------------------------------------------------------------------------------------------
Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 275,000 254,719
- -----------------------------------------------------------------------------------------------------------
Casino Magic of Louisiana Corp., 13% First Mtg. Nts., Series B, 8/15/03 120,000 136,050
- -----------------------------------------------------------------------------------------------------------
Empress Entertainment, Inc., 8.125% Sr. Sub. Nts., 7/1/06 400,000 406,000
- -----------------------------------------------------------------------------------------------------------
Florida Panthers Holdings, Inc., 9.875% Sr. Sub. Nts., 4/15/09 450,000 438,750
- -----------------------------------------------------------------------------------------------------------
Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05 100,000 71,500
- -----------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 8.45% Sr. Nts., Series C, 12/1/08 500,000 465,000
- -----------------------------------------------------------------------------------------------------------
Hollywood Casino Corp., 11.25% Sr. Sec. Nts., 5/1/07 250,000 262,500
- -----------------------------------------------------------------------------------------------------------
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07 425,000 425,000
- -----------------------------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08 350,000 344,750
- -----------------------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 8.75% Sr. Unsec. Nts., 4/15/09 350,000 323,750
- -----------------------------------------------------------------------------------------------------------
Jupiters Ltd., 8.50% Sr. Unsec. Nts., 3/1/06 400,000 384,000
- -----------------------------------------------------------------------------------------------------------
Meristar Hospitality Corp., 8.75% Sr. Unsec. Sub. Nts., 8/15/07 325,000 300,625
- -----------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
8.125% Sr. Nts., 1/1/06 300,000 292,500
8.75% Sr. Unsec. Sub. Nts., 1/1/09 700,000 693,000
</TABLE>
12 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
Gaming/Leisure (continued)
Premier Cruise Ltd., 11% Sr. Nts., 3/15/08(4)(11)(15) $ 250,000 $ 60,000
- -------------------------------------------------------------------------------------------------------
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts., 4/1/08(10) 200,000 139,000
9.25% Sr. Nts., 4/1/06 100,000 98,750
9.75% Sr. Nts., 6/15/07 250,000 250,000
- -------------------------------------------------------------------------------------------------------
Six Flags Entertainment Corp., 8.875% Sr. Nts., 4/1/06 200,000 196,250
----------
5,632,894
- -------------------------------------------------------------------------------------------------------
Healthcare--1.1%
Charles River Labs ONC, Units (each unit consists of $1,000 principal
amount of 13.50% sr. sub. nts., 10/1/09 and one warrant to purchase
3.942 shares of common stock)(4)(12) 350,000 365,750
- -------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 900,000 832,500
- -------------------------------------------------------------------------------------------------------
ICN Pharmaceutical, Inc.:
8.75% Sr. Nts., 11/15/08(4) 200,000 192,000
8.75% Sr. Nts., 11/15/08(4) 350,000 336,000
- -------------------------------------------------------------------------------------------------------
Kinetic Concepts, Inc., 9.625% Sr. Unsec. Sub. Nts., Series B, 11/1/07 250,000 186,250
- -------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 9% Sr. Sub. Nts., 2/15/08 250,000 203,750
- -------------------------------------------------------------------------------------------------------
Oxford Health Plans, Inc., 11% Sr. Unsec. Nts., 5/15/05 150,000 144,750
- -------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp., 8.625% Sr. Sub. Nts., 1/15/07 600,000 582,000
- -------------------------------------------------------------------------------------------------------
Unilab Finance Corp., 12.75% Sr. Sub. Nts., 10/1/09(4) 300,000 312,000
----------
3,155,000
- -------------------------------------------------------------------------------------------------------
Housing--1.0%
Building Materials Corp. of America, 8.625% Sr. Nts., Series B, 12/15/06 50,000 47,750
- -------------------------------------------------------------------------------------------------------
CB Richard Ellis Services, Inc., 8.875% Sr. Unsec. Sub. Nts., 6/1/06 250,000 223,750
- -------------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 8% Sr. Nts., 2/1/09 400,000 368,000
- -------------------------------------------------------------------------------------------------------
Del Webb Corp., 10.25% Sr. Unsec. Sub. Nts., 2/15/10 300,000 293,250
- -------------------------------------------------------------------------------------------------------
Falcon Building Products, Inc., 9.50% Sr. Sub. Nts., 6/15/07 100,000 97,500
- -------------------------------------------------------------------------------------------------------
Kaufman & Broad Home Corp., 7.75% Sr. Nts., 10/15/04 300,000 283,500
- -------------------------------------------------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Nts., Series B, 9/1/07 650,000 632,125
9.25% Sr. Nts., Series B, 3/15/07 150,000 147,000
- -------------------------------------------------------------------------------------------------------
Panolam Industries International, Inc., 11.50% Sr. Sub. Nts., 2/15/09(4) 600,000 613,500
----------
2,706,375
- -------------------------------------------------------------------------------------------------------
Information Technology--1.2%
Amkor Technologies, Inc., 9.25% Sr. Nts., 5/1/06(4) 700,000 686,000
- -------------------------------------------------------------------------------------------------------
Details, Inc., 10% Sr. Sub. Nts., Series B, 11/15/05 200,000 185,000
- -------------------------------------------------------------------------------------------------------
DII Group, Inc., 8.50% Sr. Sub. Nts., 9/15/07 20,000 20,000
- -------------------------------------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 350,000 309,312
- -------------------------------------------------------------------------------------------------------
Fairchild Semiconductor International, Inc., 10.375% Sr. Unsec. Nts., 10/1/07 500,000 516,250
- -------------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/08 505,000 486,694
- -------------------------------------------------------------------------------------------------------
Micron Technology, Inc., 6.50% Sub. Nts., 9/30/05(5) 1,000,000 800,000
- -------------------------------------------------------------------------------------------------------
Unisys Corp., 11.75% Sr. Nts., 10/15/04 150,000 164,625
- -------------------------------------------------------------------------------------------------------
Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07 175,000 144,594
----------
3,312,475
</TABLE>
Oppenheimer Strategic Bond Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Manufacturing--1.0%
Applied Power, Inc., 8.75% Sr. Sub. Nts., 4/1/09 $ 150,000 $ 147,562
- ------------------------------------------------------------------------------------------------------
Axia, Inc., 10.75% Sr. Sub. Nts., 7/15/08 125,000 115,156
- ------------------------------------------------------------------------------------------------------
Blount, Inc., 13% Sr. Sub. Nts., 8/1/09(4) 300,000 318,000
- ------------------------------------------------------------------------------------------------------
Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07 150,000 62,250
- ------------------------------------------------------------------------------------------------------
Communications & Power Industries, Inc., 12% Sr. Sub. Nts., Series B, 8/1/05 250,000 201,250
- ------------------------------------------------------------------------------------------------------
Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08 300,000 262,500
- ------------------------------------------------------------------------------------------------------
Grove Worldwide LLC, 9.25% Sr. Sub. Nts., 5/1/08 250,000 71,250
- ------------------------------------------------------------------------------------------------------
Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07 150,000 129,375
- ------------------------------------------------------------------------------------------------------
Insilco Corp., 12% Sr. Sub. Nts., 8/15/07 270,000 267,300
- ------------------------------------------------------------------------------------------------------
International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05 125,000 129,687
- ------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 8.75% Sr. Sub. Nts., 9/30/09 150,000 143,625
- ------------------------------------------------------------------------------------------------------
Jordan Industries, Inc., 10.375% Sr. Unsec. Nts., Series D, 8/1/07 250,000 251,250
- ------------------------------------------------------------------------------------------------------
Moll Industries, Inc., 10.50% Sr. Unsec. Sub. Nts., 7/1/08 200,000 81,000
- ------------------------------------------------------------------------------------------------------
Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07 540,000 491,400
- ------------------------------------------------------------------------------------------------------
Terex Corp., 8.875% Sr. Unsec. Sub. Nts., 4/1/08 150,000 142,500
- ------------------------------------------------------------------------------------------------------
Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03 50,000 49,312
----------
2,863,417
- ------------------------------------------------------------------------------------------------------
Media/Entertainment: Broadcasting--1.3%
Azteca Holdings SA, 11% Sr. Sec. Nts., 6/15/02 155,000 139,887
- ------------------------------------------------------------------------------------------------------
Chancellor Media Corp.:
8.125% Sr. Sub. Nts., Series B, 12/15/07 200,000 200,000
8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07 400,000 405,000
10.50% Sr. Sub. Nts., Series B, 1/15/07 90,000 98,100
- ------------------------------------------------------------------------------------------------------
Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 600,000 573,000
- ------------------------------------------------------------------------------------------------------
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(6) 100,000 107,000
- ------------------------------------------------------------------------------------------------------
RCN Corp., 10.125% Sr. Unsec. Nts., 1/15/10 800,000 800,000
- ------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8.75% Sr. Sub. Nts., 12/15/07 150,000 139,125
9% Sr. Unsec. Sub. Nts., 7/15/07 210,000 197,925
- ------------------------------------------------------------------------------------------------------
Spanish Broadcasting System, Inc., 9.625% Sr. Sub. Nts., 11/1/09 400,000 404,000
- ------------------------------------------------------------------------------------------------------
TV Azteca SA de CV:
10.125% Sr. Nts., Series A, 2/15/04 100,000 89,500
10.50% Sr. Nts., Series B, 2/15/07 150,000 130,500
- ------------------------------------------------------------------------------------------------------
Young Broadcasting, Inc.:
8.75% Sr. Sub. Debs., 6/15/07 275,000 261,937
9% Sr. Sub. Nts., Series B, 1/15/06(15) 100,000 96,750
----------
3,741,999
</TABLE>
14 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Media/Entertainment: Cable/Wireless Video--2.2%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 $ 350,000 $ 315,875
8.375% Sr. Nts., Series B, 2/1/08 100,000 93,250
9.25% Sr. Nts., 10/1/02 385,000 385,000
9.375% Sr. Nts., 11/15/09 500,000 492,500
10.50% Sr. Unsec. Nts., Series B, 7/15/04 70,000 72,975
- ----------------------------------------------------------------------------------------------------------
Bresnan Communications, Inc., 0%/9.25% Sr. Disc. Nts., 2/1/09(10) 250,000 173,750
- ----------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication Holdings Capital Corp.:
0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(10) 1,700,000 1,005,125
8.25% Sr. Unsec. Nts., 4/1/07 400,000 371,000
- ----------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 9.875% Sr. Sub. Nts., 5/15/06 250,000 265,000
- ----------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09 940,000 949,400
- ----------------------------------------------------------------------------------------------------------
EchoStar I, 8.25% Bonds, 2/26/01(5) 62,802 62,802
- ----------------------------------------------------------------------------------------------------------
EchoStar II, 8.25% Sinking Fund Bonds, 11/9/01(5) 78,168 78,169
- ----------------------------------------------------------------------------------------------------------
Falcon Holding Group LP:
0%/9.285% Sr. Disc. Debs., Series B, 4/15/10(10) 350,000 263,812
8.375% Sr. Unsec. Debs., Series B, 4/15/10 200,000 202,750
- ----------------------------------------------------------------------------------------------------------
Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts., 10/1/09(4) 400,000 415,000
- ----------------------------------------------------------------------------------------------------------
NTL Communications Corp., 9.875% Sr. Nts., 11/15/09(4)EUR 200,000 202,790
- ----------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec. Debs., 12/1/07 200,000 214,250
- ----------------------------------------------------------------------------------------------------------
Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07CAD 400,000 278,450
- ----------------------------------------------------------------------------------------------------------
United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts.,
Series B, 2/15/08(10) 770,000 496,650
----------
6,338,548
- ----------------------------------------------------------------------------------------------------------
Media/Entertainment: Diversified Media--1.4%
AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub. Nts., 2/1/11 700,000 623,000
- ----------------------------------------------------------------------------------------------------------
IPC Magazines Group plc, 9.625% Bonds, 3/15/08(5)GBP 300,000 295,637
- ----------------------------------------------------------------------------------------------------------
Lamar Advertising Co., 8.625% Sr. Sub. Nts., 9/15/07(5) 150,000 147,750
- ----------------------------------------------------------------------------------------------------------
Lamar Media Corp., 9.625% Sr. Unsec. Sub. Nts., 12/1/06 50,000 51,250
- ----------------------------------------------------------------------------------------------------------
Metromedia International Group, Inc., 0%/10.50% Sr. Unsec. Disc. Nts.,
9/30/07(5)(10) 436,950 207,551
- ----------------------------------------------------------------------------------------------------------
Premier Graphics, Inc., 11.50% Sr. Unsec. Nts., 12/1/05 200,000 141,000
- ----------------------------------------------------------------------------------------------------------
Regal Cinemas, Inc.:
8.875% Sr. Unsec. Sub. Nts., 12/15/10 250,000 177,500
9.50% Sr. Unsec. Sub. Nts., 6/1/08 500,000 380,000
- ----------------------------------------------------------------------------------------------------------
SFX Entertainment, Inc.:
9.125% Sr. Unsec. Sub. Nts., 12/1/08 200,000 191,000
9.125% Sr. Unsec. Sub. Nts., Series B, 2/1/08 500,000 473,750
- ----------------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 8.375% Sr. Debs., 3/15/23 300,000 313,677
- ----------------------------------------------------------------------------------------------------------
WRC Media Corp., Units (each unit consists of $1,000 principal amount
of 12.75% sr. sub. nts., 11/15/09 and one warrant to purchase 1.353
shares of common stock)(4)(12) 800,000 798,000
----------
3,800,115
</TABLE>
Oppenheimer Strategic Bond Fund/VA 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications--7.9%
Adelphia Business Solutions, Inc., 12% Sr. Sub. Nts., 11/1/07 $ 400,000 $428,000
- ---------------------------------------------------------------------------------------------------------
Amazon.com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08(10) 700,000 448,000
- ---------------------------------------------------------------------------------------------------------
COLT Telecom Group plc:
0%/12% Sr. Unsec. Disc. Nts., 12/15/06(10) 200,000 173,000
7.625% Bonds, 7/31/08DEM 500,000 257,604
8.875% Sr. Nts., 11/30/07DEM 100,000 53,772
10.125% Sr. Nts., 11/30/07GBP 170,000 288,367
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)(10)(12) 200,000 203,000
- ---------------------------------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd., 0%/11.20% Sr. Disc. Debs., 11/15/07(10) 250,000 239,375
- ---------------------------------------------------------------------------------------------------------
Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07 80,000 84,600
- ---------------------------------------------------------------------------------------------------------
Convergent Communications, Inc., 13% Sr. Nts., 4/1/08 50,000 35,375
- ---------------------------------------------------------------------------------------------------------
Covad Communications Group, Inc., 0%/13.50% Sr. Disc. Nts., 3/15/08(10) 700,000 444,500
- ---------------------------------------------------------------------------------------------------------
Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts., 12/15/05(10) 825,000 783,750
- ---------------------------------------------------------------------------------------------------------
Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08 50,000 49,750
- ---------------------------------------------------------------------------------------------------------
Equinix, Inc., Units (each unit consists of $1,000 principal amount of
13% sr. nts., 12/1/07 and one warrant to purchase 11.255
shares of common stock)(4)(12) 200,000 205,000
- ---------------------------------------------------------------------------------------------------------
Exodus Communications, Inc.:
10.75% Sr. Nts., 12/15/09(4) 850,000 869,125
11.25% Sr. Nts., 7/1/08 665,000 689,937
- ---------------------------------------------------------------------------------------------------------
FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08(10) 175,000 97,125
- ---------------------------------------------------------------------------------------------------------
Focal Communications Corp., 0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08(10) 250,000 163,750
- ---------------------------------------------------------------------------------------------------------
Global Crossing Ltd., 9.625% Sr. Nts., 5/15/08 510,000 512,550
- ---------------------------------------------------------------------------------------------------------
Global Telesystems Group, Inc., 10.50% Sr. Unsec. Bonds, 12/1/06(4)EUR 250,000 254,745
- ---------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(4)(10) 25,000 28,000
- ---------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc./GST Network Funding Corp., Inc., 0%/10.50%
Sr. Disc. Nts., 5/1/08(10) 125,000 60,937
- ---------------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Gtd. Sr. Disc. Nts., 12/15/05(10) 255,000 189,975
- ---------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 0%/12.50% Sr. Sec. Disc. Nts., 5/1/06(10) 195,000 146,737
- ---------------------------------------------------------------------------------------------------------
ICG Services, Inc., 0%/10% Sr. Exchangeable Unsec. Disc. Nts., 2/15/08(10) 115,000 61,237
- ---------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.:
8.50% Sr. Nts., Series B, 1/15/08 250,000 230,000
8.60% Sr. Unsec. Nts., Series B, 6/1/08 225,000 207,000
8.875% Sr. Nts., 11/1/07 365,000 341,275
- ---------------------------------------------------------------------------------------------------------
Jazztel plc, 13.25% Sr. Nts., 12/15/09(4)EUR 900,000 911,987
- ---------------------------------------------------------------------------------------------------------
KMC Telecom Holdings, Inc., 0%/12.50% Sr. Unsec. Disc. Nts., 2/15/08(10) 600,000 345,000
- ---------------------------------------------------------------------------------------------------------
Level 3 Communications, Inc.:
0%/10.50% Sr. Disc. Nts., 12/1/08(10) 1,000,000 610,000
9.125% Sr. Unsec. Nts., 5/1/08 250,000 236,875
- ---------------------------------------------------------------------------------------------------------
McLeodUSA, Inc.:
8.125% Sr. Unsec. Nts., 2/15/09 725,000 679,687
8.375% Sr. Nts., 3/15/08 513,000 487,350
9.25% Sr. Nts., 7/15/07 75,000 75,281
- ---------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Inc.:
10% Sr. Nts., 12/15/09 250,000 257,500
10% Sr. Unsec. Nts., Series B, 11/15/08 400,000 411,000
</TABLE>
16 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Media/Entertainment: Telecommunications (continued)
