485BPOS

                                                      Registration No. 2-93177
                                                             File No. 811-4108
                    SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, DC 20549
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FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933                    [X]

      Pre-Effective Amendment No. __                                       [ ]


      Post-Effective Amendment No. 41                                      [X]
                                   --


                                    and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940                                                                [X]


      Amendment No. 37                                                     [X]
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                      Oppenheimer Variable Account Funds
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              (Exact Name of Registrant as Specified in Charter)

6803 South Tucson Way, Centennial, Colorado 80112-3924
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             (Address of Principal Executive Offices) (Zip Code)

                                (303) 768-3200
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             (Registrant's Telephone Number, including Area Code)

                             Robert G. Zack, Esq.
                            OppenheimerFunds, Inc.
498 Seventh Avenue, New York, New York 10018
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                   (Name and Address of Agent for Service)


It is proposed that this filing will become effective (check appropriate box):
[   ]                  Immediately upon filing pursuant to paragraph (b)
[X]  On May 1, 2003 pursuant to paragraph (b)
[   ]                  60 days after filing pursuant to paragraph (a)(1)
[   ]                    On _______________ pursuant to paragraph (a)(1)
[   ]                  75 days after filing pursuant to paragraph (a)(2)
[   ]       On _______________ pursuant to paragraph (a)(2) of Rule 485.


If appropriate, check the following box:
[   ] This  post-effective  amendment  designates a new  effective  date for a
     previously filed post-effective amendment.

Oppenheimer
Aggressive Growth Fund/VA
A series of Oppenheimer Variable
Account Funds

Prospectus dated May 1, 2003

                                         Oppenheimer Aggressive Growth Fund/VA
                                         is a mutual fund that seeks capital
                                         appreciation by investing in "growth
                                         type" companies. It currently
                                         emphasizes investments in stocks of
                                         mid-cap companies.
                                               Shares of the Fund are sold only
                                         as the underlying investment for
                                         variable life insurance policies,
                                         variable annuity contracts and other
                                         insurance company separate accounts. A
                                         prospectus for the insurance product
                                         you have selected accompanies this
                                         Prospectus and explains how to select
                                         shares of the Fund as an investment
                                         under that insurance product, and
                                         whether you are only eligible to
                                         purchase Service shares of the Fund.
                                                      This Prospectus contains
                                         important information about the Fund's
                                         objective, its investment policies,
                                         strategies and risks. Please read this
As with all mutual funds, the            Prospectus (and your insurance product
Securities                               prospectus) carefully before you
and Exchange Commission has not          invest and keep them for future
approved or disapproved the Fund's       reference about your account.
securities nor has it determined that
this Prospectus is accurate or
complete.
It is a criminal offense to represent
otherwise.

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 Contents

            About the Fund

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            The Fund's Objective and Investment Strategies


            Main Risks of Investing in the Fund

            The Fund's Past Performance


            Fees and Expenses of the Fund


            About the Fund's Investments

            How the Fund is Managed


            Investing in the Fund

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            How to Buy and Sell Shares

            Dividends, Capital Gains and Taxes

            Financial Highlights



ABOUT THE FUND

The Fund's Investment Objective and Strategies

What is the Fund's Investment Objective? The Fund seeks capital appreciation
by investing in "growth type" companies.

What Does the Fund Mainly Invest In?  The Fund invests mainly in equity
securities, such as common stocks and can invest in other equity securities,
such as preferred stocks and securities convertible into common stocks. The
Fund emphasizes investments in companies believed by the investment manager,
OppenheimerFunds, Inc. (the "Manager") to have significant growth potential.
Growth companies can include established companies entering a growth cycle in
their business, as well as newer companies. The Fund can invest in securities
of issuers of all market capitalization ranges, but currently focuses on
stocks of "mid-cap" issuers (currently those issuers between $2.5 billion and
$11.5 billion). The Fund can invest in domestic and foreign companies,
although most of its investments are in stocks of U.S. companies.

How Do the Portfolio Managers Decide What Securities to Buy or Sell?  The
Fund's portfolio managers look for high-growth companies using a "bottom-up"
stock selection process.  The "bottom-up" approach focuses on fundamental
analysis of individual issuers before considering overall economic, market or
industry trends.  The stock selection process includes analysis of other
business and economic factors that might contribute to the company's stock
appreciation.

      The portfolio managers also look for companies with revenues growing at
above-average rates that might support and sustain above-average earnings,
and companies whose revenue growth is primarily driven by strength in unit
volume sales.  While this process and the inter-relationship of the factors
used may change over time, and its implementation may vary in particular
cases, the portfolio managers currently search primarily for stocks of
companies having the following characteristics:

o     what the portfolio managers believe to be a high rate of sustainable
   earnings growth;
o     undiscovered and undervalued emerging growth characteristics;
o     innovative management and strong leadership positions in unique market
   niches; and/or
o     an expectation of better-than-anticipated earnings or positive earnings
   forecasts.

      If the portfolio managers discern a slowdown in the company's internal
revenue growth or earnings growth or a negative movement in the company's
fundamental economic condition, they will consider selling that stock if
there are other investment alternatives that offer what they believe to be
better appreciation possibilities.

Who is the Fund  Designed  For?  The  Fund's  shares  are  available  only as an
investment  option under  certain  variable  annuity  contracts,  variable  life
insurance  policies and  investment  plans  offered  through  insurance  company
separate accounts of participating  insurance  companies,  for investors seeking
capital growth in their investment over the long term. Those investors should be
willing to assume the greater risks of short-term share price  fluctuations that
are typical for an aggressive growth fund focusing on common stock  investments.
The Fund does not seek  current  income  and it is not  designed  for  investors
needing assured levels of current income or preservation of capital. The Fund is
not a complete investment program.

Main Risks of Investing in the Fund

      All investments have some degree of risk.  The Fund's investments are
subject to changes in their value from a number of factors described below.
There is also the risk that poor security selection by the Manager will cause
the Fund to underperform other funds having a similar objective.

      However, changes in the overall market prices of securities can occur
at any time. The share prices of the Fund will change daily based on changes
in market prices of securities and market conditions, and in response to
other economic events.

|X|   Risks of Investing in Stocks.  Stocks fluctuate in price, and their
   short-term volatility at times may be great. Because the Fund currently
   focuses its investments primarily in common stocks and other equity
   securities for capital appreciation, the value of the Fund's portfolio
   will be affected by changes in the stock markets. Market risk will affect
   the Fund's net asset values per share, which will fluctuate as the values
   of the Fund's portfolio securities change.  A variety of factors can
   affect the price of a particular stock and the prices of individual stocks
   do not all move in the same direction uniformly or at the same time.
   Different stock markets may behave differently from each other.

      Stocks of growth companies may provide greater opportunities for
capital appreciation but may be more volatile than other stocks. Securities
in the Fund's portfolio may not increase as much as the market as a whole.
Growth stocks may at times be favored by the market and at other times may be
out of favor. Some securities may be inactively traded, and therefore, may
not be readily bought or sold. Although some growth stocks may appreciate
quickly, investors should not expect that investments of the Fund will
appreciate rapidly. Some investments should be expected to decline in value.

      Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the
issuer. The Fund invests primarily in securities of mid-cap companies but may
also invest in small and large-size companies. Small and mid-cap companies
may have more volatile stock prices than large companies.

|X|   Industry and Sector Focus.  At times the Fund may increase the relative
   emphasis of its investments in a particular industry or sector. The prices
   of stocks of issuers in a particular industry or sector may go up and down
   in response to changes in economic conditions, government regulations,
   availability of basic resources or supplies, or other events that affect
   that industry or sector more than others. To the extent that the Fund
   increases the relative emphasis of its investments in a particular
   industry or sector, its share values may fluctuate in response to events
   affecting that industry or sector.  To some extent that risk may be
   limited by the Fund's policy of not concentrating 25% or more of its total
   assets in investments in any one industry.

|X|   Risks of Growth Stocks.  Stocks of growth companies, particularly newer
   companies, may offer opportunities for greater capital appreciation but
   may be more volatile than stocks of larger, more established companies. If
   the company's earnings growth or stock price fails to increase as
   expected, the stock price of a growth company may decline sharply.

How Risky is the Fund Overall?  The risks described above collectively form
the overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance and its prices per share. Particular
investments and investment strategies also have risks.  These risks mean that
you can lose money by investing in the Fund. When you redeem your shares,
they may be worth more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment objective.

      In the short term, stock markets can be volatile, and the prices of the
Fund's shares can go up and down substantially.  The Fund generally does not
use income-oriented investments to help cushion the Fund's total return from
changes in stock prices, except for defensive purposes. The Fund is an
aggressive investment vehicle, designed for investors willing to assume
greater risks in the hope of achieving greater gains.  In the short-term the
Fund may be less volatile than small-cap and emerging markets stock funds,
but it may be subject to greater fluctuations in its share prices than funds
that focus on both stocks and bonds.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund's Past Performance


The bar chart and table below show one measure of the risks of investing in
the Fund, by showing changes in the Fund's performance from year to year for
the last 10 calendar years for non-service shares and by showing how the
average annual total returns or 1, 5, and 10 years or life of class of the
Fund's two existing classes of shares compare to those of a broad-based
market index. The Fund's past investment performance is not necessarily an
indication of how the Fund will perform in the future.


Annual Total Returns (as of 12/31 each year)

[See appendix to prospectus for data in bar chart showing annual total
returns]

Charges imposed by the separate accounts that invest in the Fund are not
included in the calculations of return in this bar chart, and if those
charges were included, the returns would be less than those shown.

During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 45.84% (4th Q'99) and the lowest return (not
annualized) for a calendar quarter was
- -31.01% (4th Q'00).