Netia Holdings BV:
0%/11% Sr. Disc. Nts., 11/1/07(10)DEM 400,000 $ 134,816
0%/11% Sr. Disc. Nts., Series B, 11/1/07(10)DEM 200,000 67,408
0%/11.25% Sr. Disc. Nts., Series B, 11/1/07(10) 100,000 65,250
10.25% Sr. Nts., Series B, 11/1/07 50,000 42,625
- ----------------------------------------------------------------------------------------------------------
Netia Holdings II BV, 13.50% Sr. Nts., 6/15/09(4)EUR 400,000 414,637
- ----------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc.:
9% Sr. Nts., 3/15/08 200,000 189,000
9.625% Sr. Nts., 10/1/07 350,000 343,000
10.75% Sr. Unsec. Nts., 11/15/08 300,000 310,500
10.75% Sr. Unsec. Nts., 6/1/09 310,000 320,075
- ----------------------------------------------------------------------------------------------------------
NTL Communications Corp., 0%/12.375% Sr. Unsec. Nts., Series B, 10/1/08(10) 85,000 60,563
- ----------------------------------------------------------------------------------------------------------
NTL, Inc.:
0%/9.75% Sr. Deferred Coupon Nts., Series B, 4/1/08(10) 300,000 208,500
0%/9.75% Sr. Nts., Series B, 4/15/09(10)GBP 775,000 723,820
0%/10.75% Sr. Unsec. Unsub. Nts., Series B, 4/1/08(10)GBP 115,000 123,035
7% Cv. Unsec. Sub. Nts., 12/15/08 100,000 264,500
10% Sr. Nts., Series B, 2/15/07 100,000 103,250
- ----------------------------------------------------------------------------------------------------------
Optel, Inc., 13% Sr. Nts., Series B, 2/15/05(11) 200,000 149,000
- ----------------------------------------------------------------------------------------------------------
PSINet, Inc.:
10% Sr. Unsec. Nts., Series B, 2/15/05(14) 700,000 695,625
10.50% Sr. Nts., 12/1/06(4)EUR 100,000 101,898
- ----------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc.:
0%/8.29% Sr. Unsec. Disc. Nts., Series B, 2/1/08(10) 365,000 283,788
0%/9.47% Sr. Disc. Nts., 10/15/07(10) 495,000 403,425
- ----------------------------------------------------------------------------------------------------------
RSL Communications plc:
0%/10% Bonds, 3/15/08(10)DEM 100,000 31,903
10.50% Gtd. Sr. Nts., 11/15/08 250,000 236,250
- ----------------------------------------------------------------------------------------------------------
Shaw Communications, Inc., 8.54% Debs., 9/30/27CAD 340,000 211,797
- ----------------------------------------------------------------------------------------------------------
Tele1 Europe BV, 11.875% Sr. Nts., 12/1/09(4)EUR 500,000 507,603
- ----------------------------------------------------------------------------------------------------------
Telewest Communications plc:
0%/9.875% Sr. Nts., 4/15/09(4)(10)GBP 300,000 307,753
0%/11% Sr. Disc. Debs., 10/1/07(10) 200,000 187,500
- ----------------------------------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 500,000 485,000
- ----------------------------------------------------------------------------------------------------------
Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08 100,000 103,500
- ----------------------------------------------------------------------------------------------------------
United Pan-Europe Communications NV:
0%/13.375% Sr. Disc. Nts., 11/1/09(4)(10) 500,000 282,500
10.875% Sr. Nts., 8/1/09EUR 750,000 765,178
10.875% Sr. Nts., 8/1/09 500,000 508,750
11.25% Sr. Nts., 11/1/09(4)EUR 250,000 257,261
- ----------------------------------------------------------------------------------------------------------
Verio, Inc.:
10.375% Sr. Unsec. Nts., 4/1/05 225,000 230,625
11.25% Sr. Unsec. Nts., 12/1/08 500,000 527,500
13.50% Sr. Unsec. Nts., 6/15/04 65,000 71,663
- ----------------------------------------------------------------------------------------------------------
Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08 500,000 498,750
- ----------------------------------------------------------------------------------------------------------
WAM!NET, Inc., 0%/13.25% Sr. Unsec. Disc. Nts., Series B, 3/1/05(10) 500,000 292,500
- ----------------------------------------------------------------------------------------------------------
Worldwide Fiber, Inc., 12% Sr. Nts., 8/1/09(4) 100,000 103,500
-----------
22,175,414
</TABLE>
Oppenheimer Strategic Bond Fund/VA 17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications--3.6%
Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07 $100,000 $ 79,625
- --------------------------------------------------------------------------------------------------
Celcaribe SA, 14.50% Sr. Sec. Nts., 3/15/04 150,000 125,250
- --------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/14% Sr. Disc. Nts., 10/1/07(10) 400,000 43,500
- --------------------------------------------------------------------------------------------------
Clearnet Communications, Inc., 0%/14.75% Sr. Disc. Nts., 12/15/05(10) 25,000 24,656
- --------------------------------------------------------------------------------------------------
Comunicacion Celular SA, 0%/14.125% Sr. Unsec. Deferred Bonds, 3/1/05(4)(10) 350,000 168,000
- --------------------------------------------------------------------------------------------------
Crown Castle International Corp.:
0%/10.375% Sr. Disc. Nts., 5/15/11(10) 500,000 315,000
0%/10.625% Sr. Unsec. Disc. Nts., 11/15/07(10) 500,000 378,125
- --------------------------------------------------------------------------------------------------
CTI Holdings SA, 0%/11.50% Sr. Deferred Coupon Nts., 4/15/08(10) 175,000 101,063
- --------------------------------------------------------------------------------------------------
Dobson Communications Corp., 11.75% Sr. Nts., 4/15/07 460,000 522,100
- --------------------------------------------------------------------------------------------------
Geotek Communications, Inc.:
0%/15% Sr. Sec. Disc. Nts., Series B, 7/15/05(10)(11)(15) 90,000 36,450
12% Cv. Sr. Sub. Nts., 2/15/01(11)(15) 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)(11)(12) 100,000 46,500
- --------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd., 9.50% Sr. Nts., 1/15/06 300,000 271,500
- --------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc.:
0%/11.125% Sr. Disc. Nts., Series B, 10/15/07(10)CAD 300,000 139,398
0%/14% Sr. Disc. Nts., Series B, 6/1/06(10) 300,000 266,250
- --------------------------------------------------------------------------------------------------
Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(10) 410,000 330,050
- --------------------------------------------------------------------------------------------------
Nextel Communications, Inc.:
0%/9.95% Sr. Disc. Nts., 2/15/08(10) 245,000 172,725
0%/10.65% Sr. Disc. Nts., 9/15/07(10) 800,000 600,000
9.75% Sr. Disc. Nts., 8/15/04 300,000 310,500
- --------------------------------------------------------------------------------------------------
Omnipoint Corp.:
11.50% Sr. Nts., 9/15/09(4) 735,000 793,800
11.625% Sr. Nts., 8/15/06 630,000 670,950
11.625% Sr. Nts., Series A, 8/15/06 400,000 426,000
- --------------------------------------------------------------------------------------------------
Orange plc:
8% Sr. Nts., 8/1/08 250,000 253,438
8.75% Sr. Unsec. Nts., 6/1/06 250,000 260,000
- --------------------------------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04 200,000 145,000
- --------------------------------------------------------------------------------------------------
Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(10) 550,000 255,750
- --------------------------------------------------------------------------------------------------
Pinnacle Holdings, Inc., 0%/10% Sr. Unsec. Disc. Nts., 3/15/08(10) 325,000 214,500
- --------------------------------------------------------------------------------------------------
Polska Telefoniz Cyfrowa International Financial II SA,
11.25% Sr. Sub. Nts., 12/1/09(4)EUR 200,000 203,796
- --------------------------------------------------------------------------------------------------
Price Communications Wireless, Inc.:
9.125% Sr. Sec. Nts., Series B, 12/15/06 250,000 254,375
11.75% Sr. Sub. Nts., 7/15/07 275,000 301,125
- --------------------------------------------------------------------------------------------------
PTC International Finance BV, 0%/10.75% Gtd. Sr. Unsec.
Sub. Bonds, 7/1/07(5)(10) 134,000 90,115
- --------------------------------------------------------------------------------------------------
Real Time Data Co., 11% Disc. Nts., 5/31/09(4)(13) 118,366 113,825
- --------------------------------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 300,000 308,250
- --------------------------------------------------------------------------------------------------
SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(10) 700,000 416,500
</TABLE>
18 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Media/Entertainment: Wireless Communications (continued)
Spectrasite Holdings, Inc., 0%/12% Sr. Disc. Nts., 7/15/08(10) $500,000 $ 301,250
- -----------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp.,
0%/12.50% Sr. Disc. Nts., 8/15/06(10) 65,000 60,188
- -----------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 14% Sr. Nts., 11/1/04 200,000 184,000
- -----------------------------------------------------------------------------------------------------
Voicestream Wireless Corp., 10.375% Sr. Nts., 11/15/09(4) 900,000 931,500
-----------
10,116,367
- -----------------------------------------------------------------------------------------------------
Metals/Minerals--1.5%
AEI Resources, Inc., 11.50% Sr. Sub. Nts., 12/15/06(4) 250,000 163,125
- -----------------------------------------------------------------------------------------------------
AK Steel Corp.:
7.875% Sr. Unsec. Nts., 2/15/09 500,000 475,000
9.125% Sr. Nts., 12/15/06 300,000 306,750
- -----------------------------------------------------------------------------------------------------
California Steel Industries Corp., 8.50% Sr. Unsec. Nts., Series B, 4/1/09 200,000 193,000
- -----------------------------------------------------------------------------------------------------
Centaur Mining & Exploration Ltd., 11% Sr. Nts., 12/1/07 100,000 99,625
- -----------------------------------------------------------------------------------------------------
Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., Series B, 5/15/08 500,000 477,500
- -----------------------------------------------------------------------------------------------------
International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08 50,000 42,250
- -----------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 250,000 251,250
- -----------------------------------------------------------------------------------------------------
Metallurg Holdings, Inc., 0%/12.75% Sr. Disc. Nts., 7/15/08(10) 250,000 81,250
- -----------------------------------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07 995,000 900,475
- -----------------------------------------------------------------------------------------------------
National Steel Corp., 9.875% First Mtg. Bonds, Series D, 3/1/09 500,000 517,500
- -----------------------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 500,000 495,000
- -----------------------------------------------------------------------------------------------------
Republic Technologies International Holdings LLC/RTI Capital Corp., Units
(each unit consists of $1,000 principal amount of 13.75% sr. nts., 7/15/09
and one warrant to purchase Cl. D common stock at $0.01 per share)(12) 200,000 133,000
-----------
4,135,725
- -----------------------------------------------------------------------------------------------------
Retail--0.4%
Boyds Collection Ltd. (The), 9% Sr. Unsec. Sub. Nts., Series B, 5/15/08 236,000 225,380
- -----------------------------------------------------------------------------------------------------
Central Termica Guemes, 12% Bonds, 11/26/01(4)(11)(15) 100,000 5,000
- -----------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub. Nts., 5/1/08 300,000 211,500
- -----------------------------------------------------------------------------------------------------
Finlay Enterprises, Inc., 9% Debs., 5/1/08 100,000 91,500
- -----------------------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 100,000 93,000
- -----------------------------------------------------------------------------------------------------
Home Interiors & Gifts, Inc., 10.125% Sr. Sub. Nts., 6/1/08 225,000 193,500
- -----------------------------------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 200,000 195,000
-----------
1,014,880
- -----------------------------------------------------------------------------------------------------
Service--1.4%
Allied Waste North America, Inc.:
7.875% Sr. Unsec. Nts., Series B, 1/1/09 435,000 386,606
10% Sr. Sub. Nts., 8/1/09(4) 950,000 855,000
- -----------------------------------------------------------------------------------------------------
Dura Operating Corp., 9% Sr. Sub. Nts., Series B, 5/1/09EUR 400,000 379,413
- -----------------------------------------------------------------------------------------------------
IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts., Series B, 4/1/09 200,000 195,000
- -----------------------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 350,000 343,000
- -----------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc.:
6.75% Cv. Sr. Sub. Nts., 9/15/03 125,000 60,000
7.375% Gtd. Sr. Unsec. Nts., 8/15/05 250,000 200,000
</TABLE>
Oppenheimer Strategic Bond Fund/VA 19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Service (continued)
Safety-Kleen Corp., 9.25% Sr. Unsec. Nts., 5/15/09 $ 400,000 $ 389,000
- ------------------------------------------------------------------------------------------------------------
United Rentals, Inc., 9.25% Sr. Unsec. Sub. Nts., Series B, 1/15/09 250,000 241,250
- ------------------------------------------------------------------------------------------------------------
URS Corp., 12.25% Sr. Sub. Nts., Series B, 5/1/09 500,000 515,000
- ------------------------------------------------------------------------------------------------------------
US Unwired, Inc., 0%/13.375% Sr. Disc. Nts., 11/1/09(4)(10) 700,000 413,000
------------
3,977,269
- ------------------------------------------------------------------------------------------------------------
Transportation--2.5%
America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 450,000 439,313
- ------------------------------------------------------------------------------------------------------------
Amtran, Inc., 10.50% Sr. Nts., 8/1/04(4) 300,000 301,500
- ------------------------------------------------------------------------------------------------------------
Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06 300,000 280,500
- ------------------------------------------------------------------------------------------------------------
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07 75,000 29,438
- ------------------------------------------------------------------------------------------------------------
Collins & Aikman Products Co., 11.50% Sr. Unsec. Sub. Nts., 4/15/06 250,000 248,125
- ------------------------------------------------------------------------------------------------------------
Federal-Mogul Corp., 7.875% Nts., 7/1/10 300,000 267,254
- ------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.875% Nts., Series EC, 9/9/04GBP 540,000 864,345
- ------------------------------------------------------------------------------------------------------------
Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec. Sub. Nts., 8/15/08 500,000 525,000
- ------------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc.:
9.125% Sr. Sub. Nts., 7/15/07 100,000 98,250
11% Sr. Sub. Nts., 7/15/06 225,000 236,250
- ------------------------------------------------------------------------------------------------------------
HDA Parts System, Inc., 12% Sr. Sub. Nts., 8/1/05 425,000 388,875
- ------------------------------------------------------------------------------------------------------------
Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 300,000 115,500
- ------------------------------------------------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts., 7/15/06 200,000 202,000
Millennium 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)(12) 250,000 143,750
- ------------------------------------------------------------------------------------------------------------
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts., 6/30/07(4) 275,000 127,875
Units (each unit consists of $1,000 principal amount of 11.63% second
priority ship mtg. nts., 6/30/07 and 7.66 warrants)(4)(6)(12) 150,000 11,250
- ------------------------------------------------------------------------------------------------------------
Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., Series D, 6/15/07(5) 1,300,000 1,228,500
- ------------------------------------------------------------------------------------------------------------
Pycsa Panama SA, 10.28% Sr. Sec. Bonds, 12/15/12(5) 195,800 116,012
- ------------------------------------------------------------------------------------------------------------
Tenneco, Inc., 11.625% Sr. Sub. Nts., 10/15/09(4) 400,000 410,000
- ------------------------------------------------------------------------------------------------------------
Terex Corp., 8.875% Sr. Unsec. Sub. Nts., Series C, 4/1/08 100,000 95,000
- ------------------------------------------------------------------------------------------------------------
TFM SA de CV, 10.25% Sr. Nts., 6/15/07 200,000 184,500
- ------------------------------------------------------------------------------------------------------------
Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04 430,000 278,963
- ------------------------------------------------------------------------------------------------------------
Transtar Holdings LP/Transtar Capital Corp., 13.375% Sr. Disc. Nts.,
Series B, 12/15/03 300,000 307,500
- ------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5) 184,770 83,609
------------
6,983,309
- ------------------------------------------------------------------------------------------------------------
Utility--0.4%
Beaver Valley II Funding Corp., 9% Second Lease Obligation Bonds, 6/1/17 199,000 198,751
- ------------------------------------------------------------------------------------------------------------
Calpine Corp.:
7.75% Sr. Nts., 4/15/09 450,000 427,500
8.75% Sr. Nts., 7/15/07 230,000 231,725
10.50% Sr. Nts., 5/15/06 100,000 106,000
- ------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Sec. Nts., Series E, 5/1/11 250,000 267,687
------------
1,231,663
------------
Total Corporate Bonds and Notes (Cost $120,275,567) 110,027,009
</TABLE>
20 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
============================================================================================================
Preferred Stocks--2.1%
- ------------------------------------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg.(13) 2,995 $ 54,659
- ------------------------------------------------------------------------------------------------------------
BankUnited Capital Trust, 10.25% Gtd. Bonds, 12/31/26 100,000 90,250
- ------------------------------------------------------------------------------------------------------------
CGA Group Ltd., Series A(5)(13) 19,767 494,175
- ------------------------------------------------------------------------------------------------------------
Clark USA, Inc., 11.50% Cum. Sr. Exchangeable, Non-Vtg.(13) 61 16,622
- ------------------------------------------------------------------------------------------------------------
Concentric Network Corp., 13.50% Sr. Redeemable Exchangeable,
Series B, Non-Vtg.(13) 242 240,185
- ------------------------------------------------------------------------------------------------------------
Contour Energy Co., $2.625 Cum. Cv.(15) 1,800 3,375
- ------------------------------------------------------------------------------------------------------------
CRIIMI MAE, Inc., 10.875% Cum. Cv., Series B, Non-Vtg. 46,000 759,000
- ------------------------------------------------------------------------------------------------------------
Crown American Realty Trust, 11% Cum., Series A, Non-Vtg. 2,000 70,750
- ------------------------------------------------------------------------------------------------------------
Doane Products Co., 14.25% Exchangeable, Non-Vtg.(5)(15) 5,000 222,500
- ------------------------------------------------------------------------------------------------------------
Dobson Communications Corp.:
12.25% Sr. Exchangeable, Non-Vtg.(13) 253 254,897
13% Sr. Exchangeable, Non-Vtg.(13) 319 348,507
- ------------------------------------------------------------------------------------------------------------
e.spire Communications, Inc., 12.75% Jr. Redeemable, Non-Vtg.(13) 185 37,462
- ------------------------------------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable, Series B, Non-Vtg.(5)(15) 5,000 231,250
- ------------------------------------------------------------------------------------------------------------
Earthwatch, Inc., 12% Cv. Sr., Series C, Non-Vtg.(5) 4,491 11,227
- ------------------------------------------------------------------------------------------------------------
Fidelity Federal Bank FSB Glendale California, l2% Non-Cum.
Exchangeable Perpetual, Series A(5) 20 300
- ------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.(13) 135 123,188
- ------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., Depositary Shares Representing one
one-hundredth 7% Cum. Cv. Jr., Series E, Non-Vtg.(4) 2,100 71,400
- ------------------------------------------------------------------------------------------------------------
International Utility Structures, Inc.:
13%, Non-Vtg.(4)(13) 9 7,493
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)(12)(13) 50 44,625
- ------------------------------------------------------------------------------------------------------------
Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable Exchangeable
Preferred Stock, Non-Vtg.(13) 6,061 68,186
- ------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 11.125% Exchangeable, Series E, Non-Vtg.(13) 121 121,303
- ------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc., 14% Cum., Non-Vtg.(13) 19,029 1,022,809
- ------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg.(13) 24 246,000
- ------------------------------------------------------------------------------------------------------------
PRIMEDIA, Inc.:
8.625% Exchangeable, Series H, Non-Vtg. 8,000 698,000
9.20% Exchangeable, Series F, Non-Vtg. 1,000 91,750
- ------------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum. Sr., Series B, Non-Vtg.(13) 235 241,463
- ------------------------------------------------------------------------------------------------------------
SF Holdings Group, Inc.:
13.75% Cum. Nts., Series B, 3/15/09, Non-Vtg.(13) 10 50,250
13.75% Exchangeable(4) 2 10,050
- ------------------------------------------------------------------------------------------------------------
Star Gas Partners, LP 187 2,478
- ------------------------------------------------------------------------------------------------------------
Walden Residential Properties, Inc.:
9.16% Cv., Series B, Non-Vtg. 10,000 241,250
9.20% Sr. 1,000 15,563
----------
Total Preferred Stocks (Cost $7,931,185) 5,890,967
============================================================================================================
Other Securities--0.0%
- ------------------------------------------------------------------------------------------------------------
Fletcher Challenge Ltd.:
10% Cv. Unsec. Sub. Nts., 4/30/05NZD 60,000 32,036
14.50% Cv. Sub. Nts., 9/30/00NZD 60,000 32,981
----------
Total Other Securities (Cost $91,017) 65,017
</TABLE>
Oppenheimer Strategic Bond Fund/VA 21
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
============================================================================================================
Common Stocks--0.9%
- ------------------------------------------------------------------------------------------------------------
Celcaribe SA(4)(15) 24,390 $ 39,634
- ------------------------------------------------------------------------------------------------------------
Coinstar, Inc.(15) 700 9,800
- ------------------------------------------------------------------------------------------------------------
Golden State Bancorp, Inc.(15) 2,404 41,469
- ------------------------------------------------------------------------------------------------------------
Horizon Group Properties, Inc.(15) 358 1,208
- ------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.(15) 320 12,420
- ------------------------------------------------------------------------------------------------------------
MCI WorldCom, Inc.(15) 10,327 547,977
- ------------------------------------------------------------------------------------------------------------
Optel, Inc.(15) 210 2
- ------------------------------------------------------------------------------------------------------------
Premier Holdings Ltd.(15) 18,514 62,485
- ------------------------------------------------------------------------------------------------------------
Price Communications Corp. 33,471 930,936
- ------------------------------------------------------------------------------------------------------------
SF Holdings Group, Inc., Cl. C(15) 370 4
- ------------------------------------------------------------------------------------------------------------
UnitedGlobalCom, Inc., Cl. A(15) 1,814 128,114
- ------------------------------------------------------------------------------------------------------------
Vail Resorts, Inc.(15) 15,500 278,031
- ------------------------------------------------------------------------------------------------------------
Viatel, Inc.(15) 1,189 63,760
- ------------------------------------------------------------------------------------------------------------
Weatherford International, Inc. 7,581 302,766
- ------------------------------------------------------------------------------------------------------------
Wilshire Financial Services Group, Inc.(15) 6,273 8,625
- ------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $891,044) 2,427,231
<CAPTION>
Units
<S> <C> <C>
============================================================================================================
Rights, Warrants and Certificates--0.1%
- ------------------------------------------------------------------------------------------------------------
Adelphia Business Solutions, Inc. Wts., Exp. 4/15/01(5) 60 10,500
- ------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Wts., Exp. 2/25/00 1,315 2,762
- ------------------------------------------------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 6/16/07(5) 16,000 4,800
- ------------------------------------------------------------------------------------------------------------
Clearnet Communications, Inc. Wts., Exp. 9/15/05 165 3,706
- ------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/15/03(5) 200 10,025
- ------------------------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/15/07(5) 100 26,512
- ------------------------------------------------------------------------------------------------------------
Covergent Communications, Inc. Wts., Exp. 4/1/08 400 4,900
- ------------------------------------------------------------------------------------------------------------
FirstWorld Communications, Inc. Wts., Exp. 4/15/08(5) 175 26,272
- ------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc. Wts., Exp. 7/15/05(5) 7,500 75
- ------------------------------------------------------------------------------------------------------------
Globix Corp. Wts., Exp. 5/1/05 325 78,000
- ------------------------------------------------------------------------------------------------------------
Golden State Bancorp, Inc. Wts., Exp. 1/1/01 2,404 2,103
- ------------------------------------------------------------------------------------------------------------
Gothic Energy Corp. Wts.:
Exp. 1/23/03 1,668 --
Exp. 1/23/03(5) 953 10
Exp. 5/1/05(5) 2,181 218
Exp. 9/1/04(5) 2,800 2,976
- ------------------------------------------------------------------------------------------------------------
HF Holdings, Inc. Wts., Exp. 9/27/00(5) 531 7,969
- ------------------------------------------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp. 9/15/05 825 10,181
- ------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/31/02 200 --
- ------------------------------------------------------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/15/07(5) 270 --
- ------------------------------------------------------------------------------------------------------------
KMC Telecom Holdings, Inc. Wts., Exp. 4/15/08(5) 725 2,221
- ------------------------------------------------------------------------------------------------------------
Long Distance International, Inc. Wts., Exp. 4/13/08(5) 200 100
- ------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. Wts., Exp. 1/15/07(5) 150 1,819
- ------------------------------------------------------------------------------------------------------------
Mexico Value Rts., Exp. 6/30/03 384,000 --
- ------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(5) 600 40,017
</TABLE>
22 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Units Note 1
<S> <C> <C>
==================================================================================================================
Rights, Warrants and Certificates (continued)
- ------------------------------------------------------------------------------------------------------------------
Millennium Seacarriers, Inc. Wts., Exp. 7/15/05(5) 250 $ 281
- ------------------------------------------------------------------------------------------------------------------
Occidente y Caribe Celular SA Wts., Exp. 3/15/04(5) 800 12,100
- ------------------------------------------------------------------------------------------------------------------
PLD Telekom, Inc.:
Wts., Exp. 6/1/06(5) 300 15
14% Sr. Disc. Nts. Wts., Exp. 3/31/03 300 15
- ------------------------------------------------------------------------------------------------------------------
Real Time Data Co. Wts., Exp. 5/31/04(5) 36,431 364
- ------------------------------------------------------------------------------------------------------------------
WAM!NET, Inc. Wts., Exp. 3/1/05(4) 1,500 33,562
--------
Total Rights, Warrants and Certificates (Cost $26,622) 281,503
<CAPTION>
Principal
Amount(1)
<S> <C> <C>
==================================================================================================================
Structured Instruments--3.8%
- ------------------------------------------------------------------------------------------------------------------
Citibank NA (Nassau Branch), Mexican Peso Linked Nts.:
26.10%, 10/29/01MXN 5,630,625 611,970
27.40%, 9/20/01 384,000 417,869
- ------------------------------------------------------------------------------------------------------------------
Citibank NA (New York), Mexican Peso Linked Nts., 23.95%, 11/5/01MXN 7,280,764 771,876
- ------------------------------------------------------------------------------------------------------------------
Citibank NA, Polish Zloty Linked Nts., 16.10%, 11/3/00PLZ 2,542,214 609,271
- ------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston Corp. (New York Branch), Russian OFZ Linked Nts.:
14%, 9/27/00(5)RUR 3,610,000 73,042
15%, 2/23/00(5)RUR 8,008,000 207,615
18.339%, 2/23/00(5) 240,000 171,422
18.598%, 10/25/00(5) 240,000 125,058
25%, 2/6/02(5)(6)RUR 277,180 4,035
25%, 2/6/02(5)(6)RUR 277,180 3,535
25%, 5/22/02(5)(6)RUR 277,180 3,691
25%, 6/5/02(5)(6)RUR 277,180 3,669
25%, 6/5/02(5)(6)RUR 3,150,400 57,977
25%, 9/18/02(5)(6)RUR 277,180 3,416
25%, 10/9/02(5)(6)RUR 277,180 3,641
25%, 2/5/03(5)(6)RUR 277,180 3,472
25%, 5/21/03(5)(6)RUR 277,180 3,254
25%, 6/4/03(5)(6)RUR 277,180 3,247
25%, 9/17/03(5)(6)RUR 277,180 3,113
25%, 10/8/03(5)(6)RUR 277,180 3,324
25%, 1/21/04(5)(6)RUR 277,180 3,114
Series 1, 25%, 6/4/03(6)RUR 2,561,555 41,561
Zero Coupon, 46.10%, 12/15/01(5)(9)RUR 950,000 7,990
- ------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, Indian Rupee/Japanese Yen Linked Nts., Zero Coupon,
12.56%, 8/17/01(9) 350,000 244,685
- ------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, Indonesian Rupiah Linked Nts., 13.667%, 6/30/00 475,000 457,615
- ------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, New York, Philippine Peso/Japanese Yen Linked Nts.,
10.55%, 5/12/00 135,000 106,933
- ------------------------------------------------------------------------------------------------------------------
Deutsche Morgan Grenfell, Lehman High Yield Index Linked Nts., 8.75%, 5/5/00 750,000 757,433
- ------------------------------------------------------------------------------------------------------------------
Deutsche Morgan Grenfell, Turkish Lira Treasury Bill Linked Nts., Zero Coupon,
79.84%, 5/24/00(9)TRL 346,810,000,000 525,506
- ------------------------------------------------------------------------------------------------------------------
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) 26,086 24,946
</TABLE>
Oppenheimer Strategic Bond Fund/VA 23
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market Value
Amount(1) Note 1
<S> <C> <C>
===================================================================================================================
Structured Instruments (continued)
- -------------------------------------------------------------------------------------------------------------------
J.P. Morgan & Co., Inc. Emerging Market Bond Index Linked Nts., 9.50%, 7/14/00 $ 2,493,380 $ 2,801,542
- -------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. Turkey Treasury Bond Linked Nts.:
87.282%, 1/9/01(6)TRL 350,300,000,000 790,565
87.283%, 1/7/01(6)TRL 185,000,000,000 417,512
- -------------------------------------------------------------------------------------------------------------------
Russia (Government of) Federal Loan Bonds:
Series 5022, 15%, 2/23/00(5)RUR 5,417,000 140,441
Series 27010, 25%, 9/17/03(5)(6)RUR 3,590,420 57,082
- -------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney, Inc. Brazil Credit Linked Nts.:
6%, 4/2/03(5) 310,000 246,831
Series 2, 6%, 4/2/03(5) 310,000 246,831
- -------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney, Inc. Turkey Treasury Bill Linked Nts.:
92.10%, 8/24/00(6) 320,000 270,371
94.10%, 8/24/00(6) 372,386 317,359
- -------------------------------------------------------------------------------------------------------------------
Salomon, Inc. Indonesian Rupiah Linked Nts.:
29.55%, 4/12/00 50,000 64,156
32.65%, 4/6/00 135,000 173,035
- -------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank, Philippine Peso/Japanese Yen Linked Nts.,
16.04%, 5/10/00 130,000 93,509
- -------------------------------------------------------------------------------------------------------------------
Total Structured Instruments (Cost $12,506,847) 10,873,514
<CAPTION>
Date Strike Contracts
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Options Purchased--0.1%
- -------------------------------------------------------------------------------------------------------------------
European Monetary Unit Put (5) 1/14/00 1.020EUR 10,160,000 174,912
- -------------------------------------------------------------------------------------------------------------------
Hong Kong Dollar Put 1/11/00 7.894HKD 4,815,340 --
- -------------------------------------------------------------------------------------------------------------------
Japanese Yen Put 3/6/00 105.950JPY 144,000,000 8,496
- -------------------------------------------------------------------------------------------------------------------
South Korean Won Call 6/1/00 1,100.000KRW 1,600,500,000 20,406
- -------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Co. of New York, The Emerging
Markets Bond Index Linked Nts. Call (5) 1/19/00 349.730% 1,600 126,056
- -------------------------------------------------------------------------------------------------------------------
Total Options Purchased (Cost $224,174) 329,870
- -------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $303,769,877) 101.4% 286,143,077
- -------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.4) (4,057,459)
------------- ------------
Net Assets 100.0% $282,085,618
============= ============
</TABLE>
24 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP--Argentine Peso IDR--Indonesian Rupiah
AUD--Australian Dollar JPY--Japanese Yen
CAD--Canadian Dollar KRW--South Korean Won
DEM--German Mark MXN--Mexican Nuevo Peso
DKK--Danish Krone NOK--Norwegian Krone
EUR--Euro NZD--New Zealand Dollar
FRF--French Franc PLZ--Polish Zloty
GBP--British Pound Sterling RUR--Russian Ruble
GRD--Greek Drachma SEK--Swedish Krona
HKD--Hong Kong Dollar TRL--Turkish Lira
HUF--Hungarian Forint ZAR--South African Rand
2. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
3. When-issued security to be delivered and settled after December 31, 1999.
4. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $16,799,089 or 5.96% of the Fund's net
assets as of December 31, 1999.
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 or increasing rate
security.
7. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of Notes to Financial Statements.
8. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:
<TABLE>
<CAPTION>
Principal Expiration Exercise Premium Market Value
Subject to Call/Put Date Price Received Note 1
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brazilian Real Put (BRR) 3,347,205 1/28/00 2.054BRR $55,420 $ 3,347
Japanese Yen Call (JPY) 144,000,000 3/6/00 96.100JPY 14,910 13,104
------- -------
$70,330 $16,451
======= =======
</TABLE>
9. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
10. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
11. Issuer is in default.
12. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, principal amount disclosed represents total
underlying principal.
13. Interest or dividend is paid in kind.
14. Securities with an aggregate market value of $577,958 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
15. Non-income producing security.
See accompanying Notes to Financial Statements.
Oppenheimer Strategic Bond Fund/VA 25
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
================================================================================================
Assets
Investments, at value (cost $303,769,877)--see accompanying statement $286,143,077
- ------------------------------------------------------------------------------------------------
Cash 780,123
- ------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $20,652) 20,652
- ------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts 56,495
- ------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and principal paydowns 5,466,483
Shares of beneficial interest sold 168,739
Investments sold 26,690
Other 4,848
------------
Total assets 292,667,107
================================================================================================
Liabilities
Unrealized depreciation on foreign currency contracts 102,696
- ------------------------------------------------------------------------------------------------
Options written, at value (premiums received $70,330)--see accompanying statement 16,451
- ------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $9,294,950 purchased on a when-issued basis) 9,303,817
Shares of beneficial interest redeemed 1,098,260
Closed foreign currency contracts 16,992
Daily variation on futures contracts 675
Transfer and shareholder servicing agent fees 184
Trustees' compensation 22
Other 42,392
- ------------------------------------------------------------------------------------------------
Total liabilities 10,581,489
================================================================================================
Net Assets $282,085,618
============
================================================================================================
Composition of Net Assets
Paid-in capital $285,264,616
- ------------------------------------------------------------------------------------------------
Undistributed net investment income 22,685,394
- ------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (8,158,504)
- ------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (17,705,888)
- ------------------------------------------------------------------------------------------------
Net assets--applicable to 56,728,056 shares of beneficial
interest outstanding $282,085,618
============
================================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $4.97
</TABLE>
See accompanying Notes to Financial Statements.
26 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
======================================================================================
Investment Income
Interest (net of foreign withholding taxes of $68,279) $26,884,872
- --------------------------------------------------------------------------------------
Dividends 554,128
-----------
Total income 27,439,000
======================================================================================
Expenses
Management fees 2,066,323
- --------------------------------------------------------------------------------------
Custodian fees and expenses 35,149
- --------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,108
- --------------------------------------------------------------------------------------
Trustees' compensation 1,291
- --------------------------------------------------------------------------------------
Other 55,271
-----------
Total expenses 2,160,142
Less expenses paid indirectly (11,572)
-----------
Net expenses 2,148,570
======================================================================================
Net Investment Income 25,290,430
======================================================================================
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments (including premiums on options exercised) (6,481,356)
Closing of futures contracts 406,580
Closing and expiration of option contracts written 203,611
Foreign currency transactions (2,492,662)
- --------------------------------------------------------------------------------------
Net realized loss (8,363,827)
- --------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (5,804,195)
Translation of assets and liabilities denominated in foreign currencies (2,989,088)
-----------
Net change (8,793,283)
-----------
Net realized and unrealized loss (17,157,110)
======================================================================================
Net Increase in Net Assets Resulting from Operations $ 8,133,320
===========
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Strategic Bond Fund/VA 27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
<S> <C> <C>
===========================================================================================================
Operations
Net investment income $ 25,290,430 $ 20,451,817
- -----------------------------------------------------------------------------------------------------------
Net realized loss (8,363,827) (2,696,918)
- -----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (8,793,283) (11,476,607)
------------ ------------
Net increase in net assets resulting from operations 8,133,320 6,278,292
===========================================================================================================
Dividends and/or 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 10,369,398 71,618,535
===========================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------
Total increase 2,885,222 71,360,992
- -----------------------------------------------------------------------------------------------------------
Beginning of period 279,200,396 207,839,404
------------ ------------
End of period (including undistributed net investment
income of $22,685,394 and $15,570,425, respectively) $282,085,618 $279,200,396
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
28 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995
<S> <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
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .45 .39 .39 .38 .38
Net realized and unrealized gain (loss) (.31) (.24) .04 .19 .30
- ------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations .14 .15 .43 .57 .68
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.29) (.09) (.39) (.39) (.37)
Distributions from net realized gain -- (.06) (.01) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.29) (.15) (.40) (.39) (.37)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.97 $5.12 $5.12 $5.09 $4.91
===== ===== ===== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(1) 2.83% 2.90% 8.71% 12.07% 15.33%
==============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $282,086 $279,200 $207,839 $118,716 $60,098
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $278,668 $250,227 $159,934 $82,604 $37,698
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 9.08% 8.17% 8.23% 8.48% 9.32%
Expenses 0.78% 0.80%(3) 0.83%(3) 0.85%(3) 0.85%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 81% 134% 150% 144% 87%
</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. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $242,578,613 and $216,840,010, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer Strategic Bond Fund/VA 29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
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's investment objective is
to seek a high level of current income principally derived from interest of debt
securities and seeks to enhance that income by writing covered call option on
debt securities. The Fund'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 price 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 December 31, 1999, the market value of these
securities comprised 3.85% of the Fund's net assets and resulted in realized and
unrealized losses of $1,597,657. 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 December 31, 1999, the Fund had
entered into outstanding when-issued or forward commitments of $9,294,950.