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   Average Annual                              5 Years            10 Years
 Total Returns for         1 Year         (or life of class   (or life of class
 the periods ended                            if less)            if less)
 December 31, 2002

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Oppenheimer
Aggressive
Growth       Fund/VA
Non-Service Shares         -27.79%             -1.89%               6.64%
(inception date:
8/15/86)

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S&P 500 Index
                           -22.09%             -0.58%              9.34%1

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Oppenheimer
Aggressive
Growth Fund/VA
Service Shares             -28.05%             -37.21%               N/A
(inception date:
10/16/00)

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1.    From 12/31/92

The Fund's average annual total returns measure the performance of a
hypothetical account without deducting charges imposed by the separate
accounts that invest in the Fund and assume that all dividends and capital
gains distributions have been reinvested in additional shares. The Fund's
performance is compared to the S&P 500 Index, an unmanaged index of equity
securities that is a measure of the general domestic stock market.  The index
performance includes the reinvestment of income but does not reflect fees,
expenses, or transaction costs. Also, the Fund may have investments that vary
from the index.

The Fund's total returns should not be expected to be the same as the returns
of other Oppenheimer funds, even if both funds have the same portfolio
managers and/or similar names.


Fees and Expenses of the Fund

The  following  tables  are  provided  to help  you  understand  the  fees and
expenses  you may pay if you buy and hold shares of the Fund.  The Fund pays a
variety of expenses  directly for  management  of its assets,  administration,
distribution of its shares and other  services.  Those expenses are subtracted
from the Fund's  assets to  calculate  the Fund's net asset  values per share.
All shareholders  therefore pay those expenses  indirectly.  The numbers below
are based on the Fund's  expenses  during its fiscal year ended  December  31,
2002.

Shareholder Fees.  The Fund does not charge any initial sales charge to buy
shares or to reinvest dividends.  There are no exchange fees or redemption
fees and no contingent deferred sales charges. Please refer to the
accompanying prospectus of the participating insurance company for
information on initial or contingent deferred sales charges, exchange fees or
redemption fees for that variable life insurance policy, variable annuity or
other investment product.  Those charges and fees are not reflected in either
of the tables below.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)


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                                    Non-Service Shares       Service Shares

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Management Fees                           0.67%                   0.67%

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Distribution     and     Service           None                   0.25%
(12b-1) Fees

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Other Expenses                            0.01%                   0.66%

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Total Annual Operating Expenses           0.68%                   1.58%

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Prior to May 1, 2002,  the Service  class  service fee was 0.15% per annum and
actual  service class 12b-1 fees paid during the year ended  December 31, 2002
was 0.22% and total annual operating expenses were 1.55%.

Expenses  may vary in future  years.  "Other  expenses"  in the table  include
transfer  agent fees,  custodial  fees,  and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily  agreed to limit transfer
and  shareholder  servicing  agent  fees to 0.35% per  fiscal  year,  for both
classes.  That  undertaking may be amended or withdrawn at any time. After the
waiver,  the actual Other  Expenses and Total Annual  Operating  Expenses were
0.09% and 0.98% respectively for the Service class.

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The  example  assumes  that you  invest  $10,000 in shares of the Fund for the
time periods  indicated and then redeem all of your shares at the end of those
periods.  The example also assumes that your  investment  has a 5% return each
year and that the  Fund's  operating  expenses  remain the same.  Your  actual
costs may be higher or lower,  because  expenses will vary over time. Based on
these  assumptions  your  expenses  would be as  follows,  whether  or not you
redeem your investment at the end of each period:


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                              1 Year      3 Years     5 Years     10 Years

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Non-Service Shares             $69         $218        $379         $847

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Service Shares                 $161        $499        $860        $1,878

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About the Fund's Investments

The Fund's Principle Investment Policies.  The allocation of the Fund's
portfolio among different types of investments will vary over time based on
the Manager's evaluation of economic and market trends.  The Fund's portfolio
might not always include all of the different types of investments described
below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.

      The Manager tries to reduce risks by carefully researching securities
before they are purchased. The Fund attempts to reduce its exposure to market
risks by diversifying its investments, that is, by not holding a substantial
percentage of the stock of any one company and by not investing too great a
percentage of the Fund's assets in any one issuer.  Also, the Fund does not
concentrate 25% or more of its total assets in any one industry.

|X|   Stock Investments. The Fund invests in securities issued by companies
   that the Manager believes have growth potential. Growth companies can be
   new or established companies that may be developing new products or
   services, that have relatively favorable prospects, or that are expanding
   into new and growing markets. Current examples include companies in the
   fields of telecommunications, biotechnology, computer software, and new
   consumer products. Growth companies may be providing new products or
   services that can enable them to capture a dominant or important market
   position. They may have a special area of expertise or the capability to
   take advantage of changes in demographic factors in a more profitable way
   than larger, more established companies. Newer growth companies tend to
   retain a large part of their earnings for research, development or
   investment in capital assets. Therefore, they do not tend to emphasize
   paying dividends, and may not pay any dividends for some time. Stocks of
   growth companies are selected for the Fund's portfolio because the Manager
   believes the price of the stock will increase in value over time.


      The Fund's equity investments may be exchange-traded or
over-the-counter securities. Over-the-counter securities may have less
liquidity than exchange-traded securities.



      The Fund does not limit its investments to issuers in a particular
market capitalization range or ranges, although it currently focuses on
mid-cap issuers. "Market capitalization" refers to the total market value of
an issuer's common stock. The stock prices of large-cap issuers tend to be
less volatile than the prices of mid-cap and small-cap companies in the short
term, but these large-cap companies may not afford the same growth
opportunities as mid-cap and small-cap companies.

|X|   Cyclical Opportunities.  The Fund might also seek to take advantage of
   changes in the business cycle by investing in companies that are sensitive
   to those changes if the Manager believes they have growth potential.  For
   example, when the economy is expanding, companies in the consumer durables
   and technology sectors might benefit and present long-term growth
   opportunities.  The Fund focuses on seeking growth over the long term, but
   could seek to take tactical advantage of short-term market or economic
   movements or events affecting particular issuers or industries, or invest
   in companies that deliver more consistent growth in economic downturns.

Special Portfolio Diversification Requirements. To enable a variable annuity
or variable life insurance contract based on an insurance company separate
account to qualify for favorable tax treatment under the Internal Revenue
Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Fund's investment program is managed to
meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act of 1940 that
apply to publicly-sold mutual funds.

      Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income. Those diversification requirements might also
limit, to some degree, the Fund's investment decisions in a way that could
reduce its performance.

Can the Fund's Investment Objective and Policies Change?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Fundamental policies cannot be changed without the approval
of a majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy.  Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the
Statement of Additional Information says that it is.

Other Investment Strategies.  To seek its objective, the Fund can also use
the investment techniques and strategies described below.  The Fund might not
always use all of them.  These techniques have risks, although some of them
are designed to help reduce overall investment or market risks.

|X|   Other Equity Securities.  While the Fund emphasizes investments in
   common stocks, it can also buy preferred stocks, warrants and securities
   convertible into common stock. The Manager considers some convertible
   securities to be "equity equivalents" because of the conversion feature,
   and in that case their rating has less impact on the Manager's investment
   decision than in the case of other debt securities. Nevertheless,
   convertible debt securities are subject to credit risk (the risk that the
   issuer will not make timely payments in interest and principal) and
   interest rate risk (the risk that the value of the security will fall if
   interest rates rise).  If the Fund buys convertible securities (or other
   debt securities), it will focus primarily on investment-grade securities
   which pose less credit risk than lower-grade debt securities.

|X|   Investing in Small, Unseasoned Companies.  The Fund can invest without
   limit in small, unseasoned companies.  These are companies that have been
   in operation less than three years, including the operations of any
   predecessors.  These securities may have limited liquidity, which means
   that the Fund may not be able to value them accurately or to sell them at
   an acceptable price.  Their prices may be very volatile, especially in the
   short-term.

|X|   Foreign Investing.  The Fund can buy securities in any country,
   including developed countries and emerging markets.  The Fund limits its
   investments in foreign securities to not more than 25% of its net assets,
   and it normally does not expect to invest substantial amounts of its
   assets in foreign stocks.

|X|   Special Risks of Foreign Investing.  While foreign securities offer
   special investment opportunities, there are also special risks.  The
   change in value of a foreign currency against the U.S. dollar will result
   in a change in the U.S. dollar value of securities denominated in that
   foreign currency.  Foreign issuers are not subject to the same accounting
   and disclosure requirements that U.S. companies are subject to.  The value
   of foreign investments may be affected by exchange control regulations,
   expropriation or nationalization of a company's assets, foreign taxes,
   delays in settlement of transactions, changes in governmental economic or
   monetary policy in the U.S. or abroad, or other political and economic
   factors.  Securities in underdeveloped countries may be more difficult to
   sell and their prices may be more volatile than securities of issuers in
   developed markets.

|X|   Illiquid and Restricted Securities. Investments may be illiquid because
   they do not have an active trading market, making it difficult to value
   them or dispose of them promptly at an acceptable price. A restricted
   security is one that has a contractual restriction on its resale or which
   cannot be sold publicly until it is registered under the Securities Act of
   1933. The Fund will not invest more than 15% of its net assets in illiquid
   or restricted securities.  Certain restricted securities that are eligible
   for resale to qualified institutional purchasers may not be subject to
   that limit. The Manager monitors holdings of illiquid securities on an
   ongoing basis to determine whether to sell any holdings to maintain
   adequate liquidity.

|X|   Derivative Investments. The Fund can invest in a number of different
kinds of "derivative" investments.  In general terms, a derivative investment
is an investment contract whose value depends on (or is derived from) the
value of an underlying asset, interest rate or index.  In the broadest sense,
options, futures contracts, and other hedging instruments the Fund might use
may be considered "derivative" investments.  In addition to using derivatives
for hedging, the Fund might use other derivative investments because they
offer the potential for increased value.  The Fund currently does not use
derivatives to a significant degree and is not required to use them in
seeking its objective.

      Derivatives have risks.  If the issuer of the derivative investment
does not pay the amount due, the Fund can lose money on the investment. The
underlying security or investment on which a derivative is based, and the
derivative itself, may not perform the way the Manager expected it to.  As a
result of these risks the Fund could realize less principal or income from
the investment than expected or its hedge might be unsuccessful.  As a
result, the Fund's share prices could fall.  Certain derivative investments
held by the Fund might be illiquid.

|X|   Hedging. The Fund can buy and sell futures contracts, put and call
   options, and forward contracts. These are all referred to as "hedging
   instruments."  The Fund does not currently use hedging extensively nor for
   speculative purposes. It has limits on its use of hedging instruments and
   is not required to use them in seeking its objective.