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 (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 December 31, 1999, securities with an
aggregate market value of $1,533,192, representing 0.54% 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,
1999, the Fund had available for federal income tax purposes an unused capital
loss carryover of approximately $6,413,000, which expires between 2006 and 2007.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $2,557,965. Accumulated net
realized loss on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
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.
Oppenheimer Strategic Bond Fund/VA 31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
------------------------------ -----------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Sold 13,301,419 $65,503,594 21,445,910 $109,659,739
Dividends and/or distributions reinvested 3,226,755 15,617,496 1,279,028 6,535,835
Redeemed (14,369,937) (70,751,692) (8,759,684) (44,577,039)
----------- ----------- ---------- ------------
Net increase 2,158,237 $10,369,398 13,965,254 $ 71,618,535
=========== =========== ========== ============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized depreciation on securities and options
written of $17,572,921 was composed of gross appreciation of $6,256,650, and
gross depreciation of $23,829,571.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management Fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust. The annual fees are 0.75% of the
first $200 million of average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the
next $200 million and 0.50% of average annual net assets over $1 billion. The
Fund's management fee for the year ended December 31, 1999 was 0.74% of average
annual net assets.
- --------------------------------------------------------------------------------
Transfer Agent Fees. 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 for cost.
================================================================================
5. Foreign Currency Contracts
A foreign currency 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 contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the foreign currency transactions. Realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
32 Oppenheimer Strategic Bond Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
5. Foreign Currency Contracts (continued)
As of December 31, 1999, the Fund had outstanding foreign currency contracts as
follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized Unrealized
Contract Description Dates Amounts (000s) December 31, 1999 Appreciation Depreciation
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
British Pound Sterling (GBP) 1/24/00 185 EUR $ 298,855 $ -- $ 826
Euro (EUR) 2/24/00 1,200 JPY 1,212,790 -- 43,034
Japanese Yen (JPY) 2/7/00 254,500 JPY 2,505,580 -- 1,562
------- --------
-- 45,422
------- --------
Contracts to Sell
- -----------------
British Pound Sterling (GBP) 1/30/00-6/5/00 980 GBP 1,582,807 3,914 14,584
Euro (EUR) 1/24/00-6/5/00 2,170 EUR 2,192,917 44,664 --
Euro (EUR) 1/24/00 289 GBP 291,763 7,917 --
Hong Kong Dollar (HKD) 1/26/00-1/31/00 4,859 HKD 625,030 -- 15,030
Japanese Yen (JPY) 2/24/00 129,600 EUR 1,279,172 -- 23,348
Mexican Nuevo Peso (MXN) 2/17/00 6,270 MXN 649,557 -- 4,312
------- --------
56,495 57,274
------- --------
Total Unrealized Appreciation and Depreciation $56,495 $102,696
======= ========
</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 (Continued)
- --------------------------------------------------------------------------------
================================================================================
6. Futures Contracts (continued)
As of December 31, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Unrealized
Expiration Number of Valuation as of Appreciation
Contract Description Date Contracts December 31, 1999 (Depreciation)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
Euro-Bund 3/8/00 33 $3,458,613 $(35,868)
U.S. Treasury Bonds, 20 yr. 3/22/00 22 2,000,625 (40,906)
U.S. Treasury Nts., 10 yr. 3/22/00 6 575,156 (9,047)
--------
(85,821)
--------
Contracts to Sell
- -----------------
Canadian Government Bonds, 10 yr. 3/22/00 5 409,383 2,522
Euro-Schatz 3/8/00 71 7,338,365 20,128
Japanese Government Bonds, 10 yr. 3/9/00 2 2,598,259 (33,845)
United Kingdom Long Gilt 3/29/00 3 539,949 11,486
U.S. Treasury Nts., 5 yr. 3/22/00 31 3,038,484 39,094
--------
39,385
--------
$(46,436)
========
</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 (Continued)
- --------------------------------------------------------------------------------
================================================================================
7. Option Activity (continued)
Written option activity for the year ended December 31, 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 509,978,550 50,659 28,409,390 402,988
Options closed or expired (513,584,650) (60,984) (25,059,496) (273,394)
Options exercised -- -- (2,689) (74,174)
------------ -------- ----------- ---------
Options outstanding as of
December 31, 1999 144,000,000 $ 14,910 3,347,205 $ 55,420
============ ======== =========== =========
</TABLE>
================================================================================
8. Illiquid or Restricted Securities and Currency
As of December 31, 1999, investments in securities and currency included issues
that are illiquid or restricted. Restricted securities are often purchased in
private placement transactions, are not registered under the Securities Act of
1933, may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may also
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. The Fund intends to
invest no more than 15% of its net assets (determined at the time of purchase
and reviewed periodically) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional investors,
are not subject to that limitation. The aggregate value of illiquid or
restricted securities subject to this limitation as of December 31, 1999, was
$13,116,671, which represents 4.64% of the Fund's net assets, of which $629,649
is considered restricted. Information concerning restricted securities is as
follows:
<TABLE>
<CAPTION>
Valuation Per
Unit as of
Acquisition Cost Per December 31,
Security Dates Unit 1999
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Bonds
- -----
TAGHeuer International SA, 12% Sr. Sub. Nts., 12/15/05 12/8/95 100.00% 109.66%
Stocks and Warrants
- -------------------
CGA Group Ltd., Preferred 6/17/97 $25.00 $25.00
- ----------------------------------------------------------------------------------------------------
CGA Group Ltd. Wts., Exp. 6/16/07 6/17/97 -- 0.30
- ----------------------------------------------------------------------------------------------------
Real Time Data Wts., Exp. 5/31/04 6/30/99 0.01 0.01
Currency
- --------
Russian Ruble 12/22/99-
12/28/99 0.04 0.04
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Small Cap Growth
Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Small Cap Growth Fund/VA (which is
a series of Oppenheimer Variable Account Funds) as of December 31, 1999, the
related statement of operations for the year then ended, the statements of
changes in net assets for the year ended December 31, 1999 and the period ended
December 31, 1998 and the financial highlights for the period May 1, 1998, to
December 31, 1999. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Small Cap Growth Fund/VA as of December 31, 1999, the results of its operations,
the changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- ----------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
==============================================================================================================
Common Stocks--84.2%
- --------------------------------------------------------------------------------------------------------------
Capital Goods--8.5%
- --------------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.5%
Armor Holdings, Inc.(1) 2,500 $ 32,812
- --------------------------------------------------------------------------------------------------------------
Electrical Equipment--0.2%
Plug Power, Inc.(1) 500 14,125
- --------------------------------------------------------------------------------------------------------------
Industrial Services--5.5%
Corporate Executive Board Co.(1) 1,000 55,875
- --------------------------------------------------------------------------------------------------------------
CyberSource Corp.(1) 300 15,525
- --------------------------------------------------------------------------------------------------------------
Digimarc Corp.(1) 500 25,000
- --------------------------------------------------------------------------------------------------------------
Keynote Systems, Inc.(1) 300 22,125
- --------------------------------------------------------------------------------------------------------------
Loislaw.com, Inc.(1) 600 23,475
- --------------------------------------------------------------------------------------------------------------
Metamor Worldwide, Inc.(1) 1,200 34,950
- --------------------------------------------------------------------------------------------------------------
Navidec, Inc.(1) 900 10,800
- --------------------------------------------------------------------------------------------------------------
Navigant Consulting, Inc.(1) 1,100 11,962
- --------------------------------------------------------------------------------------------------------------
Source Information Management Co. (The)(1) 3,600 60,300
- --------------------------------------------------------------------------------------------------------------
Tetra Tech, Inc.(1) 6,000 92,250
- --------------------------------------------------------------------------------------------------------------
Waste Connections, Inc.(1) 1,800 25,987
--------
378,249
- --------------------------------------------------------------------------------------------------------------
Manufacturing--2.3%
AstroPower, Inc.(1) 1,500 21,000
- --------------------------------------------------------------------------------------------------------------
Asyst Technologies, Inc.(1) 600 39,337
- --------------------------------------------------------------------------------------------------------------
Koala Corp.(1) 6,000 84,000
- --------------------------------------------------------------------------------------------------------------
Metron Technology NV(1) 800 12,850
--------
157,187
- --------------------------------------------------------------------------------------------------------------
Communication Services--6.9%
- --------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--4.1%
Clarent Corp.(1) 600 46,650
- --------------------------------------------------------------------------------------------------------------
Efficient Networks, Inc.(1) 300 20,400
- --------------------------------------------------------------------------------------------------------------
Internap Network Services Corp.(1) 150 25,950
- --------------------------------------------------------------------------------------------------------------
Latitude Communications, Inc.(1) 1,000 26,125
- --------------------------------------------------------------------------------------------------------------
MGC Communications, Inc.(1) 2,100 106,575
- --------------------------------------------------------------------------------------------------------------
Network Plus Corp.(1) 1,300 27,300
- --------------------------------------------------------------------------------------------------------------
Triton PCS Holdings, Inc., Cl. A(1) 300 13,650
- --------------------------------------------------------------------------------------------------------------
Z-Tel Technologies, Inc.(1) 400 16,150
--------
282,800
- --------------------------------------------------------------------------------------------------------------
Telephone Utilities--0.3%
Allied Riser Communications Corp.(1) 1,100 22,756
</TABLE>
4 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Telecommunications: Wireless--2.5%
Aether Systems, Inc.(1) 200 $ 14,325
- --------------------------------------------------------------------------------------------------------------
AirGate PCS, Inc.(1) 100 5,275
- --------------------------------------------------------------------------------------------------------------
Airnet Communications Corp.(1) 200 7,275
- --------------------------------------------------------------------------------------------------------------
Chartered Semiconductor Manufacturing, Sponsored ADR(1) 600 43,800
- --------------------------------------------------------------------------------------------------------------
Phone.com, Inc.(1) 150 17,391
- --------------------------------------------------------------------------------------------------------------
Proxim, Inc.(1) 600 66,000
- --------------------------------------------------------------------------------------------------------------
TeleCorp PCS, Inc.(1) 200 7,600
- --------------------------------------------------------------------------------------------------------------
Tritel, Inc.(1) 300 9,506
--------
171,172
- --------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--12.0%
- --------------------------------------------------------------------------------------------------------------
Consumer Services--1.5%
Cornell Corrections, Inc.(1) 4,000 33,500
- --------------------------------------------------------------------------------------------------------------
Getty Images, Inc.(1) 700 34,212
- --------------------------------------------------------------------------------------------------------------
Jupiter Communications, Inc.(1) 400 12,100
- --------------------------------------------------------------------------------------------------------------
Netcentives, Inc.(1) 400 24,925
--------
104,737
- --------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--2.0%
Activision, Inc.(1) 3,000 45,937
- --------------------------------------------------------------------------------------------------------------
Handleman Co.(1) 3,500 46,812
- --------------------------------------------------------------------------------------------------------------
JAKKS Pacific, Inc.(1) 2,400 44,850
--------
137,599
- --------------------------------------------------------------------------------------------------------------
Media--2.0%
Lifeminders.com, Inc.(1) 500 28,875
- --------------------------------------------------------------------------------------------------------------
NetRatings, Inc.(1) 100 4,812
- --------------------------------------------------------------------------------------------------------------
True North Communications, Inc. 900 40,219
- --------------------------------------------------------------------------------------------------------------
Tweeter Home Entertainment Group, Inc. 1,800 63,900
--------
137,806
- --------------------------------------------------------------------------------------------------------------
Retail: Specialty--6.5%
BOLDER Technologies Corp.(1) 2,500 31,875
- --------------------------------------------------------------------------------------------------------------
Charlotte Russe Holding, Inc.(1) 800 16,800
- --------------------------------------------------------------------------------------------------------------
Chico's Fas, Inc.(1) 800 30,100
- --------------------------------------------------------------------------------------------------------------
Copart, Inc.(1) 1,200 52,200
- --------------------------------------------------------------------------------------------------------------
Cost Plus, Inc.(1) 800 28,500
- --------------------------------------------------------------------------------------------------------------
David's Bridal, Inc.(1) 3,800 42,512
- --------------------------------------------------------------------------------------------------------------
Factory 2-U Stores, Inc.(1) 2,000 56,750
- --------------------------------------------------------------------------------------------------------------
Pantry, Inc. (The)(1) 2,200 31,075
- --------------------------------------------------------------------------------------------------------------
PurchasePro.com, Inc.(1) 500 68,750
- --------------------------------------------------------------------------------------------------------------
School Specialty, Inc.(1) 1,600 24,200
- --------------------------------------------------------------------------------------------------------------
Whitehall Jewellers, Inc. 1,200 44,250
- --------------------------------------------------------------------------------------------------------------
Yankee Candle, Inc. (The)(1) 1,600 26,100
--------
453,112
</TABLE>
Oppenheimer Small Cap Growth Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Consumer Staples--7.9%
- --------------------------------------------------------------------------------------------------------------
Broadcasting--3.0%
Citadel Communications Corp.(1) 900 $ 58,387
- --------------------------------------------------------------------------------------------------------------
Classic Communications, Inc.(1) 500 18,281
- --------------------------------------------------------------------------------------------------------------
Cumulus Media, Inc., Cl. A(1) 900 45,675
- --------------------------------------------------------------------------------------------------------------
Insight Communications Co., Inc.(1) 900 26,662
- --------------------------------------------------------------------------------------------------------------
Radio Unica Corp.(1) 400 11,550
- --------------------------------------------------------------------------------------------------------------
Spanish Broadcasting System, Inc., Cl. A(1) 1,200 48,300
--------
208,855
- --------------------------------------------------------------------------------------------------------------
Education--0.8%
Corinthian Colleges, Inc.(1) 1,700 40,587
- --------------------------------------------------------------------------------------------------------------
ZapMe! Corp.(1) 1,700 14,662
--------
55,249
- --------------------------------------------------------------------------------------------------------------
Entertainment--3.4%
Buca, Inc.(1) 4,000 41,000
- --------------------------------------------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(1) 4,000 98,000
- --------------------------------------------------------------------------------------------------------------
Imax Corp.(1) 1,500 41,062
- --------------------------------------------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(1) 2,300 57,212
--------
237,274
- --------------------------------------------------------------------------------------------------------------
Food--0.7%
Diedrich Coffee, Inc.(1) 5,000 20,312
- --------------------------------------------------------------------------------------------------------------
Wild Oats Markets, Inc.(1) 1,200 26,625
--------
46,937
- --------------------------------------------------------------------------------------------------------------
Energy--0.4%
- --------------------------------------------------------------------------------------------------------------
Energy Services--0.4%
Cal Dive International, Inc.(1) 800 26,500
- --------------------------------------------------------------------------------------------------------------
Financial--3.4%
- --------------------------------------------------------------------------------------------------------------
Banks--1.5%
Investors Financial Services Corp. 1,500 69,000
- --------------------------------------------------------------------------------------------------------------
Labrance & Co., Inc.(1) 3,000 38,250
--------
107,250
- --------------------------------------------------------------------------------------------------------------
Diversified Financial--1.4%
MicroFinancial, Inc. 5,000 58,438
- --------------------------------------------------------------------------------------------------------------
NextCard, Inc.(1) 600 17,325
- --------------------------------------------------------------------------------------------------------------
ReSourcePhoenix.com, Inc.(1) 1,000 19,750
--------
95,513
- --------------------------------------------------------------------------------------------------------------
Insurance--0.5%
Advance Paradigm, Inc.(1) 1,600 34,500
</TABLE>
6 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Healthcare--5.1%
- --------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--3.8%
Abgenix, Inc.(1) 500 $ 66,250
- --------------------------------------------------------------------------------------------------------------
BioCryst Pharmaceuticals, Inc.(1) 1,500 44,250
- --------------------------------------------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc.(1) 1,100 21,175
- --------------------------------------------------------------------------------------------------------------
Maxygen, Inc.(1) 200 14,200
- --------------------------------------------------------------------------------------------------------------
Nuerocrine Biosciences, Inc.(1) 2,100 51,975
- --------------------------------------------------------------------------------------------------------------
Syncor International Corp.(1) 1,500 43,688
- --------------------------------------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(1) 1,000 24,875
--------
266,413
- --------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.3%
Hanger Orthopedic Group, Inc.(1) 500 5,000