      Some of these strategies would hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call
options, would tend to increase the Fund's exposure to the securities market.

      Options trading involves the payment of premiums and there are also
special risks in particular hedging strategies.  For example, if a covered
call written by the Fund is exercised on an investment that has increased in
value, the Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has increased in
value above the call price. If the Manager used a hedging instrument at the
wrong time or judged market conditions incorrectly, the strategy could reduce
the Fund's return.  The Fund could also experience losses if the prices of
its futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market.

      |X| Repurchase Agreements.  The Fund can enter into repurchase
agreements.  In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized.  However, if the vendor
fails to pay the resale price on the delivery date, the Fund could incur
costs in disposing of the collateral and might experience losses if there is
any delay in its ability to do so.  There is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements of seven days
or less.

|X|   Temporary Defensive and Interim Investments.  In times of unstable or
   adverse market or economic conditions, the Fund can invest up to 100% of
   its assets in temporary defensive investments that are inconsistent with
   the Fund's principal investment strategies.  Generally, they would be cash
   equivalents (such as commercial paper) money market instruments,
   short-term debt securities, U.S. Government securities, or repurchase
   agreements.  They could include other investment-grade debt securities.
   The Fund might also hold these types of securities pending the investment
   of proceeds from the sale of Fund share or portfolio securities or to meet
   anticipated redemptions of Fund shares.  To the extent the Fund invests
   defensively in these securities, it might not achieve its investment
   objective of capital appreciation.

|X|   Portfolio Turnover. A change in the securities held by the Fund is
      known as "portfolio turnover." The Fund can engage in active and
      frequent trading to try to achieve its objective, and may have a high
      portfolio turnover rate (for example, over 100%), although the Manger
      does not expect turnover to be high.  Increased portfolio turnover
      creates higher brokerage and transaction costs for the Fund.  If the
      Fund realizes capital gains when it sells its portfolio investments, it
      must generally pay those gains out to shareholders, increasing their
      taxable distributions. The Financial Highlights table at the end of
      this Prospectus shows the Fund's portfolio turnover rate during prior
      fiscal years.


How the Fund Is Managed

The Manager.  The Manager chooses the Fund's investments and handles its
day-to-day business.  The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an investment
advisory agreement that states the Manager's responsibilities.  The agreement
sets the fees paid by the Fund to the Manager and describes the expenses that
the Fund is responsible to pay to conduct its business.


      The Manager has been an investment adviser since January, 1960.  The
Manager and its subsidiaries and controlled affiliates managed more than $120
billion in assets as of March 31, 2003, including other Oppenheimer funds
with more than 7 million shareholder accounts. The Manager is located at 498
Seventh Avenue, New York, New York 10018.


|X|   Portfolio Managers. The portfolio managers of the Fund are Bruce
Bartlett and James F. Turner, II.  They are the persons primarily responsible
for the day-to-day management of the Fund's portfolio. Mr. Bartlett and Mr.
Turner have been the Fund's portfolio managers since April 1998 and March
2001, respectively. Mr. Bartlett has been a Senior Vice President of the
Manager since July 1999. He is also an officer and portfolio manager of other
Oppenheimer funds.

      Mr. Turner has been a Vice President of the Manager since March 26,
2001. From May 2000 through March 2001, he was a portfolio manager for
Technology Crossover Ventures. From August 1999 through May 2000, he was an
Assistant Vice President and Associate Portfolio Manager of the Manager and
from October 1996 through August 1999, he was a securities analyst of the
Manager.


|X|   Advisory Fees.  Under the investment advisory agreement, the Fund pays
the Manager an advisory fee at an annual rate that declines on additional
assets as the Fund grows: 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
its last fiscal year ended December 31, 2002, was 0.67% of the Fund's average
annual net assets for each class of shares.


|X|   Possible Conflicts of Interest. The Fund offers its shares to separate
accounts of different insurance companies that are not affiliated with each
other, as an investment for their variable annuity, variable life and other
investment product contracts. While the Fund does not foresee any
disadvantages to contract owners from these arrangements, it is possible that
the interests of owners of different contracts participating in the Fund
through different separate accounts might conflict. For example, a conflict
could arise because of differences in tax treatment.

      The Fund's Board of Trustees has procedures to monitor the portfolio
for possible conflicts to determine what action should be taken. If a
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Fund. That
could force the Fund to sell securities at disadvantageous prices, and
orderly portfolio management could be disrupted. Also, the Board might refuse
to sell shares of the Fund to a particular separate account, or could
terminate the offering of the Fund's shares if required to do so by law or if
it would be in the best interests of the shareholders of the Fund to do so.

INVESTING IN THE FUND

How to Buy and Sell Shares


How Are Shares Purchased? Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That Prospectus will indicate whether
you are only eligible to purchase Service shares of the Fund.  The Fund
reserves the right to refuse any purchase order when the Manager believes it
would be in the Fund's best interests to do so.


      |X| Market Timers.  The Fund has instructed its participating insurance
companies that it may restrict or refuse investments by their separate
accounts from market timers.  "Market timers" include persons whose separate
account transactions have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier exchange request, (ii) exchanges out of the
Fund more than twice in any calendar quarter, (iii) an exchange of Fund
shares equal to at least $5 million, or more than 1% of the Fund's net
assets, or (iv) other transactions in Fund shares that demonstrated a timing
pattern.  Separate accounts under common ownership or control are combined
for these limits. There can be no assurance that all such participating
insurance companies will be successful in controlling investments in their
respective separate accounts by market timers.

- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------


At What Price Are Shares Sold?  Shares are sold to participating insurance
companies at their offering price, which is the net asset value per share.
The Fund does not impose any sales charge on purchases of its shares. If
there are any charges imposed under the variable annuity, variable life or
other contract through which Fund shares are purchased, they are described in
the accompanying prospectus of the participating insurance company.

Net Asset Value.  The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange ("the Exchange"), on
each day the Exchange is open for trading (referred to in this Prospectus as
a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.


      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security. A security's valuation may differ depending on the method used
for determining value.


      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
or policy owners to purchase Fund shares on a regular business day, provided
that the Fund receives the order from the insurance company, generally by
9:30 A.M. on the next regular business day at the offices of its Transfer
Agent in Colorado.


|X|   Classes of Shares. The Fund offers two different classes of shares. The
class of shares designated as Service shares are subject to a Distribution
and Service Plan. The impact of the expenses of the Plan on Service shares is
described below.  The class of shares that are not subject to a Plan has no
class "name" designation. The different classes of shares represent
investments in the same portfolio of securities but are expected to be
subject to different expenses and will likely have different share prices.

Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution related services and personal services and account maintenance
for the Fund's Service shares. Under the Plan, payments are made quarterly at
an annual rate of up to 0.25% of the average annual net assets of Service
shares of the Fund.  The distributor currently uses all of those fees to
compensate sponsor(s) of the insurance product that offers Fund shares, for
providing personal service and maintenance of accounts of their variable
contract owners that hold Service shares.  The impact of the service plan is
to increase operating expenses of the Service shares, which results in lower
performance compared to the Fund's shares that are not subject to a service
fee.


How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.



      The share price that applies to a redemption order is the next net
asset value per share that is determined after the participating insurance
company (as the Fund's designated agent) receives a redemption request on a
regular business day from its contract or policy holder, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M.
the next regular business day at the office of its Transfer Agent in
Colorado. The Fund normally sends payment
by Federal Funds wire to the insurance company's account the day after the
Fund receives the order (and no later than seven days after the Fund's
receipt of the order). Under unusual circumstances determined by the
Securities and Exchange Commission, payment may be delayed or suspended.


Dividends, Capital Gains and Taxes


Dividends.  The Fund intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis, and to pay
those dividends in March. Dividends and distributions will generally be lower
for Service shares, which normally have higher expenses. The Fund has no
fixed dividend rate and cannot guarantee that it will pay any dividends.


      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).

Capital Gains.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year.  The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).

Taxes.  For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Fund from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable,
if at all, to the participating insurance company.

      This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your
tax advisor or your participating insurance company representative about the
effect of an investment in the Fund under your contract or policy.

Financial Highlights


The Financial  Highlights  Table is presented to help you  understand the Fund's
financial  performance for its non-service  shares for the past ten fiscal years
and the past three  fiscal  years for its service  shares.  Certain  information
reflects  financial  results for a single Fund share.  The total  returns in the
table  represent  the rate that an  investor  would have  earned (or lost) on an
investment   in  the  Fund   (assuming   reinvestment   of  all   dividends  and
distributions).  This information has been audited by Deloitte & Touche LLP,
the Fund's independent  auditors,  whose report, along with the Fund's financial
statements,  is included in the  Statement of Additional  Information,  which is
available on request.

FINANCIAL HIGHLIGHTS
OPPENHEIMER AGGRESSIVE GROWTH FUND/VA


Non-Service shares  Year Ended December 31
2002          2001          2000         1999          1998
- --------------------------------------------------------------------------------


Per Share Operating Data
Net asset value, beginning of period                           $ 40.72
$ 70.77       $ 82.31      $ 44.83       $ 40.96
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.10)          .23           .53         (.09)         (.05)
Net realized and unrealized gain (loss)                         (11.16)
(21.38)        (8.59)       37.57          5.09

- ---------------------------------------------------------------------
Total from investment operations                                (11.26)
(21.15)        (8.06)       37.48          5.04
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.23)         (.54)           --           --          (.10)
Distributions from net realized gain
- --         (8.36)        (3.48)          --         (1.07)

- ---------------------------------------------------------------------
Total dividends and/or distributions to shareholders
(.23)        (8.90)        (3.48)          --         (1.17)
- --------------------------------------------------------------------------------
Net asset value, end of period                                  $29.23
$40.72        $70.77       $82.31        $44.83

- ---------------------------------------------------------------------

- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                              (27.79)%
(31.27)%      (11.24)%      83.60%        12.36%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                    $  979,919
$1,621,550    $2,595,101   $2,104,128    $1,077,960
- --------------------------------------------------------------------------------
Average net assets (in thousands)                           $1,240,435
$1,898,088    $2,978,465   $1,314,349    $  954,848
- --------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)
(0.29)%        0.47%         0.65%      (0.17)%        (0.12)%
Expenses
0.68%         0.68%         0.64%        0.67%         0.71% 3
- --------------------------------------------------------------------------------
Portfolio turnover rate
54%          134%           39%          66%           80%

1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.