- --------------------------------------------------------------------------------------------------------------
NovaMed Eyecare, Inc.(1) 600 4,050
- --------------------------------------------------------------------------------------------------------------
PlanetRx.com, Inc.(1) 700 10,150
- --------------------------------------------------------------------------------------------------------------
Renal Care Group, Inc.(1) 2,400 56,100
- --------------------------------------------------------------------------------------------------------------
SciQuest.com, Inc.(1) 200 15,900
--------
91,200
- --------------------------------------------------------------------------------------------------------------
Technology--40.0%
- --------------------------------------------------------------------------------------------------------------
Computer Hardware--6.1%
3DO Co. (The) 5,500 50,016
- --------------------------------------------------------------------------------------------------------------
Creo Products, Inc.(1) 1,200 46,125
- --------------------------------------------------------------------------------------------------------------
Echelon Corp.(1) 1,000 19,563
- --------------------------------------------------------------------------------------------------------------
Gadzoox Networks, Inc. 300 13,069
- --------------------------------------------------------------------------------------------------------------
Network Appliance, Inc.(1) 1,200 99,675
- --------------------------------------------------------------------------------------------------------------
Optimal Robotics Corp.(1) 1,200 44,700
- --------------------------------------------------------------------------------------------------------------
SanDisk Corp.(1) 500 48,125
- --------------------------------------------------------------------------------------------------------------
SmartDisk Corp.(1) 300 9,825
- --------------------------------------------------------------------------------------------------------------
Xircom, Inc.(1) 1,200 90,000
--------
421,098
- --------------------------------------------------------------------------------------------------------------
Computer Services--10.9%
Alloy Online, Inc.(1) 1,800 28,350
- --------------------------------------------------------------------------------------------------------------
AppNet, Inc.(1) 600 26,250
- --------------------------------------------------------------------------------------------------------------
Art Technology Group, Inc.(1) 400 51,250
- --------------------------------------------------------------------------------------------------------------
BackWeb Technologies Ltd.(1) 800 33,700
- --------------------------------------------------------------------------------------------------------------
Braun Consulting, Inc.(1) 1,200 85,800
- --------------------------------------------------------------------------------------------------------------
C-bridge Internet Solutions, Inc.(1) 300 14,588
- --------------------------------------------------------------------------------------------------------------
CAIS Internet, Inc.(1) 1,000 35,500
- --------------------------------------------------------------------------------------------------------------
Critical Path, Inc.(1) 300 28,313
- --------------------------------------------------------------------------------------------------------------
El Sitio, Inc.(1) 200 7,350
- --------------------------------------------------------------------------------------------------------------
Finisar Corp.(1) 100 8,988
- --------------------------------------------------------------------------------------------------------------
Interactive Pictures Corp.(1) 900 20,981
- --------------------------------------------------------------------------------------------------------------
Kopin Corp.(1) 900 37,800
- --------------------------------------------------------------------------------------------------------------
MedQuist, Inc.(1) 600 15,488
- --------------------------------------------------------------------------------------------------------------
OneSource Information Services, Inc.(1) 4,500 60,469
</TABLE>
Oppenheimer Small Cap Growth Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Computer Services (continued)
Packeteer, Inc.(1) 400 $ 28,400
- --------------------------------------------------------------------------------------------------------------
pcOrder.com, Inc.(1) 600 30,600
- --------------------------------------------------------------------------------------------------------------
Predictive Systems, Inc.(1) 300 19,650
- --------------------------------------------------------------------------------------------------------------
Ramp Networks, Inc.(1) 1,600 24,400
- --------------------------------------------------------------------------------------------------------------
Salon.com, Inc.(1) 3,600 18,000
- --------------------------------------------------------------------------------------------------------------
Stamps.com, Inc.(1) 750 31,219
- --------------------------------------------------------------------------------------------------------------
Student Advantage, Inc.(1) 1,500 33,281
- --------------------------------------------------------------------------------------------------------------
Tanning Technology Corp. 450 26,522
- --------------------------------------------------------------------------------------------------------------
Viant Corp.(1) 300 29,700
- --------------------------------------------------------------------------------------------------------------
WatchGuard Technologies, Inc.(1) 700 21,175
- --------------------------------------------------------------------------------------------------------------
WebTrends Corp.(1) 500 40,500
--------
758,274
- --------------------------------------------------------------------------------------------------------------
Computer Software--17.8%
Accrue Software, Inc.(1) 400 21,650
- --------------------------------------------------------------------------------------------------------------
Active Software, Inc.(1) 400 36,800
- --------------------------------------------------------------------------------------------------------------
Advent Software, Inc.(1) 1,500 96,656
- --------------------------------------------------------------------------------------------------------------
AGENCY.COM Ltd.(1) 100 5,100
- --------------------------------------------------------------------------------------------------------------
Allaire Corp.(1) 300 43,894
- --------------------------------------------------------------------------------------------------------------
Andover.Net, Inc.(1) 400 14,250
- --------------------------------------------------------------------------------------------------------------
Best Software, Inc.(1) 1,000 29,500
- --------------------------------------------------------------------------------------------------------------
BindView Development Corp.(1) 2,600 129,188
- --------------------------------------------------------------------------------------------------------------
Brio Technology, Inc.(1) 1,500 63,000
- --------------------------------------------------------------------------------------------------------------
Data Return Corp.(1) 700 37,450
- --------------------------------------------------------------------------------------------------------------
E.piphany, Inc.(1) 150 33,469
- --------------------------------------------------------------------------------------------------------------
eCollege.com(1) 800 8,750
- --------------------------------------------------------------------------------------------------------------
FreeMarkets, Inc.(1) 50 17,066
- --------------------------------------------------------------------------------------------------------------
GRIC Communications, Inc.(1) 200 5,075
- --------------------------------------------------------------------------------------------------------------
iBasis, Inc.(1) 500 14,375
- --------------------------------------------------------------------------------------------------------------
iManage, Inc.(1) 200 6,425
- --------------------------------------------------------------------------------------------------------------
Interactive Intelligence, Inc.(1) 1,100 29,288
- --------------------------------------------------------------------------------------------------------------
Intertrust Technologies Corp.(1) 150 17,644
- --------------------------------------------------------------------------------------------------------------
Legato Systems, Inc.(1) 600 41,288
- --------------------------------------------------------------------------------------------------------------
McAfee.com Corp.(1) 400 18,000
- --------------------------------------------------------------------------------------------------------------
Metasolv Software, Inc.(1) 250 20,438
- --------------------------------------------------------------------------------------------------------------
Micromuse, Inc.(1) 700 119,000
- --------------------------------------------------------------------------------------------------------------
Mission Critical Software, Inc.(1) 400 28,000
- --------------------------------------------------------------------------------------------------------------
National Information Consortium, Inc.(1) 800 25,600
- --------------------------------------------------------------------------------------------------------------
NetIQ Corp.(1) 1,200 62,475
- --------------------------------------------------------------------------------------------------------------
Novadigm, Inc.(1) 1,300 26,975
- --------------------------------------------------------------------------------------------------------------
OnDisplay, Inc.(1) 100 9,088
- --------------------------------------------------------------------------------------------------------------
Optio Software, Inc.(1) 1,000 23,500
- --------------------------------------------------------------------------------------------------------------
Preview Systems, Inc.(1) 200 12,975
- --------------------------------------------------------------------------------------------------------------
Primus Knowledge Solutions, Inc.(1) 700 31,719
</TABLE>
8 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Computer Software (continued)
Quest Software, Inc.(1) 200 $ 20,400
- --------------------------------------------------------------------------------------------------------------
SERENA Software, Inc.(1) 1,200 37,125
- --------------------------------------------------------------------------------------------------------------
SonicWALL, Inc. 400 16,100
- --------------------------------------------------------------------------------------------------------------
Telemate.Net Software, Inc.(1) 1,000 16,250
- --------------------------------------------------------------------------------------------------------------
TenFold Corp.(1) 700 27,956
- --------------------------------------------------------------------------------------------------------------
Verity, Inc.(1) 800 34,050
- --------------------------------------------------------------------------------------------------------------
Viador, Inc.(1) 700 29,663
- --------------------------------------------------------------------------------------------------------------
Vitria Technology, Inc.(1) 100 23,400
----------
1,233,582
- --------------------------------------------------------------------------------------------------------------
Communications Equipment--1.4%
Advanced Fibre Communications, Inc.(1) 1,200 53,625
- --------------------------------------------------------------------------------------------------------------
Extreme Networks, Inc.(1) 150 12,525
- --------------------------------------------------------------------------------------------------------------
Inet Technologies, Inc.(1) 450 31,444
----------
97,594
- --------------------------------------------------------------------------------------------------------------
Electronics--3.8%
ACT Manufacturing, Inc.(1) 1,200 45,000
- --------------------------------------------------------------------------------------------------------------
Alpha Industries, Inc.(1) 800 45,850
- --------------------------------------------------------------------------------------------------------------
ANADIGICS, Inc.(1) 400 18,875
- --------------------------------------------------------------------------------------------------------------
ASM International NV(1) 1,800 41,400
- --------------------------------------------------------------------------------------------------------------
ATMI, Inc.(1) 1,300 42,981
- --------------------------------------------------------------------------------------------------------------
Audiovox Corp., Cl. A(1) 1,000 30,375
- --------------------------------------------------------------------------------------------------------------
Caliper Technologies Corp.(1) 100 6,675
- --------------------------------------------------------------------------------------------------------------
InterTAN, Inc.(1) 1,200 31,350
----------
262,506
----------
Total Common Stocks (Cost $4,138,541) 5,835,100
<CAPTION>
Principal
Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements--1.5%
- --------------------------------------------------------------------------------------------------------------
Repurchase agreement with Banc One Capital Markets, Inc., 2.75%,
dated 12/31/99, to be repurchased at $100,023 on 1/3/00, collateralized
by U.S. Treasury Bonds, 5.25%-12%, 2/15/01-11/15/28, with a value
of $39,249 and U.S. Treasury Nts., 5%-7.50%, 12/31/00-2/15/07,
with a value of $62,809 (Cost $100,000) $100,000 100,000
- --------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $4,238,541) 85.7% 5,935,100
- --------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 14.3 991,496
--------- ----------
Net Assets 100.0% $6,926,596
========= ==========
</TABLE>
1. Non-income producing security.
See accompanying Notes to Financial Statements.
Oppenheimer Small Cap Growth Fund/VA 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
==========================================================================================
Assets
Investments, at value (cost $4,238,541)--see accompanying statement $5,935,100
- ------------------------------------------------------------------------------------------
Cash 1,000,432
- ------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 3,066
Interest and dividends 343
Other 5,360
----------
Total assets 6,944,301
==========================================================================================
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed 12,487
Shareholder reports 2,780
Legal, auditing and other professional fees 1,158
Registration and filing fees 1,080
Trustees' compensation 76
Other 124
----------
Total liabilities 17,705
==========================================================================================
Net Assets $6,926,596
==========
==========================================================================================
Composition of Net Assets
Paid-in capital $4,791,913
- ------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 438,124
- ------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 1,696,559
----------
Net assets--applicable to 492,201 shares of beneficial interest outstanding $6,926,596
==========
==========================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $14.07
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
==========================================================================================
Investment Income
Interest $ 25,318
- ------------------------------------------------------------------------------------------
Dividends 1,127
----------
Total income 26,445
==========================================================================================
Expenses
Management fees 20,414
- ------------------------------------------------------------------------------------------
Shareholder reports 16,643
- ------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 7,311
- ------------------------------------------------------------------------------------------
Custodian fees and expenses 2,410
- ------------------------------------------------------------------------------------------
Trustees' compensation 1,051
- ------------------------------------------------------------------------------------------
Other 2,373
----------
Total expenses 50,202
Less expenses paid indirectly (2,398)
Less voluntary assumption of expenses (11,200)
----------
Net expenses 36,604
==========================================================================================
Net Investment Loss (10,159)
==========================================================================================
Realized and Unrealized Gain
Net realized gain on investments 493,584
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 1,591,588
----------
Net realized and unrealized gain 2,085,172
==========================================================================================
Net Increase in Net Assets Resulting from Operations $2,075,013
==========
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Small Cap Growth Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, December 31,
1999 1998(1)
===============================================================================================================
<S> <C> <C>
Operations
Net investment loss $ (10,159) $ (2,339)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 493,584 (45,301)
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 1,591,588 104,971
---------- --------
Net increase in net assets resulting from operations 2,075,013 57,331
===============================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions 3,857,279 936,973
===============================================================================================================
Net Assets
Total increase 5,932,292 994,304
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 994,304 --
---------- --------
End of period $6,926,596 $994,304
========== ========
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
See accompanying Notes to Financial Statements.
12 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998(1)
===========================================================================================
<S> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $ 9.60 $10.00
- -------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.02) (.02)
Net realized and unrealized gain (loss) 4.49 (.38)
- -------------------------------------------------------------------------------------------
Total income (loss) from investment operations 4.47 (.40)
- -------------------------------------------------------------------------------------------
Net asset value, end of period $14.07 $ 9.60
====== ======
===========================================================================================
Total Return, at Net Asset Value(2) 46.56% (4.00)%
===========================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $6,927 $994
- -------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,738 $441
- -------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment loss (0.37)% (0.79)%
Expenses 1.83% 0.87%(4)
Expenses, net of voluntary assumption of expenses 1.34% N/A
- -------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 176% 61%
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Total returns are not annualized for periods of less than
one full year. Total return information does not reflect expenses that apply at
the separate account level or to related insurance products. Inclusion of these
charges would reduce the total return figures for all periods shown.
3. Annualized for periods less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $7,060,737 and $4,155,665, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer Small Cap Growth Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Small Cap Growth Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek capital
appreciation. The Fund'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 price 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and 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. 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.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect a
decrease in accumulated net investment loss of $10,159. Accumulated net realized
gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
14 Oppenheimer Small Cap Growth Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998(1)
---------------------------- ------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 504,223 $5,008,676 114,434 $1,030,883
Redeemed (115,553) (1,151,397) (10,903) (93,910)
-------- ---------- ------- ----------
Net increase 388,670 $3,857,279 103,531 $ 936,973
======== ========== ======= ==========
</TABLE>
1. For the period from May 1, 1998 (commencement of operations) to December 31,
1998.
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of $1,696,559
was composed of gross appreciation of $1,896,881, and gross depreciation of
$200,322.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. 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 and
0.60% of average annual net assets over $800 million. The Manager has
voluntarily reimbursed certain Fund expenses. The Fund's management fee for the
year ended December 31, 1999 was 0.75% of average annual net assets.
- --------------------------------------------------------------------------------
Transfer Agent Fees. 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 for cost.