Service shares    December 31
2002          2001        2000  1
- --------------------------------------------------------------------------------


Per Share Operating
Data
Net asset value, beginning of period                                  $
40.70       $ 70.77     $ 97.75
- --------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income
..16           .19         .20
Net realized and unrealized loss
(11.53)       (21.36)     (27.18)

- -------------------------------------
Total from investment operations
(11.37)       (21.17)     (26.98)
- --------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income
(.20)         (.54)         --
Distributions from net realized gain
- --         (8.36)         --

- -------------------------------------
Total dividends and/or distributions to shareholders
(.20)        (8.90)         --
- --------------------------------------------------------------------------------
Net asset value, end of period
$29.13        $40.70      $70.77

- -------------------------------------

- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 2
(28.05)%      (31.31)%    (27.60)%



- --------------------------------------------------------------------------------
Ratios/Supplemental Data

Net assets, end of period (in thousands)
$144           $54          $1
- --------------------------------------------------------------------------------
Average net assets (in thousands)                                        $
72           $31          $1
- --------------------------------------------------------------------------------
Ratios to average net assets:
3
Net investment income (loss)
(0.56)%        0.09%       1.14%
Expenses
1.55%         0.83%       0.64%
Expenses, net of reduction to custodian expenses
and/or
voluntary waiver of transfer agent fees
0.98%         0.83%       0.64%
- --------------------------------------------------------------------------------
Portfolio turnover rate
54%          134%         39%

1. For the period from October 16, 2000  (inception of offering) to December 31,
2000.
2. Assumes an  investment on the business day before the first day of the fiscal
period  (or  inception  of  offering),  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 of less than one full year.

INFORMATION AND SERVICES

For More Information on Oppenheimer Aggressive Growth Fund/VA

The following additional information about Oppenheimer Aggressive Growth
Fund/VA is available without charge upon request:

STATEMENT OF ADDITIONAL INFORMATION
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into
this Prospectus (which means it is legally part of this Prospectus).

ANNUAL AND SEMI-ANNUAL REPORTS
Additional information about the Fund's investments and performance is
available in the Fund's Annual and Semi-Annual Reports to shareholders.
The Annual Report includes a discussion of market conditions and
investment strategies that significantly affected the Fund's performance
during its last fiscal year.

How to Get More Information

You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund, or instructions on how to contact the
sponsor of your insurance product:

- --------------------------------------------------------------------------------
By Telephone                          Call OppenheimerFunds Services
                                      toll-free:
                                      1.800.981.2871
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
By Mail                               Write to:
                                      OppenheimerFunds Services
                                      P.O. Box 5270
                                      Denver, Colorado 80217-5270
- --------------------------------------------------------------------------------

Information about the Fund including the Statement of Additional
Information can be reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1.202.942.8090.  Reports and
other information about the Fund are available on the EDGAR database on
the SEC's Internet website at www.sec.gov. Copies may be obtained after
                              -----------
payment of a duplicating fee by electronic request at the SEC's e-mail
address: publicinfo@sec.gov or by writing to the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

No one has been authorized to provide any information about the Fund or
to make any representations about the Fund other than what is contained
in this Prospectus. This Prospectus is not an offer to sell shares of the
Fund, nor a solicitation of an offer to buy shares of the Fund, to any
person in any state or other jurisdiction where it is unlawful to make
such an offer.


The Fund's SEC File No.: 811-4108

PR0620.001.0500PR0620.001.0503
Printed on recycled paper.



                            Appendix to Prospectus of
                      Oppenheimer Aggressive Growth Fund/VA
                (a series of Oppenheimer Variable Account Funds)

      Graphic material included in the Prospectus of Oppenheimer
Aggressive Growth Fund/VA (the "Fund") under the heading "Annual Total
Return (as of 12/31 each year)":


     A bar chart will be included in the Prospectus of the Fund depicting
the annual total returns of a hypothetical $10,000 investment in
non-service shares of the Fund for each of the 10 most recent calendar
years, without deducting separate account expenses.  Set forth below are
the relevant data that will appear on the bar chart:


Calendar
Year
Ended                               Annual Total Returns
- -----                               --------------------


12/31/93                                  27.32%
12/31/94                                  -7.59%
12/31/95                                  32.52%
12/31/96                                  20.23%
12/31/97                                  11.67%
12/31/98                                  12.36%
12/31/99                                  83.60%
12/31/00                                       -11.24%
12/31/01                                       -31.27%
12/31/02                                   -27.79%


NIA\OVAF\620PSP_2003(b).doc

Oppenheimer

Bond Fund/VA                                   Oppenheimer Bond Fund/VA is a
A series of Oppenheimer Variable         mutual fund that seeks a high level of
Account Funds                            current income as its primary goal. As
                                         a secondary goal, the Fund seeks

Prospectus dated May 1, 2003             capital appreciation when consistent
                                         with its goal of high current income.
                                         The Fund invests mainly in investment
                                         grade debt securities.

                                               Shares of the Fund are sold only
                                         as the underlying investment for
                                         variable life insurance policies,
                                         variable annuity contracts and other
                                         insurance company separate accounts. A
                                         prospectus for the insurance product
                                         you have selected accompanies this
                                         Prospectus and explains how to select
                                         shares of the Fund as an investment
                                         under that insurance product and
                                         whether you are only eligible to
                                         purchase Service shares of the Fund.
                                         This Prospectus contains important
                                         information about the Fund's
                                         objective, its investment policies,
                                         strategies and risks. Please read this
                                         Prospectus (and your insurance product
                                         prospectus) carefully before you
                                         invest and keep them for future
                                         reference about your account.

As with all mutual funds, the
Securities and Exchange Commission has
not approved or disapproved the Fund's
securities nor has it determined that
this Prospectus is accurate or
complete. It is a criminal offense to
represent otherwise.

                                                                          1234



CONTENTS



- ------------------------------------------------------------------------------

                  ABOUT THE FUND


                  The Fund's Objective and Investment Strategies

                  Main Risks of Investing in the Fund

                  The Fund's Past Performance


                  Fees and Expenses of the Fund


                  About the Fund's Investments

                  How the Fund is Managed



                  INVESTING IN THE FUND

- ------------------------------------------------------------------------------

                  How to Buy and Sell Shares

                  Dividends, Capital Gains and Taxes

                  Financial Highlights


About the Fund

The Fund's Objective and Investment Strategies

What Are the Fund's Investment Objectives? The Fund's main objective is to
seek a high level of current income.  As a secondary objective, the Fund
seeks capital appreciation when consistent with its primary objective.


What Does the Fund Mainly Invest In?  The Fund invests at least 80% of its
net assets (plus borrowings) in debt securities. Normally, the Fund invests
at least 65% of its total assets in investment-grade debt securities, U.S.
government securities and money market instruments. The investment-grade debt
securities the Fund invests in can include the following types of
obligations, which in general are referred to as "bonds":
o     short, medium and long-term foreign and U.S. government bonds and

         notes,
o     domestic and foreign corporate debt obligations,
o     collateralized mortgage obligations (CMOs),
o     other mortgage-related securities and asset-backed securities,
o     participation interests in loans,
o     "structured" notes, and
      other debt obligations.

      The Fund's investments in U.S. government securities include securities
issued or guaranteed by the U.S. government or its agencies or
federally-chartered corporate entities referred to as "instrumentalities."
These include mortgage-related U.S. government securities and CMOs.


      There are no other set percentage allocations of the Fund's assets
among the types of debt securities the Fund buys, but currently the Fund
focuses mainly on U.S. government securities, CMOs, and investment-grade debt
securities to do so because they currently offer higher yields than money
market instruments.  However, if market conditions change, the Fund's
portfolio managers may change the relative allocation of the Fund's assets.


      The Fund has no limitations on the range of maturities of the debt
securities in which it can invest and therefore may hold bonds with short,
medium or long-term maturities.  The Fund's investments in debt securities
can include "zero coupon" securities and securities that have been "stripped"
of their interest coupons.  The Fund can invest up to 35% of its total assets
in high yield debt securities and other debt securities that are below
investment grade (commonly referred to as "junk bonds") and other investments
such as preferred stock.

What Is A "Debt" Security? A debt security is essentially a loan by the buyer to
the issuer of the debt security.  The issuer  promises to pay back the principal
amount of the loan and normally pays  interest,  at a fixed or variable rate, on
the debt while it is outstanding.

      The Fund can also use hedging instruments and certain derivative
investments, primarily CMOs and "structured" notes, to try to enhance income
or to try to manage investment risks. These investments are more fully
explained in "About the Fund's Investments," below.


How Do the Portfolio Managers Decide What Securities to Buy or Sell? In
selecting securities for the Fund, the Fund's portfolio managers analyze the
overall investment opportunities and risks in different sectors of the debt
security markets by focusing on business cycle analysis and relative values
between the corporate and government sectors. The portfolio managers' overall
strategy is to build a broadly diversified portfolio of debt securities. The
portfolio managers currently focus on the factors below (some of which may
vary in particular cases and may change over time), looking for:
      |_|  High current income from different types of corporate and
         government debt securities,

      |_|  Investment-grade securities, primarily to help reduce credit risk,
      |_|  Broad portfolio diversification to help reduce the volatility of
the Fund's share prices,
      |_|  Relative values among the debt securities market sectors.


      The portfolio managers look for securities whose yield and price change
are expected to maximize the return to investors. The portfolio managers
normally will not invest in securities with higher yields if, in their
opinions they expect the price to decline to the point where total return
(including income) would be lower than the return on alternative fixed-income
investments. Conversely, the portfolio managers normally will not invest in
securities they expect to appreciate in price if that security's yield is so
low that total return (including income) will be lower than the return on
alternative fixed-income investments. All else being equal, the portfolio
managers' preference is for investing for income over price appreciation.