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
================================================================================
To the Board of Trustees and Shareholders of Oppenheimer Main Street Growth &
Income Fund/VA:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Main Street Growth & Income/VA
(which is a series of Oppenheimer Variable Account Funds) as of December 31,
1999, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended December 31, 1999 and
1998 and the financial highlights for the period July 5, 1995, to December 31,
1999. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Main Street Growth & Income Fund/VA as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
- ----------------------------
Deloitte & Touche LLP
Denver, Colorado
January 24, 2000
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares Note 1
===================================================================================================================
<S> <C> <C>
Common Stocks--94.6%
- -------------------------------------------------------------------------------------------------------------------
Basic Materials--2.9%
- -------------------------------------------------------------------------------------------------------------------
Chemicals--2.0%
Dexter Corp. 7,000 $ 278,250
- -------------------------------------------------------------------------------------------------------------------
Dow Chemical Co. 18,500 2,472,062
- -------------------------------------------------------------------------------------------------------------------
Du Pont (E.I.) De Nemours & Co. 88,400 5,823,350
- -------------------------------------------------------------------------------------------------------------------
Ecolab, Inc. 6,900 269,962
- -------------------------------------------------------------------------------------------------------------------
Engelhard Corp. 3,000 56,625
- -------------------------------------------------------------------------------------------------------------------
Great Lakes Chemical Corp. 1,200 45,825
- -------------------------------------------------------------------------------------------------------------------
International Flavors & Fragrances, Inc. 3,000 113,250
- -------------------------------------------------------------------------------------------------------------------
Lafarge Corp. 8,100 223,762
- -------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co. 6,900 280,744
- -------------------------------------------------------------------------------------------------------------------
Schulman (A.), Inc. 10,000 163,125
- -------------------------------------------------------------------------------------------------------------------
Union Carbide Corp. 20,500 1,368,375
- -------------------------------------------------------------------------------------------------------------------
Universal Corp. 5,000 114,062
- -------------------------------------------------------------------------------------------------------------------
W.R. Grace & Co.(1) 4,000 55,500
-----------
11,264,892
- -------------------------------------------------------------------------------------------------------------------
Gold & Precious Minerals--0.0%
Homestake Mining Co. 10,100 78,906
- -------------------------------------------------------------------------------------------------------------------
Metals--0.6%
AK Steel Holding Corp. 10,000 188,750
- -------------------------------------------------------------------------------------------------------------------
Alcoa, Inc. 18,400 1,527,200
- -------------------------------------------------------------------------------------------------------------------
Inco Ltd.(1) 19,900 467,650
- -------------------------------------------------------------------------------------------------------------------
Nucor Corp. 6,000 328,875
- -------------------------------------------------------------------------------------------------------------------
Reliance Steel & Aluminum Co. 15,000 351,562
- -------------------------------------------------------------------------------------------------------------------
Ryerson Tull, Inc. 13,000 252,687
- -------------------------------------------------------------------------------------------------------------------
Worthington Industries, Inc. 1,600 26,500
-----------
3,143,224
- -------------------------------------------------------------------------------------------------------------------
Paper--0.3%
Georgia Pacific Group 7,600 385,700
- -------------------------------------------------------------------------------------------------------------------
Louisiana-Pacific Corp. 21,300 303,525
- -------------------------------------------------------------------------------------------------------------------
Rayonier, Inc. 4,000 193,250
- -------------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 8,300 596,044
- -------------------------------------------------------------------------------------------------------------------
Willamette Industries, Inc. 7,000 325,062
-----------
1,803,581
- -------------------------------------------------------------------------------------------------------------------
Capital Goods--10.5%
- -------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--1.6%
Boeing Co. 147,100 6,113,844
- -------------------------------------------------------------------------------------------------------------------
General Dynamics Corp. 25,300 1,334,575
- -------------------------------------------------------------------------------------------------------------------
Lockheed Martin Corp. 11,600 253,750
- -------------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp. 8,000 432,500
- -------------------------------------------------------------------------------------------------------------------
Raytheon Co., Cl. B 15,000 398,437
- -------------------------------------------------------------------------------------------------------------------
TRW, Inc. 7,600 394,725
-----------
8,927,831
4 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Electrical Equipment--3.7%
AVX Corp. 9,400 $ 469,412
- -------------------------------------------------------------------------------------------------------------------
CommScope, Inc.(1) 65,000 2,620,312
- -------------------------------------------------------------------------------------------------------------------
Conexant Systems, Inc.(1) 9,400 623,925
- -------------------------------------------------------------------------------------------------------------------
Emerson Electric Co. 30,000 1,721,250
- -------------------------------------------------------------------------------------------------------------------
General Electric Co. 80,000 12,380,000
- -------------------------------------------------------------------------------------------------------------------
Integrated Device Technology, Inc.(1) 7,000 203,000
- -------------------------------------------------------------------------------------------------------------------
Rockwell International Corp. 24,700 1,182,512
- -------------------------------------------------------------------------------------------------------------------
SPX Corp.(1) 6,000 484,875
- -------------------------------------------------------------------------------------------------------------------
Symbol Technologies, Inc. 8,850 562,528
-----------
20,247,814
- -------------------------------------------------------------------------------------------------------------------
Industrial Services--0.6%
Coflexip SA, Sponsored ADR 62,500 2,375,000
- -------------------------------------------------------------------------------------------------------------------
Fluor Corp. 4,900 224,787
- -------------------------------------------------------------------------------------------------------------------
Payches, Inc. 3,300 132,000
- -------------------------------------------------------------------------------------------------------------------
Valassis Communications, Inc.(1) 10,000 422,500
-----------
3,154,287
- -------------------------------------------------------------------------------------------------------------------
Manufacturing--4.6%
American Standard Cos., Inc.(1) 75,000 3,440,625
- -------------------------------------------------------------------------------------------------------------------
Avery-Dennison Corp. 28,500 2,076,937
- -------------------------------------------------------------------------------------------------------------------
Ball Corp. 3,400 133,875
- -------------------------------------------------------------------------------------------------------------------
Bemis Co., Inc. 4,700 163,912
- -------------------------------------------------------------------------------------------------------------------
Briggs & Stratton Corp. 4,000 214,500
- -------------------------------------------------------------------------------------------------------------------
Cooper Industries, Inc. 13,900 562,081
- -------------------------------------------------------------------------------------------------------------------
Corning, Inc. 4,500 580,219
- -------------------------------------------------------------------------------------------------------------------
Crown Cork & Seal Co., Inc. 2,500 55,937
- -------------------------------------------------------------------------------------------------------------------
Cummins Engine Co., Inc. 1,200 57,975
- -------------------------------------------------------------------------------------------------------------------
Danaher Corp. 5,700 275,025
- -------------------------------------------------------------------------------------------------------------------
Dover Corp. 23,200 1,052,700
- -------------------------------------------------------------------------------------------------------------------
Eaton Corp. 8,700 631,837
- -------------------------------------------------------------------------------------------------------------------
Honeywell International, Inc. 84,375 4,867,383
- -------------------------------------------------------------------------------------------------------------------
Illinois Tool Works, Inc. 20,300 1,371,519
- -------------------------------------------------------------------------------------------------------------------
Mark IV Industries, Inc. 15,000 265,312
- -------------------------------------------------------------------------------------------------------------------
Mettler-Toledo International, Inc.(1) 6,000 229,125
- -------------------------------------------------------------------------------------------------------------------
Microchip Technology, Inc.(1) 3,000 205,312
- -------------------------------------------------------------------------------------------------------------------
Miller (Herman), Inc. 10,000 230,000
- -------------------------------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 42,500 4,159,687
- -------------------------------------------------------------------------------------------------------------------
PACCAR, Inc. 1,800 79,762
- -------------------------------------------------------------------------------------------------------------------
Parker-Hannifin Corp. 7,100 364,319
- -------------------------------------------------------------------------------------------------------------------
Pentair, Inc. 2,000 77,000
- -------------------------------------------------------------------------------------------------------------------
Temple-Inland, Inc. 2,000 131,875
- -------------------------------------------------------------------------------------------------------------------
Tyco International Ltd. 33,300 1,294,537
- -------------------------------------------------------------------------------------------------------------------
United Technologies Corp. 47,500 3,087,500
-----------
25,608,954
Oppenheimer Main Street Growth & Income Fund/VA 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Communication Services--5.7%
- -------------------------------------------------------------------------------------------------------------------
Telecommunications: Long Distance--3.8%
ADC Telecommunications, Inc.(1) 5,700 $ 413,606
- -------------------------------------------------------------------------------------------------------------------
ALLTELL Corp. 21,000 1,736,437
- -------------------------------------------------------------------------------------------------------------------
AT&T Corp. 299,300 15,189,475
- -------------------------------------------------------------------------------------------------------------------
Comverse Technology, Inc.(1) 4,000 579,000
- -------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc.(1)(2) 1,230 38,191
- -------------------------------------------------------------------------------------------------------------------
Sprint Corp. (Fon Group) 50,000 3,365,625
-----------
21,322,334
- -------------------------------------------------------------------------------------------------------------------
Telephone Utilities--1.9%
BellSouth Corp. 166,000 7,770,875
- -------------------------------------------------------------------------------------------------------------------
GTE Corp. 29,800 2,102,762
- -------------------------------------------------------------------------------------------------------------------
Western Wireless Corp.(1) 9,000 600,750
-----------
10,474,387
- -------------------------------------------------------------------------------------------------------------------
Telecommunications: Wireless--0.0%
United States Cellular Corp.(1) 2,000 201,875
- -------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--17.1%
- -------------------------------------------------------------------------------------------------------------------
Autos & Housing--2.2%
Arvin Industries, Inc. 6,900 195,787
- -------------------------------------------------------------------------------------------------------------------
Bandag, Inc. 2,000 50,000
- -------------------------------------------------------------------------------------------------------------------
Centex Construction Products, Inc. 6,000 234,000
- -------------------------------------------------------------------------------------------------------------------
Cooper Tire & Rubber Co. 7,700 119,831
- -------------------------------------------------------------------------------------------------------------------
Dana Corp. 3,800 113,762
- -------------------------------------------------------------------------------------------------------------------
Delphi Automotive Systems Corp. 79,231 1,247,888
- -------------------------------------------------------------------------------------------------------------------
Fortune Brands, Inc. 15,000 495,937
- -------------------------------------------------------------------------------------------------------------------
Furniture Brands International, Inc.(1) 5,000 110,000
- -------------------------------------------------------------------------------------------------------------------
General Motors Corp. 57,500 4,179,531
- -------------------------------------------------------------------------------------------------------------------
Hughes Supply, Inc. 6,900 148,781
- -------------------------------------------------------------------------------------------------------------------
Johns Manville Corp. 25,800 361,200
- -------------------------------------------------------------------------------------------------------------------
Johnson Controls, Inc. 6,600 375,375
- -------------------------------------------------------------------------------------------------------------------
Lear Corp.(1) 17,500 560,000
- -------------------------------------------------------------------------------------------------------------------
Leggett & Platt, Inc. 14,100 302,269
- -------------------------------------------------------------------------------------------------------------------
Masco Corp. 9,000 228,375
- -------------------------------------------------------------------------------------------------------------------
Maytag Corp. 9,000 432,000
- -------------------------------------------------------------------------------------------------------------------
Meritor Automotive, Inc. 12,000 232,500
- -------------------------------------------------------------------------------------------------------------------
NVR, Inc.(1) 5,000 238,750
- -------------------------------------------------------------------------------------------------------------------
Ryland Group, Inc. (The) 7,000 161,437
- -------------------------------------------------------------------------------------------------------------------
Snap-On, Inc. 4,300 114,219
- -------------------------------------------------------------------------------------------------------------------
Southdown, Inc. 5,400 278,775
- -------------------------------------------------------------------------------------------------------------------
Toll Brothers, Inc.(1) 10,000 186,250
- -------------------------------------------------------------------------------------------------------------------
Tower Automotive, Inc.(1) 8,900 137,394
- -------------------------------------------------------------------------------------------------------------------
Vulcan Materials Co. 8,000 319,500
6 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Autos & Housing (continued)
Webb (Del E.) Corp.(1) 9,900 $ 246,881
- -------------------------------------------------------------------------------------------------------------------
Whirlpool Corp. 12,700 826,294
- -------------------------------------------------------------------------------------------------------------------
York International Corp. 4,800 131,700
-----------
12,028,436
- -------------------------------------------------------------------------------------------------------------------
Consumer Services--0.8%
Avis Rent A Car, Inc.(1) 18,000 460,125
- -------------------------------------------------------------------------------------------------------------------
Catalina Marketing Corp.(1) 3,500 405,125
- -------------------------------------------------------------------------------------------------------------------
CDI Corp.(1) 9,900 238,837
- -------------------------------------------------------------------------------------------------------------------
Dun & Bradstreet Corp. 12,000 354,000
- -------------------------------------------------------------------------------------------------------------------
H&R Block, Inc. 14,000 612,500
- -------------------------------------------------------------------------------------------------------------------
Hertz Corp., Cl. A 5,000 250,625
- -------------------------------------------------------------------------------------------------------------------
Interpublic Group of Cos., Inc. 27,000 1,557,562
- -------------------------------------------------------------------------------------------------------------------
Young & Rubicam, Inc. 8,000 566,000
-----------
4,444,774
- -------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.5%
Brunswick Corp. 25,000 556,250
- -------------------------------------------------------------------------------------------------------------------
Harley-Davidson, Inc. 10,000 640,625
- -------------------------------------------------------------------------------------------------------------------
Hasbro, Inc. 10,000 190,625
- -------------------------------------------------------------------------------------------------------------------
Marriott International, Inc., Cl. A 17,000 536,562
- -------------------------------------------------------------------------------------------------------------------
MGM Grand, Inc. 8,624 433,895
- -------------------------------------------------------------------------------------------------------------------
Park Place Entertainment Corp.(1) 50,000 625,000
-----------
2,982,957
- -------------------------------------------------------------------------------------------------------------------
Media--3.0%
Central Newspapers, Inc., Cl. A 5,000 196,875
- -------------------------------------------------------------------------------------------------------------------
Deluxe Corp. 10,000 274,375
- -------------------------------------------------------------------------------------------------------------------
Dow Jones & Co., Inc. 4,000 272,000
- -------------------------------------------------------------------------------------------------------------------
Gannett Co., Inc. 28,000 2,283,750
- -------------------------------------------------------------------------------------------------------------------
Harland (John H.) Co. 10,000 183,125
- -------------------------------------------------------------------------------------------------------------------
Knight-Ridder, Inc. 10,800 642,600
- -------------------------------------------------------------------------------------------------------------------
McClatchy Co., Cl. A 5,000 216,250
- -------------------------------------------------------------------------------------------------------------------
New York Times Co., Cl. A 15,000 736,875
- -------------------------------------------------------------------------------------------------------------------
R.H. Donnelley Corp.(1) 9,900 186,862
- -------------------------------------------------------------------------------------------------------------------
Readers Digest Assn., Inc., Cl. A, Non-Vtg. 28,300 827,775
- -------------------------------------------------------------------------------------------------------------------
Snyder Communications, Inc.(1) 5,000 96,250
- -------------------------------------------------------------------------------------------------------------------
Time Warner, Inc. 114,700 8,308,581
- -------------------------------------------------------------------------------------------------------------------
Times Mirror Co. (The), Cl. A 2,400 160,800
- -------------------------------------------------------------------------------------------------------------------
Tribune Co. 20,000 1,101,250
- -------------------------------------------------------------------------------------------------------------------
USA Networks, Inc.(1) 20,000 1,105,000
-----------
16,592,368
Oppenheimer Main Street Growth & Income Fund/VA 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Retail: General--4.8%
Dayton Hudson Corp. 15,600 $ 1,145,625
- -------------------------------------------------------------------------------------------------------------------
Dillard's, Inc. 4,000 80,750
- -------------------------------------------------------------------------------------------------------------------
Dollar General Corp. 15,600 354,900
- -------------------------------------------------------------------------------------------------------------------
Family Dollar Stores, Inc. 6,000 97,875
- -------------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc.(1) 87,500 4,424,219
- -------------------------------------------------------------------------------------------------------------------
K Mart Corp.(1) 55,000 553,437
- -------------------------------------------------------------------------------------------------------------------
Kohl's Corp.(1) 7,700 555,844
- -------------------------------------------------------------------------------------------------------------------
May Department Stores Co. 45,000 1,451,250
- -------------------------------------------------------------------------------------------------------------------
Nordstrom, Inc. 6,000 157,125
- -------------------------------------------------------------------------------------------------------------------
Penney (J.C.) Co., Inc. 7,000 139,562
- -------------------------------------------------------------------------------------------------------------------
Sears Roebuck & Co. 42,000 1,278,375
- -------------------------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 237,700 16,431,012
-----------
26,669,974
- -------------------------------------------------------------------------------------------------------------------
Retail: Specialty--5.1%
Abercrombie & Fitch Co., Cl. A(1) 43,000 1,147,562
- -------------------------------------------------------------------------------------------------------------------
American Eagle Outfitters, Inc.(1) 11,200 504,000
- -------------------------------------------------------------------------------------------------------------------
American Greetings Corp., Cl. A 2,200 51,975
- -------------------------------------------------------------------------------------------------------------------
Ann Taylor Stores Corp.(1) 10,000 344,375
- -------------------------------------------------------------------------------------------------------------------
Bed Bath & Beyond, Inc.(1) 2,700 93,825
- -------------------------------------------------------------------------------------------------------------------
Best Buy Co., Inc.(1) 23,000 1,154,312
- -------------------------------------------------------------------------------------------------------------------
BJ's Wholesale Club, Inc.(1) 8,000 292,000
- -------------------------------------------------------------------------------------------------------------------
Circuit City Stores-Circuit City Group 9,600 432,600
- -------------------------------------------------------------------------------------------------------------------
Gap, Inc. 55,500 2,553,000
- -------------------------------------------------------------------------------------------------------------------
Home Depot, Inc. 180,600 12,382,387
- -------------------------------------------------------------------------------------------------------------------
Lands' End, Inc.(1) 4,700 163,325
- -------------------------------------------------------------------------------------------------------------------
Limited, Inc. 20,700 896,569
- -------------------------------------------------------------------------------------------------------------------
Linens 'N Things, Inc.(1) 5,000 148,125
- -------------------------------------------------------------------------------------------------------------------
Lowe's Cos., Inc. 21,500 1,284,625
- -------------------------------------------------------------------------------------------------------------------
Nike, Inc., Cl. B 20,000 991,250
- -------------------------------------------------------------------------------------------------------------------
Office Depot, Inc.(1) 20,000 218,750
- -------------------------------------------------------------------------------------------------------------------
Payless ShoeSource, Inc.(1) 15,000 705,000
- -------------------------------------------------------------------------------------------------------------------
Ross Stores, Inc. 43,000 771,312
- -------------------------------------------------------------------------------------------------------------------
Sherwin-Williams Co. 23,000 483,000
- -------------------------------------------------------------------------------------------------------------------
Shopko Stores, Inc.(1) 10,000 230,000
- -------------------------------------------------------------------------------------------------------------------
Tandy Corp. 20,000 983,750