Who Is the Fund Designed For? The Fund's shares are available only as an
investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
high current income from a fund that invests mainly in investment-grade debt
securities, but which can also hold below-investment-grade securities to seek
higher income. Those investors should be willing to assume the credit risks
of a fund that typically invests a significant amount of its assets in debt
securities and the changes in share prices that can occur when interest rates
rise. Since the Fund's income level will fluctuate, it is not designed for
investors needing an assured level of current income. The Fund is not a
complete investment program.

Main Risks of Investing in the Fund

      All investments carry risks to some degree.  The Fund's investments are
subject to changes in their value from a number of factors, described below.
There is also the risk that the value of your investment could be eroded over
time by the effects of inflation and that poor security selection by the
Fund's investment manager, OppenheimerFunds, Inc., will cause the Fund to
underperform other funds having similar objectives.


      |X| Credit Risk.  Debt securities are subject to credit risk.  Credit
risk relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. If the issuer fails to
pay interest, the Fund's income might be reduced, and if the issuer fails to
repay principal, the value of that security and of the Fund's shares might be
reduced. While the Fund's investments in U.S. government securities are
subject to little credit risk, debt securities issued by domestic and foreign
corporations and by foreign governments are subject to risks of default.

      |X| Credit Derivatives.  The Fund may enter into credit default swaps,
both (i) directly and (ii) indirectly in the form of a swap embedded within a
structured note, to protect against the risk that a security will default.
The Fund pays a fee to enter into the trade and receives a fixed payment
during the life of the swap. If there is a credit event, the Fund either
delivers the defaulted bond (if the Fund has taken the short position in the
credit default swap) or pays the par amount of the defaulted bond (if the
Fund has taken the long position in the credit default swap note). Risks of
credit default swaps include the cost of paying for credit protection if
there are no credit events.

            |_|  Special Risks of Lower-Grade Securities.  Because the Fund
can invest up to 35% of its total assets in securities below investment grade
to seek higher income, the Fund's credit risks are greater than those of
funds that buy only investment grade securities.  Lower-grade debt securities
may be subject to greater market fluctuations and greater risks of loss of
income and principal than investment-grade debt securities.  Securities that
are (or that have fallen) below investment grade are exposed to a greater
risk that the issuers of those securities might not meet their debt
obligations.  Those risks can reduce the Fund's share prices and the income
it earns.  The market for lower-grade securities may be less liquid,
especially during times of economic distress, and therefore they may be
harder to value or to sell at an acceptable price.

      |X| Interest Rate Risks. The values of debt securities, including U.S.
government securities prior to maturity, are subject to change when
prevailing interest rates change.  When interest rates fall, the values of
already-issued debt securities generally rise.  When interest rates rise, the
values of already-issued debt securities generally fall, and they may sell at
a discount from their face amount. The magnitude of these fluctuations will
often be greater for longer-term debt securities than shorter-term debt
securities.  However, interest rate changes may have different effects on the
values of mortgage-related securities because of prepayment risks, discussed
below.  The Fund's share prices can go up or down when interest rates change
because of the effect of the changes on the value of the Fund's investments
in debt securities.

      |X| Prepayment Risk. Prepayment risk occurs when the mortgages
underlying a mortgage-related security are prepaid at a rate faster than
anticipated (usually when interest rates fall) and the issuer of a security
can prepay the principal prior to the security's maturity. Mortgage-related
securities that are subject to prepayment risk, including the CMOs and other
mortgage-related securities that the Fund buys, generally offer less
potential for gains when prevailing interest rates decline, and have greater
potential for loss when interest rates rise.

      The impact of prepayments on the price of a security may be difficult
to predict and may increase the volatility of the price. Additionally, the
Fund may buy mortgage-related securities at a premium. Accelerated
prepayments on those securities could cause the Fund to lose the portion of
its principal investment represented by the premium the Fund paid.

      |X| Risks of Foreign Investing.  The Fund can invest its assets without
limit in foreign debt securities and can buy securities of governments and
companies in both developed markets and emerging markets. While foreign
securities offer special investment opportunities, there are also special
risks that can reduce the Fund's share prices and returns.


      The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that
foreign currency.  Currency rate changes can also affect the distributions
the Fund makes from the income it receives from foreign securities as foreign
currency values change against the U.S. dollar. Foreign investing can result
in higher transaction and operating costs for the Fund. Foreign issuers are
not subject to the same accounting and disclosure requirements that U.S.
companies are subject to.

      The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in governmental economic
or monetary policy in the U.S. or abroad, or other political and economic
factors.


      |X| There are Special Risks in Using Derivative Investments. The Fund
can use derivatives to seek increased income or to try to hedge investment
risks. In general terms, a derivatives investment is an investment contract
whose value depends on (or is derived from) the value of an underlying asset,
interest rate or index. Options, futures, interest rate swaps, credit
derivatives, structured notes and CMOs are examples of derivatives the Fund
can use.


      If the issuer of the derivative does not pay the amount due, the Fund
can lose money on the investment. Also, the underlying security or investment
on which the derivative is based, and the derivative itself, might not
perform the way the Manager expected it to perform. If that happens, the
Fund's share price could decline or the Fund could get less income than
expected. The Fund has limits on the amount of particular types of
derivatives it can hold. However, using derivatives can cause the Fund to
lose money on its investment and/or increase the volatility of its share
prices.

      How Risky is the Fund Overall? The risks described above collectively
form the risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its price per share. These risks
mean that you can lose money by investing in the Fund. When you redeem your
shares, they may be worth more or less than what you paid for them. There is
no assurance that the Fund will achieve its investment objective. Debt
securities are subject to credit and interest rate risks that can affect
their values and the share prices of the Fund. Prepayment risks of
mortgage-backed securities can cause the Fund to reinvest the proceeds of its
investments in lower-yielding securities. The Fund generally has more risks
than bond funds that focus on U.S. government securities but the Fund's
emphasis on investment-grade securities may make its share prices less
volatile than high yield bond funds or funds that focus on foreign bonds.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund's Past Performance


      The bar chart and table below show one measure of the risks of
investing in the Fund, by showing changes in the Fund's performance (for its
non-service shares) from year to year for the last 10 calendar years and by
showing how the average annual total returns of the Fund's shares compare to
those of a broad-based market index. The Fund's past investment performance
is not necessarily an indication of how the Fund will perform in the future.


                 Annual Total Returns (as of 12/31 each year)

    [See appendix to prospectus for data in bar chart showing annual total
                                   returns]

Charges imposed by the separate accounts that invest in the Fund are not
included in the calculations of return in this bar chart, and if those
charges were included, the returns would be less than those shown.


During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 5.60% (2nd Qtr `95) and the lowest return (not
annualized) for a calendar quarter was -1.90% (1st Qtr `94).


- ---------------------------------------------------------------------------------
Average Annual Total
Returns for the             1 Year             5 Years            10 Years
periods ended

December 31, 2002

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer Bond

Fund/VA Non-Service          9.02%              5.57%               6.89%
Shares

(inception 4/3/85)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lehman Brothers

Corporate Bond Index        10.52%              7.28%               7.86%

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Oppenheimer Bond
Fund/VA Service              N/A1                N/A                 N/A
Shares  (inception
5/1/02)

- ---------------------------------------------------------------------------------


1. Because this is a new class of shares, return data for the period
specified is not available.

The Fund's returns in the table measure the performance of a hypothetical
account without deducting charges imposed by the separate accounts that
invest in the Fund and assume that all dividends and capital gains
distributions have been reinvested in additional shares. The Fund's
performance is compared to the Lehman Brothers Corporate Bond Index, an
unmanaged index of non-convertible investment grade corporate debt of U.S.
issuers that is a measure of the general domestic bond market. The index
performance reflects the reinvestment of income but does not consider the
effects of fees, expenses or transaction costs. Also, the Fund may have
investments that vary from the index.


The Fund's total returns should not be expected to be the same as the returns
of other Oppenheimer funds, even if both funds have the same portfolio
managers and/or similar names.


Fees and Expenses of the Fund

The following tables are provided to help you understand the fees and
expenses you may pay if you buy and hold shares of the Fund. The Fund pays a
variety of expenses directly for

management of its assets, administration, distribution of its shares and
other services. Those expenses are subtracted from the Fund's assets to
calculate the Fund's net asset values per share. All shareholders therefore
pay those expenses indirectly. The numbers below are based on the Fund's
expenses during its fiscal year ended December 31, 2002.

Shareholder Fees.  The Fund does not charge any initial sales charge to buy
shares or to reinvest dividends.  There are no exchange fees or redemption
fees and no contingent deferred sales charges. Please refer to the
accompanying prospectus of the participating insurance company for
information on initial or contingent deferred sales charges, exchange fees or
redemption fees for that variable life insurance policy, variable annuity or
other investment product.  Those charges and fees are not reflected in either
of the tables below.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)


- --------------------------------------------------------------------------------

                                    Non-Service Shares       Service Shares

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Management Fees                           0.71%                   0.71%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Distribution and Service                   None                   0.25%
(12b-1) Fees

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Other Expenses                            0.02%                   0.02%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Total Annual Operating Expenses           0.73%                   0.98%

- --------------------------------------------------------------------------------


Expenses may vary in future years. "Other expenses" in the table include
transfer agent fees, custodial fees, and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily agreed to limit transfer
and shareholder servicing agent fees to 0.35% per fiscal year, for both
classes. That undertaking may be amended or withdrawn at any time. For the
Fund's fiscal year ended December 31, 2002, the transfer agent fees did not
exceed the expense limitation described above.

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

      The example assumes that you invest $10,000 in shares of the Fund for
the time periods indicated, reinvest your dividends and distributions and
then redeem all of your shares at the end of those periods.  The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same.  Your actual costs may be higher or
lower, because expenses will vary over time.  Based on these assumptions your
expenses would be as follows, whether or not you redeem your investment at
the end of each period:


- ------------------------------------------------------------------------------

                              1 Year      3 Years     5 Years     10 Years

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Non-Service Shares             $75         $233        $406         $906

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Service Shares                 $100        $312        $542        $1,201

- ------------------------------------------------------------------------------

About the Fund's Investments

The Fund's Principal Investment Policies. The allocation of the Fund's
portfolio among different types of investments will vary over time based upon
the Manager's evaluation of economic and market trends.  The Fund's portfolio
might not always include all of the different types of investments described
below.  The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.

      The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce
risks by carefully researching securities before they are purchased, and in
some cases by using hedging techniques. The Fund attempts to reduce its
exposure to credit risks by limiting its investments in below-investment
grade securities, as explained above.  The Fund attempts to reduce its
exposure to market risks by diversifying its investments, that is, by not
holding a substantial percentage of the securities of any one issuer and by
not investing too great a percentage of the Fund's assets in any one issuer.
Also, the Fund does not concentrate 25% or more of its investments in the
securities of any one foreign government or in the debt and equity securities
of companies in any one industry.

      A debt security is essentially a loan by the buyer to the issuer of the
debt security. The issuer promises to pay back the principal amount of the
loan and normally pays interest, at a fixed or variable rate, on the debt
while it is outstanding. The debt securities the Fund buys may be rated by
nationally recognized rating organizations or they may be unrated securities
assigned an equivalent rating by the Manager. While the Fund's investments
may be above or below investment grade in credit quality, the Fund invests
primarily in investment-grade debt securities. However, the Fund can invest
up to 35% of its net assets in below investment-grade debt
securities, commonly called "junk bonds."  They typically offer higher yields
than investment-grade bonds, because investors assume the greater risks of
default of those securities. The ratings definitions of the principal
national rating organizations is included in Appendix A to the Statement of
Additional Information.

      Investment-grade debt securities are those rated in one of the four
highest categories by Standard & Poor's Corporation, Moody's Investors
Service, Inc., Fitch or other national rating organizations.  They can also
be unrated or "split-rated" (rated as investment grade by one rating
organization but below investment grade by another), if determined by the
Manager to be of comparable quality to rated investment-grade securities.
The Fund is not obligated to dispose of securities when issuers are in
default or if the rating of the security is reduced below investment grade.

      The Fund can invest some of its assets in other types of securities,
including common stocks, preferred stocks, and other equity securities of
foreign and U.S. companies. However, the Fund does not anticipate having
significant investments in those types of securities as part of its normal
portfolio strategy.


The Fund could pursue its secondary objective of capital appreciation by
      investing in securities convertible into common stock. Convertible
      securities might allow the Fund to participate in the increase in value
      of the issuer's underlying common stock, by exercising the conversion
      right. Normally the Fund would not hold the common stock for
      investment, although it can hold common stock as part of the value of
      its net assets that is not normally expected to be invested in debt
      securities. Typically, convertible securities also pay dividends until
      they are converted. There may be other investment strategies that could
      offer the Fund opportunities for capital appreciation, such as
      investing in defaulted securities, but these are not expected to be a
      significant part of the Fund's investment program.

      |X| U.S. Government Securities.  The Fund can invest in securities
issued or guaranteed by the U.S. Treasury or other government agencies or
federally-chartered corporate entities referred to as "instrumentalities."
These are referred to as "U.S. government securities" in this Prospectus.

      |X| U.S. Treasury Obligations. These include Treasury bills (which have
maturities of one year or less when issued), Treasury notes (which have
maturities of from one to ten years when issued), and Treasury bonds (which
have maturities of more than ten years when issued). Treasury securities are
backed by the full faith and credit of the United States as to timely
payments of interest and repayments of principal. The Fund can also buy U.S.
Treasury securities that have been "stripped" of their coupons by a Federal
Reserve Bank, zero-coupon U.S. Treasury securities described below, and
Treasury Inflation-Protection Securities ("TIPS").

      |X| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the U.S.
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association pass-through
mortgage certificates (called "Ginnie Maes"). Some are supported by the right
of the issuer to borrow from the U.S. Treasury under certain circumstances,
such as Federal National Mortgage Association bonds ("Fannie Maes"). Others
are supported only by the credit of the entity that issued them, such as
Federal Home Loan Mortgage Corporation obligations ("Freddie Macs").

            |_|  Mortgage-Related U.S. Government Securities. The Fund can
buy interests in pools of residential or commercial mortgages, in the form of
collateralized mortgage obligations ("CMOs") and other "pass-through"
mortgage securities. CMOs that are U.S. government securities have collateral
to secure payment of interest and principal on underlying assets. They may be
issued in different series each having different interest rates and
maturities. The collateral is either in the form of mortgage pass-through
certificates issued or guaranteed by a U.S. agency or instrumentality or
mortgage loans insured by a U.S. government agency. The Fund can have
substantial amounts of its assets invested in mortgage-related U.S.
government securities.


      The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when interest rates rise.

      If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be
reduced. Additionally, the Fund may have to reinvest the prepayment proceeds
in other securities paying interest at lower rates, which could reduce the
Fund's yield.

      When interest rates rise rapidly, and if prepayments occur more slowly
than expected, a short or medium-term CMO can in effect become a long-term
security, subject to greater fluctuations in value.  These prepayment risks
can make the prices of CMOs very volatile when interest rates change. The
prices of longer-term debt securities tend to fluctuate more than those of
shorter-term debt securities.  That volatility will affect the Fund's share
prices.


      |X| Forward Rolls.  The Fund may enter into "forward roll" (also
referred to as "mortgage dollar rolls") transactions with respect to
mortgage-related securities.  In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase
a similar security at a later date at a set price.

      During the period between the sale and the purchase, the Fund 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
Fund sells may decline below the price at which the Fund is obligated to
repurchase securities, or that the counterparty might default in its
obligation.

      |X| High-Yield, Lower-Grade Debt Securities. The Fund can purchase a
variety of lower-grade, high-yield debt securities of U.S. and foreign
issuers, including bonds, debentures, notes, preferred stocks, loan
participation interests, structured notes, asset-backed securities, among
others, to seek high current income. These securities are sometimes called
"junk bonds." The Fund has no requirements as to the maturity of the debt
securities it can buy, or as to the market capitalization range of the
issuers of those securities. Up to 35% of the Fund's assets can be invested
in debt securities below investment grade under normal market conditions.


     Lower-grade  debt  securities  are  those  rated  below  "Baa"  by  Moody's
Investors  Service,  Inc. or lower than "BBB" by Standard  &  Poor's  Rating
Service  or that have  similar  ratings  by other  nationally-recognized  rating
organizations.  The Fund can invest in securities rated as low as "C" or "D", in
unrated  bonds or bonds  which are in  default  at the time the Fund buys  them.
While  securities  rated  "Baa" by Moody's or "BBB" by  S&P  are  considered
"investment grade," they have some speculative characteristics.

      The Manager does not rely solely on ratings issued by rating
organizations when selecting investments for the Fund. The Fund can buy
unrated securities that offer high current income. The Manager may assign a
rating to an unrated security that is equivalent to the rating of a rated
security that the Manager believes offers comparable yields and risks.


      While investment-grade securities are subject to risks of non-payment
of interest and principal, in general higher-yielding lower-grade bonds,
whether rated or unrated, have greater risks than investment-grade
securities.  They may be subject to greater market fluctuations and risk of
loss of income and principal than investment-grade securities. There may be
less of a market for them and therefore they may be harder to value and to
sell at an acceptable price. There is a relatively greater possibility that
the issuer's earnings may be insufficient to make the payments of interest
and principal due on the bonds.  These risks mean that the Fund may not
achieve the expected income from lower-grade securities, and that the Fund's
net asset value per share may be affected by declines in value of these
securities.

      |X| Private-Issuer Mortgage-Backed Securities. The Fund can invest a
substantial portion of its assets in mortgage-backed securities issued by
private issuers, which do not offer the credit backing of U.S. government
securities. Primarily these include multi-class debt or pass-through
certificates secured by mortgage loans. They may be issued by banks, savings
and loans, mortgage bankers and other non-governmental issuers. Private
issuer mortgage-backed securities are subject to the credit risks of the
issuers (as well as the interest rate risks and prepayment risks of CMOs that
are U.S. government securities, discussed above), although in some cases they
may be supported by insurance or guarantees.

      |X| Asset-Backed Securities. The Fund can buy asset-backed securities,
which are fractional interests in pools of loans collateralized by the loans
or other assets or receivables. They are issued by trusts and special purpose
corporations that pass the income from the underlying pool to the buyer of
the interest. These securities are subject to the risk of default by the
issuer as well as by the borrowers of the underlying loans in the pool.

      |X| Foreign Debt Securities.  The Fund can buy debt securities issued
by foreign governments and companies, as well as "supra-national" entities,
such as the World Bank. They can include bonds, debentures, and notes,
including derivative investments called "structured" notes, described below.
The Fund will not invest 25% or more of its total assets in debt securities
of any one foreign government or in debt securities of companies in any one
industry. The Fund has no requirements as to the maturity range of the
foreign debt securities it can buy, or as to the market capitalization range
of the issuers of those securities.


      Foreign government debt securities might not be supported by the full
faith and credit of the issuing government.  The Fund's foreign debt
investments can be denominated in U.S. dollars or in foreign currencies. The
Fund will buy foreign currency only in connection with the purchase and sale
of foreign securities and not for speculation.


      |_| Special Risks of Emerging and Developing Markets.  Securities of
issuers in emerging and developing markets may offer special investment
opportunities but present risks not found in more mature markets. Those
securities may be more difficult to value and to sell at an acceptable price
and their prices may be more volatile than securities of issuers in more
developed markets. Settlements of trades may be subject to greater delays so
that the Fund may not receive the proceeds of a sale of a security on a
timely basis. These investments may be very speculative.


      These countries might have less developed trading markets and
exchanges. Emerging market countries may have less developed legal and
accounting systems and investments may be subject to greater risks of
government restrictions on withdrawing the sales proceeds of securities from
the country. Economies of developing countries may be more dependent on
relatively few industries that may be highly vulnerable to local and global
changes. Governments may be more unstable and present greater risks of
nationalization or restrictions on foreign ownership of stocks of local
companies.

      The Fund can buy "Brady Bonds," which are U.S.-dollar denominated debt
securities collateralized by zero-coupon U.S. Treasury securities. They are
typically issued by emerging markets countries and are considered speculative
securities with higher risks of default.