- -------------------------------------------------------------------------------------------------------------------
Tiffany & Co. 10,000 892,500
- -------------------------------------------------------------------------------------------------------------------
TJX Cos., Inc. 31,200 637,650
- -------------------------------------------------------------------------------------------------------------------
Too, Inc.(1) 2,957 51,008
- -------------------------------------------------------------------------------------------------------------------
Toys "R" Us, Inc.(1) 23,000 329,187
- -------------------------------------------------------------------------------------------------------------------
Zale Corp.(1) 12,000 580,500
-----------
28,322,587
8 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Textile/Apparel & Home Furnishings--0.7%
Jones Apparel Group, Inc.(1) 65,099 $1,765,810
- -------------------------------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 14,000 526,750
- -------------------------------------------------------------------------------------------------------------------
Mohawk Industries, Inc.(1) 7,900 208,362
- -------------------------------------------------------------------------------------------------------------------
Shaw Industries, Inc. 46,000 710,125
- -------------------------------------------------------------------------------------------------------------------
VF Corp. 16,000 480,000
- -------------------------------------------------------------------------------------------------------------------
Warnaco Group, Inc. (The), Cl. A 11,600 142,825
- -------------------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc. 12,000 210,000
----------
4,043,872
- -------------------------------------------------------------------------------------------------------------------
Consumer Staples--5.7%
- -------------------------------------------------------------------------------------------------------------------
Beverages--0.5%
Adolph Coors Co., Cl. B 3,500 183,750
- -------------------------------------------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 37,800 2,679,075
- -------------------------------------------------------------------------------------------------------------------
Brown-Forman Corp., Cl. B 700 40,075
----------
2,902,900
- -------------------------------------------------------------------------------------------------------------------
Broadcasting--1.7%
CBS Corp.(1) 38,000 2,429,625
- -------------------------------------------------------------------------------------------------------------------
Comcast Corp., Cl. A Special 101,000 5,106,813
- -------------------------------------------------------------------------------------------------------------------
Cox Communications, Inc., Cl. A(1) 10,000 515,000
- -------------------------------------------------------------------------------------------------------------------
MediaOne Group, Inc.(1) 21,000 1,613,063
----------
9,664,501
- -------------------------------------------------------------------------------------------------------------------
Entertainment--0.7%
Brinker International, Inc.(1) 85,000 2,040,000
- -------------------------------------------------------------------------------------------------------------------
Darden Restaurants, Inc. 14,600 264,625
- -------------------------------------------------------------------------------------------------------------------
Ruby Tuesday, Inc. 10,000 181,875
- -------------------------------------------------------------------------------------------------------------------
Tricon Global Restaurants, Inc.(1) 27,600 1,066,050
- -------------------------------------------------------------------------------------------------------------------
Wendy's International, Inc. 26,600 548,625
----------
4,101,175
- -------------------------------------------------------------------------------------------------------------------
Food--0.4%
Agribrands International, Inc.(1) 10,000 460,000
- -------------------------------------------------------------------------------------------------------------------
ConAgra, Inc. 12,500 282,031
- -------------------------------------------------------------------------------------------------------------------
Corn Products International, Inc. 9,900 324,225
- -------------------------------------------------------------------------------------------------------------------
Hormel Foods Corp. 4,000 162,500
- -------------------------------------------------------------------------------------------------------------------
IBP, Inc. 12,000 216,000
- -------------------------------------------------------------------------------------------------------------------
Sysco Corp. 20,800 822,900
----------
2,267,656
- -------------------------------------------------------------------------------------------------------------------
Food & Drug Retailers--0.4%
Albertson's, Inc. 31,800 1,025,550
- -------------------------------------------------------------------------------------------------------------------
CVS Corp. 26,500 1,058,344
- -------------------------------------------------------------------------------------------------------------------
SUPERVALU, Inc. 7,700 154,000
- -------------------------------------------------------------------------------------------------------------------
Walgreen Co. 5,100 149,175
----------
2,387,069
- -------------------------------------------------------------------------------------------------------------------
Household Goods--0.6%
Kimberly-Clark Corp. 50,000 3,262,500
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Tobacco--1.4%
Philip Morris Cos., Inc. 275,000 $ 6,376,563
- -------------------------------------------------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc. 44,900 791,363
- -------------------------------------------------------------------------------------------------------------------
UST, Inc. 15,700 395,444
-----------
7,563,370
- -------------------------------------------------------------------------------------------------------------------
Energy--11.5%
- -------------------------------------------------------------------------------------------------------------------
Energy Services--3.0%
BJ Services Co.(1) 57,500 2,404,219
- -------------------------------------------------------------------------------------------------------------------
Coastal Corp. 4,600 163,013
- -------------------------------------------------------------------------------------------------------------------
Cooper Cameron Corp.(1) 60,000 2,936,250
- -------------------------------------------------------------------------------------------------------------------
Nabors Industries, Inc.(1) 30,000 928,125
- -------------------------------------------------------------------------------------------------------------------
Noble Drilling Corp.(1) 60,000 1,965,000
- -------------------------------------------------------------------------------------------------------------------
Santa Fe International Corp. 50,000 1,293,750
- -------------------------------------------------------------------------------------------------------------------
Stolt Comex Seaway SA, ADR(1) 315,000 3,465,000
- -------------------------------------------------------------------------------------------------------------------
Transocean Sedco Forex, Inc. 39,000 1,313,813
- -------------------------------------------------------------------------------------------------------------------
Weatherford International, Inc. 50,000 1,996,875
-----------
16,466,045
- -------------------------------------------------------------------------------------------------------------------
Oil: Domestic--5.2%
Amerada Hess Corp. 13,700 777,475
- -------------------------------------------------------------------------------------------------------------------
Burlington Resources, Inc. 37,500 1,239,844
- -------------------------------------------------------------------------------------------------------------------
Chevron Corp. 37,700 3,265,763
- -------------------------------------------------------------------------------------------------------------------
Chieftain International, Inc.(1) 53,600 924,600
- -------------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl. B 11,000 273,625
- -------------------------------------------------------------------------------------------------------------------
Devon Energy Corp. 25,000 821,875
- -------------------------------------------------------------------------------------------------------------------
EOG Resources, Inc. 35,600 625,225
- -------------------------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 140,288 11,301,952
- -------------------------------------------------------------------------------------------------------------------
Frontier Oil Corp.(1) 61,300 413,775
- -------------------------------------------------------------------------------------------------------------------
Murphy Oil Corp. 21,600 1,239,300
- -------------------------------------------------------------------------------------------------------------------
Newfield Exploration Co.(1) 16,000 428,000
- -------------------------------------------------------------------------------------------------------------------
Noble Affiliates, Inc. 8,000 171,500
- -------------------------------------------------------------------------------------------------------------------
Phillips Petroleum Co. 15,000 705,000
- -------------------------------------------------------------------------------------------------------------------
Stone Energy Corp.(1) 9,700 345,563
- -------------------------------------------------------------------------------------------------------------------
Tesoro Petroleum Corp.(1) 34,000 393,125
- -------------------------------------------------------------------------------------------------------------------
Texaco, Inc. 55,100 2,992,619
- -------------------------------------------------------------------------------------------------------------------
Tosco Corp. 5,000 135,938
- -------------------------------------------------------------------------------------------------------------------
Vastar Resources, Inc. 50,000 2,950,000
-----------
29,005,179
10 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Oil: International--3.3%
Anderson Exploration Ltd.(1) 66,400 $ 791,405
- -------------------------------------------------------------------------------------------------------------------
Beau Canada Exploration Ltd.(1) 308,600 362,482
- -------------------------------------------------------------------------------------------------------------------
Berkley Petroleum Corp.(1) 90,000 786,637
- -------------------------------------------------------------------------------------------------------------------
Canadian 88 Energy Corp. 300,000 414,565
- -------------------------------------------------------------------------------------------------------------------
Canadian Hunter Exploration Ltd.(1) 15,000 246,148
- -------------------------------------------------------------------------------------------------------------------
Canadian Natural Resources Ltd.(1) 70,000 1,704,899
- -------------------------------------------------------------------------------------------------------------------
Encal Energy Ltd.(1) 70,000 319,215
- -------------------------------------------------------------------------------------------------------------------
Newport Petroleum Corp.(1) 152,500 347,716
- -------------------------------------------------------------------------------------------------------------------
Paramount Resources Ltd. 49,900 586,126
- -------------------------------------------------------------------------------------------------------------------
Prize Energy, Inc.(1) 57,692 11,959
- -------------------------------------------------------------------------------------------------------------------
Ranger Oil Ltd.(1) 85,300 265,218
- -------------------------------------------------------------------------------------------------------------------
Rio Alto Exploration Ltd.(1) 29,300 412,990
- -------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 173,100 10,461,731
- -------------------------------------------------------------------------------------------------------------------
Talisman Energy, Inc.(1) 50,000 1,274,788
- -------------------------------------------------------------------------------------------------------------------
Ulster Petroleums Ltd.(1) 35,000 310,751
-----------
18,296,630
- -------------------------------------------------------------------------------------------------------------------
Financial--9.2%
- -------------------------------------------------------------------------------------------------------------------
Banks--2.7%
Bank of America Corp. 30,000 1,505,625
- -------------------------------------------------------------------------------------------------------------------
BB&T Corp. 11,600 317,550
- -------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 70,000 5,438,125
- -------------------------------------------------------------------------------------------------------------------
First Union Corp. 41,200 1,351,875
- -------------------------------------------------------------------------------------------------------------------
M&T Bank Corp. 100 41,425
- -------------------------------------------------------------------------------------------------------------------
National City Corp. 6,000 142,125
- -------------------------------------------------------------------------------------------------------------------
Northern Trust Corp. 10,600 561,800
- -------------------------------------------------------------------------------------------------------------------
Old Kent Financial Corp. 17,000 601,375
- -------------------------------------------------------------------------------------------------------------------
PNC Bank Corp. 32,000 1,424,000
- -------------------------------------------------------------------------------------------------------------------
Prosperity Bancshares, Inc. 67,500 1,080,000
- -------------------------------------------------------------------------------------------------------------------
TCF Financial Corp. 3,000 74,625
- -------------------------------------------------------------------------------------------------------------------
Wachovia Corp. 6,800 462,400
- -------------------------------------------------------------------------------------------------------------------
Wells Fargo Co. 42,800 1,730,725
- -------------------------------------------------------------------------------------------------------------------
Zions Bancorp 3,000 177,563
-----------
14,909,213
Oppenheimer Main Street Growth & Income Fund/VA 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Diversified Financial--3.6%
AMBAC Financial Group, Inc. 7,000 $ 365,313
- -------------------------------------------------------------------------------------------------------------------
Bear Stearns Cos., Inc. 8,500 363,375
- -------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 134,500 7,473,156
- -------------------------------------------------------------------------------------------------------------------
Financial Security Assurance Holdings Ltd. 7,000 364,875
- -------------------------------------------------------------------------------------------------------------------
Freddie Mac 26,800 1,261,275
- -------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 18,600 1,751,888
- -------------------------------------------------------------------------------------------------------------------
Household International, Inc. 17,000 633,250
- -------------------------------------------------------------------------------------------------------------------
MGIC Investment Corp. 21,500 1,294,031
- -------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 17,300 2,469,575
- -------------------------------------------------------------------------------------------------------------------
PaineWebber Group, Inc. 7,400 287,213
- -------------------------------------------------------------------------------------------------------------------
PMI Group, Inc. (The) 30,000 1,464,375
- -------------------------------------------------------------------------------------------------------------------
Providian Financial Corp. 19,000 1,730,188
- -------------------------------------------------------------------------------------------------------------------
SEI Investments Co. 2,000 238,031
-----------
19,696,545
- -------------------------------------------------------------------------------------------------------------------
Insurance--2.4%
Aetna, Inc. 9,000 502,313
- -------------------------------------------------------------------------------------------------------------------
AFLAC, Inc. 6,300 297,281
- -------------------------------------------------------------------------------------------------------------------
Allmerica Financial Corp. 16,000 890,000
- -------------------------------------------------------------------------------------------------------------------
Allstate Corp. 48,000 1,152,000
- -------------------------------------------------------------------------------------------------------------------
American General Corp. 11,400 864,975
- -------------------------------------------------------------------------------------------------------------------
AXA Financial, Inc. 46,000 1,558,250
- -------------------------------------------------------------------------------------------------------------------
Cigna Corp. 32,000 2,578,000
- -------------------------------------------------------------------------------------------------------------------
Cincinnati Financial Corp. 9,700 302,519
- -------------------------------------------------------------------------------------------------------------------
Conseco, Inc. 14,600 260,975
- -------------------------------------------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 10,000 440,000
- -------------------------------------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 9,500 648,375
- -------------------------------------------------------------------------------------------------------------------
Lincoln National Corp. 20,000 800,000
- -------------------------------------------------------------------------------------------------------------------
Loews Corp. 15,100 916,381
- -------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc. 8,000 765,500
- -------------------------------------------------------------------------------------------------------------------
Progressive Corp. 5,200 380,250
- -------------------------------------------------------------------------------------------------------------------
Quantum Corp.-DLT & Storage Systems(1) 6,000 90,750
- -------------------------------------------------------------------------------------------------------------------
Radian Group, Inc. 4,000 191,000
- -------------------------------------------------------------------------------------------------------------------
UnumProvident Corp. 12,000 384,750
-----------
13,023,319
- -------------------------------------------------------------------------------------------------------------------
Savings & Loans--0.5%
Dime Bancorp, Inc. 15,000 226,875
- -------------------------------------------------------------------------------------------------------------------
Golden State Bancorp, Inc.(1) 30,000 517,500
- -------------------------------------------------------------------------------------------------------------------
Golden West Financial Corp. 5,000 167,500
- -------------------------------------------------------------------------------------------------------------------
Greenpoint Financial Corp. 13,000 309,563
- -------------------------------------------------------------------------------------------------------------------
Washington Mutual, Inc. 62,000 1,612,000
- -------------------------------------------------------------------------------------------------------------------
Webster Financial Corp. 5,000 117,813
-----------
2,951,251
12 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Healthcare--7.4%
- -------------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--6.4%
Abbott Laboratories 51,100 $ 1,855,569
- -------------------------------------------------------------------------------------------------------------------
Alpharma, Inc. 5,000 153,750
- -------------------------------------------------------------------------------------------------------------------
ALZA Corp., Cl. A(1) 5,000 173,125
- -------------------------------------------------------------------------------------------------------------------
Amgen, Inc.(1) 84,200 5,057,263
- -------------------------------------------------------------------------------------------------------------------
Andrx Corp.(1) 10,000 423,125
- -------------------------------------------------------------------------------------------------------------------
Biogen, Inc.(1) 19,000 1,605,500
- -------------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 98,500 6,322,469
- -------------------------------------------------------------------------------------------------------------------
Johnson & Johnson 92,200 8,586,125
- -------------------------------------------------------------------------------------------------------------------
Mallinckrodt, Inc. 4,000 127,250
- -------------------------------------------------------------------------------------------------------------------
Medimmune, Inc.(1) 6,000 995,250
- -------------------------------------------------------------------------------------------------------------------
Merck & Co., Inc. 88,600 5,941,738
- -------------------------------------------------------------------------------------------------------------------
Millennium Pharmaceuticals, Inc.(1) 6,000 732,000
- -------------------------------------------------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 16,800 756,000
- -------------------------------------------------------------------------------------------------------------------
Schering-Plough Corp. 57,500 2,425,781
- -------------------------------------------------------------------------------------------------------------------
Trigon Healthcare, Inc.(1) 7,500 221,250
-----------
35,376,195
- -------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.0%
Alberto-Culver Co., Cl. B 2,000 51,625
- -------------------------------------------------------------------------------------------------------------------
Allergan, Inc. 15,200 756,200
- -------------------------------------------------------------------------------------------------------------------
Biomet, Inc. 7,000 280,000
- -------------------------------------------------------------------------------------------------------------------
Cardinal Health, Inc. 33,000 1,579,875
- -------------------------------------------------------------------------------------------------------------------
Guidant Corp.(1) 2,100 98,700
- -------------------------------------------------------------------------------------------------------------------
PacifiCare Health Systems, Inc.(1) 2,600 137,800
- -------------------------------------------------------------------------------------------------------------------
PerkinElmer, Inc. 5,200 216,775
- -------------------------------------------------------------------------------------------------------------------
Shared Medical Systems Corp. 1,000 50,938
- -------------------------------------------------------------------------------------------------------------------
United Healthcare Corp. 31,600 1,678,750
- -------------------------------------------------------------------------------------------------------------------
VISX, Inc.(1) 8,000 414,000
-----------
5,264,663
- -------------------------------------------------------------------------------------------------------------------
Technology--20.8%
- -------------------------------------------------------------------------------------------------------------------
Computer Hardware--4.9%
Adaptec, Inc.(1) 12,000 598,500
- -------------------------------------------------------------------------------------------------------------------
Apple Computer, Inc.(1) 17,000 1,747,813
- -------------------------------------------------------------------------------------------------------------------
Cabletron Systems, Inc.(1) 42,000 1,092,000
- -------------------------------------------------------------------------------------------------------------------
Electronics for Imaging, Inc.(1) 14,000 813,750
- -------------------------------------------------------------------------------------------------------------------
Gateway, Inc.(1) 8,000 576,500
- -------------------------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 50,000 5,696,875
- -------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. 109,000 11,772,000
- -------------------------------------------------------------------------------------------------------------------
KLA Instruments Corp.(1) 4,800 534,600
- -------------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A(1) 15,300 1,384,650
- -------------------------------------------------------------------------------------------------------------------
NCR Corp.(1) 5,000 189,375
- -------------------------------------------------------------------------------------------------------------------
Pitney Bowes, Inc. 15,400 744,013
- -------------------------------------------------------------------------------------------------------------------
Seagate Technology, Inc.(1) 31,000 1,443,438
Oppenheimer Main Street Growth & Income Fund/VA 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Computer Hardware (continued)
Xircom, Inc.(1) 10,000 $ 750,000
-----------
27,343,514
- -------------------------------------------------------------------------------------------------------------------
Computer Services--0.7%
Automatic Data Processing, Inc. 28,300 1,524,663
- -------------------------------------------------------------------------------------------------------------------
DST Systems, Inc.(1) 3,000 228,938
- -------------------------------------------------------------------------------------------------------------------
First Data Corp. 33,000 1,627,313
- -------------------------------------------------------------------------------------------------------------------
Keane, Inc.(1) 6,000 190,500
-----------
3,571,414
- -------------------------------------------------------------------------------------------------------------------
Computer Software--6.7%
Adobe Systems, Inc. 8,000 538,000
- -------------------------------------------------------------------------------------------------------------------
BMC Software, Inc.(1) 12,900 1,031,194
- -------------------------------------------------------------------------------------------------------------------
Cadence Design Systems, Inc.(1) 9,000 216,000
- -------------------------------------------------------------------------------------------------------------------
Computer Sciences Corp.(1) 4,000 378,500
- -------------------------------------------------------------------------------------------------------------------
Compuware Corp.(1) 29,000 1,080,250
- -------------------------------------------------------------------------------------------------------------------
Electronic Arts, Inc.(1) 4,000 336,000
- -------------------------------------------------------------------------------------------------------------------
Electronic Data Systems Corp. 31,500 2,108,531
- -------------------------------------------------------------------------------------------------------------------
Legato Systems, Inc.(1) 10,000 688,125
- -------------------------------------------------------------------------------------------------------------------
Microsoft Corp.(1) 228,150 26,636,513
- -------------------------------------------------------------------------------------------------------------------
Peoplesoft, Inc.(1) 20,000 426,250
- -------------------------------------------------------------------------------------------------------------------
Siebel Systems, Inc.(1) 10,000 840,000
- -------------------------------------------------------------------------------------------------------------------
Synopsys, Inc.(1) 3,400 226,950
- -------------------------------------------------------------------------------------------------------------------
Veritas Software Corp.(1) 18,000 2,576,250
-----------
37,082,563
- -------------------------------------------------------------------------------------------------------------------
Communications Equipment--2.3%
Cisco Systems, Inc.(1) 94,000 10,069,750
- -------------------------------------------------------------------------------------------------------------------
General Instrument Corp.(1) 11,000 935,000
- -------------------------------------------------------------------------------------------------------------------
Harmonic, Inc.(1) 4,000 379,750
- -------------------------------------------------------------------------------------------------------------------
Tellabs, Inc.(1) 17,400 1,116,863
-----------
12,501,363
- -------------------------------------------------------------------------------------------------------------------
Electronics--5.5%
Advanced Micro Devices, Inc. 12,400 358,825
- -------------------------------------------------------------------------------------------------------------------
Analog Devices, Inc.(1) 18,000 1,674,000
- -------------------------------------------------------------------------------------------------------------------
Cypress Semiconductor Corp.(1) 36,000 1,165,500
- -------------------------------------------------------------------------------------------------------------------
Grainger (W.W.), Inc. 17,000 812,813
- -------------------------------------------------------------------------------------------------------------------
Intel Corp. 187,000 15,392,438
- -------------------------------------------------------------------------------------------------------------------
Lam Research Corp.(1) 10,000 1,115,625
- -------------------------------------------------------------------------------------------------------------------
Micron Technology, Inc. 40,000 3,110,000
- -------------------------------------------------------------------------------------------------------------------
Motorola, Inc. 9,300 1,369,425
- -------------------------------------------------------------------------------------------------------------------
National Semiconductor Corp.(1) 34,700 1,485,594
- -------------------------------------------------------------------------------------------------------------------
QLogic Corp.(1) 6,000 959,250
- -------------------------------------------------------------------------------------------------------------------
RF Micro Devices, Inc.(1) 7,000 479,063
- -------------------------------------------------------------------------------------------------------------------
Teradyne, Inc.(1) 14,500 957,000
- -------------------------------------------------------------------------------------------------------------------
Waters Corp.(1) 9,400 498,200
- -------------------------------------------------------------------------------------------------------------------
Xilinx, Inc.(1) 30,000 1,364,063
-----------
30,741,796
14 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Photography--0.7%
Eastman Kodak Co. 46,000 $3,047,500
- -------------------------------------------------------------------------------------------------------------------
Xerox Corp. 45,000 1,020,938
----------
4,068,438
- -------------------------------------------------------------------------------------------------------------------
Transportation--1.4%
- -------------------------------------------------------------------------------------------------------------------
Air Transportation--0.8%
Alaska Air Group, Inc.(1) 16,000 562,000
- -------------------------------------------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B(1) 51,558 2,287,886
- -------------------------------------------------------------------------------------------------------------------
Delta Air Lines, Inc. 25,000 1,245,313
- -------------------------------------------------------------------------------------------------------------------
Northwest Airlines Corp., Cl. A(1) 3,000 66,750
- -------------------------------------------------------------------------------------------------------------------
UAL Corp.(1) 2,900 224,931
----------
4,386,880
- -------------------------------------------------------------------------------------------------------------------
Railroads & Truckers--0.6%
Burlington Northern Santa Fe Corp. 35,800 868,150
- -------------------------------------------------------------------------------------------------------------------
CNF Transportation, Inc. 10,000 345,000
- -------------------------------------------------------------------------------------------------------------------
Navistar International Corp.(1) 2,000 94,750
- -------------------------------------------------------------------------------------------------------------------
Rollins Truck Leasing Co. 10,000 119,375
- -------------------------------------------------------------------------------------------------------------------
Union Pacific Corp. 39,600 1,727,550
- -------------------------------------------------------------------------------------------------------------------
USFreightways Corp. 2,000 95,750
- -------------------------------------------------------------------------------------------------------------------
XTRA Corp.(1) 5,000 213,125
----------
3,463,700
- -------------------------------------------------------------------------------------------------------------------
Utilities--2.4%
- -------------------------------------------------------------------------------------------------------------------
Electric Utilities--2.4%
Allegheny Energy, Inc. 20,000 538,750
- -------------------------------------------------------------------------------------------------------------------
Ameren Corp. 13,300 435,575
- -------------------------------------------------------------------------------------------------------------------
Calpine Corp.(1) 6,000 384,000
- -------------------------------------------------------------------------------------------------------------------
Carolina Power & Light Co. 3,500 106,531
- -------------------------------------------------------------------------------------------------------------------
Conectiv, Inc. 4,000 67,250
- -------------------------------------------------------------------------------------------------------------------
Consolidated Edison Co. of New York, Inc. 12,000 414,000
- -------------------------------------------------------------------------------------------------------------------
DTE Energy Co. 16,700 523,963
- -------------------------------------------------------------------------------------------------------------------
Duke Energy Corp. 11,000 551,375
- -------------------------------------------------------------------------------------------------------------------
Edison International 5,500 144,031
- -------------------------------------------------------------------------------------------------------------------
Energy East Corp. 30,000 624,375
- -------------------------------------------------------------------------------------------------------------------
Entergy Corp. 19,300 496,975
- -------------------------------------------------------------------------------------------------------------------
FirstEnergy Corp. 30,000 680,625
- -------------------------------------------------------------------------------------------------------------------
Florida Progress Corp. 16,000 677,000
- -------------------------------------------------------------------------------------------------------------------
FPL Group, Inc. 21,600 924,750
- -------------------------------------------------------------------------------------------------------------------
GPU, Inc. 15,000 449,063
- -------------------------------------------------------------------------------------------------------------------
IPALCO Enterprises, Inc. 10,000 170,625
- -------------------------------------------------------------------------------------------------------------------
Northeast Utilities Co. 10,400 213,850
- -------------------------------------------------------------------------------------------------------------------
OGE Energy Corp. 9,900 188,100
- -------------------------------------------------------------------------------------------------------------------
Peco Energy Co. 19,600 681,100
- -------------------------------------------------------------------------------------------------------------------
PG&E Corp. 31,300 641,650
- -------------------------------------------------------------------------------------------------------------------
PP&L Resources, Inc. 25,500 583,313
Oppenheimer Main Street Growth & Income Fund/VA 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Market Value
Shares Note 1
- -------------------------------------------------------------------------------------------------------------------
Electric Utilities (continued)
Public Service Enterprise Group, Inc. 25,000 $ 870,313
- -------------------------------------------------------------------------------------------------------------------
Southern Co. 32,300 759,050
- -------------------------------------------------------------------------------------------------------------------
Texas Utilities Co. 16,000 569,000
- -------------------------------------------------------------------------------------------------------------------
TNP Enterprises, Inc. 18,000 742,500
- -------------------------------------------------------------------------------------------------------------------
Unicom Corp. 26,000 871,000
- -------------------------------------------------------------------------------------------------------------------
UtiliCorp United, Inc. 3,000 58,313
------------
13,367,077
- -------------------------------------------------------------------------------------------------------------------
Gas Utilities--0.0%
NICOR, Inc. 1,200 39,000
- -------------------------------------------------------------------------------------------------------------------
Sempra Energy 8,700 151,163
------------
190,163
------------
Total Common Stocks (Cost $460,541,934) 525,168,172
===================================================================================================================
Other Securities--0.5%
- -------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc., 7% Automatic Common Exchange Securities for
Time Warner, Inc. Common Stock (Cost $1,170,994) 25,000 3,012,500
Principal
Amount
===================================================================================================================
Repurchase Agreements--7.3%
- -------------------------------------------------------------------------------------------------------------------
Repurchase agreement with PaineWebber, Inc., 3%, dated 12/31/99, to be
repurchased at $40,310,075 on 1/3/00, collateralized by U.S. Treasury Nts.,
5.625%-6.125%, 11/30/00-12/31/01, with a value of $41,163,751 (Cost $40,300,000) $40,300,000 40,300,000
- -------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $502,012,928) 102.4% 568,480,672
- -------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (2.4) (13,169,640)
----------- ------------
Net Assets 100.0% $555,311,032
=========== ============
</TABLE>
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
See accompanying Notes to Financial Statements.
16 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
===============================================================================================
Assets
Investments, at value (cost $502,012,928)--see accompanying statement $568,480,672
- -----------------------------------------------------------------------------------------------
Cash 815,492
- -----------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 1,561,996
Shares of beneficial interest sold 1,353,452
Interest and dividends 408,004
Other 5,662
------------
Total assets 572,625,278
===============================================================================================
Liabilities
Payables and other liabilities:
Investments purchased 16,455,193
Shares of beneficial interest redeemed 757,476
Transfer and shareholder servicing agent fees 186
Other 101,391
------------
Total liabilities 17,314,246
===============================================================================================
Net Assets $555,311,032
============
===============================================================================================
Composition of Net Assets
Paid-in capital $454,999,711
- -----------------------------------------------------------------------------------------------
Undistributed net investment income 2,471,016
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 31,372,614
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 66,467,691
------------
Net assets--applicable to 22,545,003 shares of beneficial
interest outstanding $555,311,032
============
===============================================================================================
Net Asset Value, Redemption Price Per Share and Offering Price Per Share $24.63
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Main Street Growth & Income Fund/VA 17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
================================================================================================
Investment Income
Dividends (net of foreign withholding taxes of $9,543) $ 4,116,206
- ------------------------------------------------------------------------------------------------
Interest 1,409,101
-----------
Total income 5,525,307
================================================================================================
Expenses
Management fees 2,864,220
- ------------------------------------------------------------------------------------------------
Custodian fees and expenses 102,216
- ------------------------------------------------------------------------------------------------
Trustees' compensation 2,364
- ------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 2,103
- ------------------------------------------------------------------------------------------------
Other 85,634
-----------
Total expenses 3,056,537
Less expenses paid indirectly (5,133)
-----------
Net expenses 3,051,404
================================================================================================
Net Investment Income 2,473,903
================================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (including premiums on options exercised) 37,106,529
Closing and expiration of option contracts written (1,299,413)
Foreign currency transactions (2,141)
-----------
Net realized gain 35,804,975
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 41,728,791
Translation of assets and liabilities denominated in foreign currencies 150,803
-----------
Net change 41,879,594
-----------
Net realized and unrealized gain 77,684,569
================================================================================================
Net Increase in Net Assets Resulting from Operations $80,158,472
===========
</TABLE>
See accompanying Notes to Financial Statements.
18 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
==================================================================================================
<S> <C> <C>
Operations
Net investment income $ 2,473,903 $ 1,744,608
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) 35,804,975 (1,957,235)
- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 41,879,594 6,335,797
------------ ------------
Net increase in net assets resulting from operations 80,158,472 6,123,170
==================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income (1,427,635) (449,201)
- --------------------------------------------------------------------------------------------------
Distributions from net realized gain (2,405,256) (9,891,403)
==================================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from
beneficial interest transactions 170,632,137 157,202,998
==================================================================================================
Net Assets
Total increase 246,957,718 152,985,564
- --------------------------------------------------------------------------------------------------
Beginning of period 308,353,314 155,367,750
------------ ------------
End of period (including undistributed net investment
income of $2,471,016 and $1,425,924, respectively) $555,311,032 $308,353,314
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer Main Street Growth & Income Fund/VA 19
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997 1996 1995(1)
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $20.48 $20.58 $16.37 $12.51 $10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .11 .13 .19 .14 .01
Net realized and unrealized gain 4.29 .92 4.91 3.91 2.52
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 4.40 1.05 5.10 4.05 2.53
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.09) (.05) (.17) (.14) (.02)
Distributions from net realized gain (.16) (1.10) (.72) (.05) --
- ---------------------------------------------------------------------------------------------------------------------------
Total dividends and/or distributions to shareholders (.25) (1.15) (.89) (.19) (.02)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $24.63 $20.48 $20.58 $16.37 $12.51
====== ====== ====== ====== ======
===========================================================================================================================
Total Return, at Net Asset Value(2) 21.71% 4.70% 32.48% 32.51% 25.25%
===========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $555,311 $308,353 $155,368 $47,009 $4,288
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $391,063 $234,306 $ 94,906 $21,562 $1,809
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 0.63% 0.74% 1.15% 1.41% 0.50%
Expenses 0.78% 0.79%(4) 0.83%(4) 1.00%(4) 2.07%(4)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 118% 86% 79% 113% 24%
</TABLE>
1. For the period from July 5, 1995 (commencement of operations) to December 31,
1995.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), 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.
3. Annualized for periods less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1999, were $585,193,287 and $443,805,600, respectively.
See accompanying Notes to Financial Statements.
20 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer Main Street Growth & Income Fund/VA (the Fund), formerly known as
Oppenheimer Growth & Income Fund, is a separate series of Oppenheimer Variable
Account Funds (the Trust), a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment objective is to seek a high total return (which includes growth in
the value of its shares as well as current income) from equity and debt
securities. The Fund'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 price 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
Oppenheimer Main Street Growth & Income Fund/VA 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of 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.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 1999, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $1,176. Accumulated net
realized gain on investments was increased by the same amount.
- --------------------------------------------------------------------------------
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. 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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Year Ended December 31, 1998
---------------------------------- ------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 9,936,050 $224,240,741 9,181,075 $189,060,690
Dividends and/or distributions reinvested 186,334 3,832,892 468,325 10,340,604
Redeemed (2,632,085) (57,441,496) (2,145,877) (42,198,296)
---------- ------------ ---------- ------------
Net increase 7,490,299 $170,632,137 7,503,523 $157,202,998
========== ============ ========== ============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Securities
As of December 31, 1999, net unrealized appreciation on securities of
$66,467,744 was composed of gross appreciation of $85,539,274, and gross
depreciation of $19,071,530.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management Fees. Management Fees paid to the Manager were in accordance with the
investment advisory agreement with the Trust. The annual fees are 0.75% of the
first $200 million of average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, 0.66% of the next $200 million and 0.60% of
average annual net assets over $800 million. The Fund's management fee for the
year ended December 31, 1999 was 0.73% of average annual net assets.
- --------------------------------------------------------------------------------
Transfer Agent Fees. 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 for cost.
22 Oppenheimer Main Street Growth & Income Fund/VA
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
5. Foreign Currency Contracts
A foreign currency 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 contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
================================================================================
6. 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.
Written option activity for the year ended December 31, 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 1,325 $ 570,160 100 $ 41,573
Options written 6,829 5,027,060 -- --
Options closed or expired (7,593) (5,445,702) -- --
Options exercised (561) (151,518) (100) (41,573)
------ ----------- ---- --------
Options outstanding as of December 31, 1999 -- $ -- -- $ --
====== =========== ==== ========
</TABLE>
Oppenheimer Main Street Growth & Income Fund/VA 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
7. Illiquid or Restricted Securities
As of December 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 15% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of December 31, 1999, was $38,191,
which represents 0.01% of the Fund's net assets, of which $38,191 is considered
restricted. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation Per
Unit as of
Acquisition Cost Per December 31,
Security Dates Unit 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Intermedia Communications, Inc. 9/29/98-12/29/98 $12.51-$21.54 $31.05
</TABLE>
Appendix A
- -------------------------------------------------------------------------------
RATINGS DEFINITIONS
- -------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
- -------------------------------------------------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing and may be in default or there may
be present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high
degree and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category. Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
- -------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being
made on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the
due date. The rating may also be used if a bankruptcy petition has been filed
or similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- -------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and
are extremely speculative. "DDD" designates the highest potential for
recovery of amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for
meeting financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D: Default. Denotes actual or imminent payment default.
<PAGE>
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free
U.S. Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
B-1
Appendix B
- -------------------------------------------------------------------------------
Industry Classifications
- -------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Technology
Electrical Equipment Telephone - Utility
Electronics Textile/Apparel
Energy Services & Producers Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
C-3
APPENDIX C - MAJOR SHAREHOLDERS
As of April 1, 2000, the number of shares and approximate percentage of shares
held of record by separate accounts of the following insurance companies (and
their respective subsidiaries) that held 5% or more of the outstanding shares of
one of the Funds as shown in the tables below. The full name and address of each
insurance company is shown under "Major Shareholders" on page 41:
Monarch ReliaStar GE Nationwide Aetna
Money Fund/VA 26,171,804.122 11,093,546.362 * * *
12.47% 5.28%
High Income Fund/VA * * 16,604,140.786 * *
48.99%
Bond Fund/VA * * 7,448,544.944 26,927,389.349 *
14.11% 50.99%
Aggressive Growth * * 4,983,384.798 3,330,369.703 *
Fund/VA 16.44% 10.99%
Capital Appreciation
Fund/VA * * 6,535,825.800 12,600,353.500 *
18.52% 35.70%
Multiple
Strategies 2,927,574.165 2,066,955.383 5,345,372.214 19,388,503.010 *
Fund/VA 8.21% 5.80% 15.00% 54.40%
Global
Securities * * * 31,070,936.176 *
Fund/VA 45.87%
Strategic Bond Fund/VA * * * * 8,607,862.354
13.99%
Main Street
Growth & Income * * * 8,455,401.615 3,167,637.365
Fund/VA 29.28% 10.97%
Small Cap Growth
Fund/VA * * * * *
- ---------------
*Less than 5% of the outstanding shares of that Fund.
(continued)
<PAGE>
MassMutual Jefferson-Pilot CUNA American General
Money Fund/VA 150,976,417.325 * * *
71.92%
High
Income Fund/VA 6,815,140.706 * 5,817,683.356 *
20.10% 17.16%
Bond Fund/VA 12,069,185.864 4,073,511.357 * *
22.86% 7.71%
Aggressive Growth 18,771,463,001 * * *
Fund/VA 61.92%
Capital Appreciation
Fund/VA 8,195,775.646 3,187,616.811 * *
23.21% 9.03%
Multiple Strategies 3,788,175.008 * * *
Fund/VA 10.63%
Global Securities 32,566,965.144 * * *
Fund/VA 48.08%
Strategic Bond
Fund/VA 41,864,107.650 * * *
68.03%
Main Street
Growth & Income 12,674,904.018 * * *
Fund/VA 43.90%
Small Cap Growth 656,758.164 * * 207,970.245
Fund/VA 72.22% 22.87%
- -----------
*Less than 5% of the outstanding shares of that Fund.
(continued)
Protective
Money Fund/VA 13,991,905.170
6.67%
High Income Fund/VA *
Bond Fund/VA *
Aggressive Growth *
Fund/VA
Capital Appreciation
Fund/VA *
Multiple Strategies
Fund/VA *
Global Securities *
Fund/VA
Strategic Bond
Fund/VA 6,211,146.010
10.09%
Main Street
Growth & Income 3,121,995.390
Fund/VA 10.81%
Small Cap Growth *
Fund/VA
<PAGE>
- -------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
- -------------------------------------------------------------------------------
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-888-470-0861
Custodian Bank
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
(OppenheimerFunds logo)