Special Portfolio Diversification Requirements. To enable a variable annuity
or variable life insurance contract based on an insurance company separate
account to qualify for favorable tax treatment under the Internal Revenue
Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Fund's investment program is managed to
meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.

      Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income. Those diversification requirements might also
limit, to some degree, the Fund's investment decisions in a way that could
reduce its performance.


Can the Fund's Investment Objective and Policies Change?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Shareholders will receive 60 days advance notice of any
change in the 80% requirement (a non-fundamental policy) described under
"What Does The Fund Mainly Invest In?"  Fundamental policies are those that
cannot be changed without the approval of a majority of the Fund's
outstanding voting shares. The Fund's investment objective is a fundamental
policy. Investment restrictions that are fundamental policies are listed in
the Statement of Additional Information. An investment policy is not
fundamental unless this Prospectus or the Statement of Additional Information
says that it is.

      |_| Portfolio Turnover. The Fund may engage in short-term trading to
try to achieve its objective.  High portfolio turnover increases the
brokerage and transaction costs the Fund pays. The Financial Highlights table
below shows the Fund's portfolio turnover rates during prior fiscal years.


Other Investment Strategies.  To seek its objective, the Fund can also use
the investment techniques and strategies described below. The Fund might not
always use all of them. These techniques involve risks, although some are
designed to help reduce overall investment or market risks.


      |X| Zero-Coupon and "Stripped" Securities.  Some of the government and
corporate debt securities the Fund buys are zero-coupon bonds that pay no
interest. They are issued at a substantial discount from their face value.
"Stripped" securities are the separate income or principal components of a
debt security. Some CMOs or other mortgage-related securities may be
stripped, with each component having a different proportion of principal or
interest payments. One class might receive all the interest and the other all
the principal payments.


      Zero-coupon and stripped securities are subject to greater fluctuations
in price from interest rate changes than conventional interest-bearing
securities. The Fund may have to pay out the imputed income on zero-coupon
securities without receiving the actual cash currently. Interest-only
securities are particularly sensitive to changes in interest rates.

      The values of interest-only mortgage-related securities are also very
sensitive to prepayments of underlying mortgages. Principal-only securities
are also sensitive to changes in interest rates. When prepayments tend to
fall, the timing of the cash flows to these securities increases, making them
more sensitive to changes in interest rates. The market for some of these
securities may be limited, making it difficult for the Fund to dispose of its
holdings at an acceptable price. The Fund can invest up to 50% of its total
assets in zero-coupon securities issued by either the U.S. Treasury or
companies.


      |X| Participation Interests in Loans. These securities represent an
undivided fractional interest in a loan obligation by a borrower. They are
typically purchased from banks or dealers that have made the loan or are
members of the loan syndicate. The loans may be to foreign or U.S. companies.
The Fund does not invest more than 5% of its net assets in participation
interests of any one borrower. They are subject to the risk of default by the
borrower. If the borrower fails to pay interest or repay principal, the Fund
can lose money on its investment.

      |X| Illiquid and Restricted Securities. Investments may be illiquid
because they do not have an active trading market, making it difficult to
value them or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual restriction on its resale or which
cannot be sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 15% of its net assets in illiquid or
restricted securities.  Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that
limit. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate
liquidity.

      |X| Derivative Investments. The Fund can invest in a number of
different kinds of "derivative" investments.  In the broadest sense,
exchange-traded options, futures contracts, structured notes, CMOs and other
hedging instruments the Fund can use may be considered "derivative
investments."  In addition to using hedging instruments, the Fund can use
other derivative investments because they offer the potential for increased
income.


      Markets underlying securities and indices may move in a direction not
anticipated by the Manager.  Interest rate and stock market changes in the
U.S. and abroad may also influence the performance of derivatives.  As a
result of these risks the Fund could realize less principal or income from
the investment than expected.  Certain derivative investments held by the
Fund may be illiquid.


      |X| "Structured" Notes. The Fund can buy "structured" notes, which are
specially-designed derivative debt investments.  Their principal payments or
interest payments are linked to the value of an index (such as a currency or
securities index) or commodity. The terms of the instrument may be
"structured" by the purchaser (the Fund) and the borrower issuing the note.


      The principal and/or interest payments depend on the performance of one
or more other securities or indices, and the values of these notes will
therefore fall or rise in response to the changes in the values of the
underlying security or index. They are subject to both credit and interest
rate risks and therefore the Fund could receive more or less than it
originally invested when the notes mature, or it might receive less interest
than the stated coupon payment if the underlying investment or index does not
perform as anticipated. Their values may be very volatile and they may have a
limited trading market, making it difficult for the Fund to sell its
investment at an acceptable price.


      |X| Hedging.  The Fund can buy and sell futures contracts, put and call
options, forward contracts and options on futures and broadly-based
securities indices.  These are all referred to as "hedging instruments." The
Fund does not use hedging instruments for speculative purposes, and has
limits on its use of them. The Fund is not required to use hedging
instruments in seeking its goal.


      The Fund could buy and sell options, futures and forward contracts for
a number of purposes. It might do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities.  It might do so to try to manage its
exposure to changing interest rates.

      Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an
investment that has increased in value, the Fund will be required to sell the
investment at the call price and will not be able to realize any profit if
the investment has increased in value above the call price.  In writing a
put, there is a risk that the Fund may be required to buy the underlying
security at a disadvantageous price.

      If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Fund's return.
The Fund could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or if it
could not close out a position because of an illiquid market.


Temporary Defensive and Interim Investments.  In times of unstable adverse
market or economic conditions, the Fund can invest up to 100% of its assets
in temporary investments that are inconsistent with the Funds' principal
investment strategies. Generally they would be cash or cash equivalents, such
as U.S. Treasury Bills and other short-term U.S. government obligations or
high-grade commercial paper.  The Fund can also hold these types of
securities pending the investment of proceeds from the sale of Fund shares or
portfolio securities or to meet anticipated redemptions of Fund shares.  To
the extent the Fund invests defensively in these securities, it might not
achieve its investment objectives.


How the Fund Is Managed

The Manager. The Fund's investment Manager, OppenheimerFunds, Inc., chooses
the Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Fund's
Board of Trustees, under an investment advisory agreement that states the
Manager's responsibilities.  The agreement sets the fees the Fund pays to the
Manager and describes the expenses that the Fund is responsible to pay to
conduct its business.


      The Manager has been an investment adviser since January, 1960.  The
Manager and its subsidiaries and affiliates managed $120 billion in assets as
of March 31, 2003, including other Oppenheimer funds, with more than 7
million shareholder accounts.  The Manager is located at 498 Seventh Avenue,
New York, New York 10018.

      |X| Portfolio Managers. Since April 23, 2002, the Fund has been managed
by a portfolio management team comprised of Angelo Manioudakis and other
investment professionals selected from the Manager's high-grade team in its
fixed-income department. This portfolio management team is primarily
responsible for the day-to-day management of the Fund's portfolio. Mr.
Manioudakis is a Vice President of the Fund and Senior Vice President of the
Manager.  He is also an officer and portfolio manager of other Oppenheimer
funds.  Certain members of the Fund's portfolio management team have
portfolio management responsibilities for other Oppenheimer funds.  Prior to
joining the Manager in April 2002, Mr. Manioudakis was a portfolio manager at
Morgan Stanley Investment Management (since August 1993).

      |X| Advisory Fees.  Under the Investment Advisory Agreement, the Fund
pays the Manager an advisory fee at an annual rate that declines on
additional assets as the Fund grows: 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% on the next $200 million
and 0.50% of average annual net assets over $1 billion. The Fund's management
fee for its fiscal year ended December 31, 2002, was 0.71% of the Fund's
average annual net assets for each class of shares.


      |X| Possible Conflicts of Interest. The Fund offers its shares to
separate accounts of different insurance companies that are not affiliated
with each other, as an investment for their variable annuity, variable life
and other investment product contracts. While the Fund does not foresee any
disadvantages to contract owners from these arrangements, it is possible that
the interests of owners of different contracts participating in the Fund
through different separate accounts might conflict. For example, a conflict
could arise because of differences in tax treatment.

      The Fund's Board has procedures to monitor the portfolio for possible
conflicts to determine what action should be taken. If a conflict occurs, the
Board might require one or more participating insurance company separate
accounts to withdraw their investments in the Fund. That could force the Fund
to sell securities at disadvantageous prices, and orderly portfolio
management could be disrupted. Also, the Board might refuse to sell shares of
the Fund to a particular separate account, or could terminate the offering of
the Fund's shares if required to do so by law or if it would be in the best
interests of the shareholders of the Fund to do so.


INVESTING IN THE FUND


How to Buy and Sell Shares

How Are Shares Purchased? Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That Prospectus will indicate whether
you are only eligible to purchase Service shares of the Fund. The Fund
reserves the right to refuse any purchase order when the Manager believes it
would be in the Fund's best interests to do so.

      |X| Market Timers.  The Fund has instructed its participating insurance
companies that it may restrict or refuse investments by their separate
accounts from market timers.  "Market timers" include persons whose separate
account transactions have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier exchange request, (ii) exchanges out of the
Fund more than twice in any calendar quarter, (iii) an exchange of Fund
shares equal to at least $5 million, or more than 1% of the Fund's net
assets, or (iv) other transactions in Fund shares that demonstrated a timing
pattern.  Separate accounts under common ownership or control are combined
for these limits. There can be no assurance that all such participating
insurance companies will be successful in controlling investments in their
respective separate accounts by market timers.

- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------

At What Price Are Shares Sold? Shares are sold at their offering price, which
is the net asset value per share. The Fund does not impose any sales charge
on purchases of its shares. If there are any charges imposed under the
variable annuity, variable life or other contract through which Fund shares
are purchased, they are described in the accompanying prospectus of the
participating insurance company.


Net Asset Value.  The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange ("the Exchange"), on
each day the Exchange is open for trading (referred to in this Prospectus as
a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.


      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security.  A security's valuation may differ depending on the method
used for determining value.


      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
owners to purchase Fund shares on a regular business day, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M. on
the next regular business day at the offices of its Transfer Agent in
Colorado.


      |X| Classes of Shares. The Fund may offer two different classes of
shares. The class of shares designated as Service shares are subject to a
Distribution and Service Plan. The impact of the expenses of the Plan on
Service shares is described below.  The class of shares that are not subject
to a Plan has no class "name" designation.  The different classes of shares
represent investments in the same portfolio of securities but are expected to
be subject to different expenses and will likely have different share prices.

Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution related services and personal service and maintenance of
accounts for the Fund's Service shares. Under the Plan, payments are made
quarterly at an annual rate of up to 0.25% of the average annual net assets
of Service shares of the Fund. The distributor currently uses all of those
fees to compensate sponsor(s) of the insurance product that offers Fund
shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares.  The impact of the service
plan is to increase operating expenses of the Service shares, which results
in lower performance compared to the Fund's shares that are not subject to a
service fee.


How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.

The share price that applies to a redemption order is the next net asset
value per share that is determined after the participating insurance company
(as the Fund's designated agent) receives a redemption request on a regular
business day from its contract or policy holder, provided that the Fund
receives the order from the insurance company, generally by 9:30 A.M. the
next regular business day at the office of its Transfer Agent in Colorado.
The Fund normally sends payment by Federal Funds wire to the insurance
company's account the day after the Fund receives the order (and no later
than 7 days after the Fund's receipt of the order). Under unusual
circumstances determined by the Securities and Exchange Commission, payment
may be delayed or suspended.

Dividends, Capital Gains and Taxes

Dividends.  The Fund intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis, and to pay
those dividends in March. Dividends and distributions will generally be lower
for Service shares, which normally have higher expenses.  The Fund has no
fixed dividend rate and cannot guarantee that it will pay any dividends.


      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).


Capital Gains.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year.  The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

Taxes. For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Fund from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable,
if at all, to the participating insurance company.

      This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your
tax advisor or your participating insurance company representative about the
effect of an investment in the Fund under your contract or policy.

Financial Highlights

The Financial Highlights Table is presented to help you understand the Fund's

financial performance for the past five fiscal years. Certain information

reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
the Fund's independent auditors, whose report, along with the Fund's
financial statements, is included in the Statement of Additional Information,
which is available on request.

FINANCIAL HIGHLIGHTS
OPPENHEIMER BOND FUND/VA

Non-Service shares    Year Ended December 31                    2002
2001          2000          1999          1998
- --------------------------------------------------------------------------------
Per Share Operating Data
- --------------------------------------------------------------------------------


Net asset value, beginning of period                          $11.21
$11.25        $11.52        $12.32        $11.91
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..65           .81           .94           .88           .72
Net realized and unrealized gain (loss)                          .27
  .03          (.29)        (1.06)          .07
Payment from affiliate
..01            --            --            --            --

- ---------------------------------------------------------------
Total from investment operations
..93           .84           .65          (.18)          .79
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                            (.83)
(.88)         (.92)         (.57)         (.20)
Distributions from net realized gain
- --            --            --          (.05)         (.18)

- ---------------------------------------------------------------
Total dividends and/or distributions to shareholders            (.83)
(.88)         (.92)         (.62)         (.38)
- --------------------------------------------------------------------------------
Net asset value, end of period                                $11.31
$11.21        $11.25        $11.52        $12.32

- ---------------------------------------------------------------------------------
Total Return
Total return at net asset value 1                               9.02%
7.79%         6.10%        (1.52)%        6.80%
Total return before payment from affiliate 2
8.93%          N/A           N/A           N/A           N/A

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                    $724,787
$693,701      $562,345      $601,064      $655,543
- --------------------------------------------------------------------------------
Average net assets (in thousands)                           $686,932
$638,820      $557,873      $633,059      $586,242
- --------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income before payment from affiliate             5.91% 2
7.93%         7.94%         7.22%         6.31%
Net investment income after payment from affiliate
6.07%          N/A           N/A           N/A           N/A
Expenses                                                        0.73%
0.77%         0.76%         0.73%         0.74% 4
- --------------------------------------------------------------------------------
Portfolio turnover rate
157%          186%          260%          256%           76%

1. Assumes an  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. The Manager voluntarily  reimbursed the Class $1,107,704 from an error in the
calculation of the Fund's net asset value per share.
3. Annualized for periods of less than one full year.
4. Expense ratio has been  calculated  without  adjustment  for the reduction to
custodian expenses.

FINANCIAL HIGHLIGHTS  Continued
- --------------------------------------------------------------------------------
Service shares    Period Ended December
31                                                                2002 1
- --------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of period
                                                        $10.46
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income
                                                             .11
Net realized and unrealized
gain
..72
Payment from
affiliate
                           .01

- --------
Total from investment
operations
..84
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income
- --
Distributions from net realized
gain                                                                        --

- --------
Total dividends and/or distributions to
shareholders                                                        --

- --------
Net asset value, end of period
                                                   $11.30

========

- --------------------------------------------------------------------------------
Total Return
Total return at net asset value
2
8.03%
Total return before payment from affiliate
3                                                              7.94%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in
thousands)                                                               $
2,435
- --------------------------------------------------------------------------------
Average net assets (in
thousands)
$   834
- --------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income before payment from
affiliate                                                       4.37% 3
Net investment income after payment from
affiliate                                                        5.04%
Expenses
0.98%
Expenses, net of reduction to custodian expenses and/or voluntary waiver of
transfer agent fees           0.98% 5
- --------------------------------------------------------------------------------
Portfolio turnover
rate
               157%

1. For the period from May 1, 2002 (inception of offering) to December 31,
2002.
2. Assumes an  investment on the business day before the first day of the fiscal
period  (or  inception  of  offering),  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. The Manager voluntarily reimbursed the Class $3,723 from an error in the
calculation of the Fund's net asset value per share.
4. Annualized for periods of less than one full year.
5. Less than 0.01%.

INFORMATION AND SERVICES


For More Information on Oppenheimer Bond Fund/VA

The following additional information about the Fund is available without
charge upon request:


STATEMENT OF ADDITIONAL INFORMATION. This document includes additional
information about the Fund's investment policies, risks, and operations. It
is incorporated by reference into this Prospectus (which means it is legally
part of this Prospectus).

ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.


How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund or instructions on how to contact the
sponsor of your insurance product:

- ------------------------------------------------------------------------------

By Telephone:                 Call OppenheimerFunds Services toll-free:
                              1.800.981.2871

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

By Mail:                      Write to:
                              OppenheimerFunds Services
                              P.O. Box 5270
                              Denver, Colorado 80217-5270

- ------------------------------------------------------------------------------


Information about the Fund including the Statement of Additional Information
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1.202.942.8090.  Reports and other information
about the Fund are available on the EDGAR database on the SEC's Internet
website at www.sec.gov. Copies may be obtained after payment of a duplicating
fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or
by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102.

No one has been authorized to provide any information about the Fund or to
make any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any
state or other jurisdiction where it is unlawful to make such an offer.

The Fund's shares are distributed by:                [logo]   OppenheimerFunds
Distributor, Inc.
The Fund's SEC File No. 811-4108
PR0630.001.0503
Printed on recycled paper

                         Appendix to Prospectus of
                         Oppenheimer Bond Fund/VA
             (a series of Oppenheimer Variable Account Funds)


      Graphic material included in the Prospectus of Oppenheimer Bond
Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31
each year)":


      A bar chart will be included in the Prospectus of the Fund
depicting the annual total returns of a hypothetical $10,000 investment
in Non-Service shares of the Fund for each of the ten most recent
calendar years, without deducting separate account expenses.  Set forth
below are the relevant data that will appear on the bar chart:


Calendar
Year
Ended                               Annual Total Returns
- -----                               --------------------


12/31/93                                  13.04%
12/31/94                                  -1.94%
12/31/95                                  17.00%
12/31/96                                   4.80%
12/31/97                                   9.26%
12/31/98                                   6.80%
12/31/99                                  -1.52%
12/31/00                                   6.10%
12/31/01                                   7.79%
12/31/02                                   9.02%

Oppenheimer
Capital Appreciation Fund/VA
A series of Oppenheimer Variable
Account Funds

Prospectus dated May 1, 2003


                                         Oppenheimer Capital Appreciation
                                         Fund/VA is a mutual fund that seeks
                                         capital appreciation by investing in
                                         securities of well-known, established
                                         companies.
                                               Shares of the Fund are sold only
                                         as the underlying investment for
                                         variable life insurance policies,
                                         variable annuity contracts and other
                                         insurance company separate accounts. A
                                         prospectus for the insurance product
                                         you have selected accompanies this
                                         Prospectus and explains how to select
                                         shares of the Fund as an investment
                                         under that insurance product, and
                                         whether you are only eligible to
                                         purchase Service shares of the Fund.
                                               This Prospectus contains
                                         important information about the Fund's
                                         objective, its investment policies,
                                         strategies and risks. Please read this
                                         Prospectus (and your insurance product
                                         prospectus) carefully before you
                                         invest and keep them for future
As with all mutual funds, the            reference about your account.
Securities
And Exchange Commission has not
approved or disapproved the Fund's
securities nor has it determined that
this Prospectus is accurate or
complete.
It is a criminal offense to represent
otherwise.

                                                                          1234


Contents

            About the Fund

- ------------------------------------------------------------------------------

            The Fund's Objective and Investment Strategies

            Main Risks of Investing in the Fund

            The Fund's Past Performance


            Fees and Expenses of the Fund


            About the Fund's Investments

            How the Fund is Managed


            Investing in the Fund

- ------------------------------------------------------------------------------

            How to Buy and Sell Shares

            Dividends, Capital Gains and Taxes

            Financial Highlights


ABOUT THE FUND

The Fund's Objective and Investment Strategies

What Is the Fund's Investment Objective? The Fund seeks capital appreciation
by investing in securities of well-known, established companies.

What Does the Fund Mainly Invest In? The Fund invests mainly in common stocks
of "growth companies." These may be newer companies or established companies
of any capitalization range that the portfolio manager believes may
appreciate in value over the long term. The Fund currently focuses mainly on
mid-cap and large-cap domestic companies, but buys foreign stocks as well.

How Does the Portfolio Manager Decide What Securities to Buy or Sell?  The
Fund's portfolio manager looks primarily for growth companies that she
believes have reasonably priced stock in relation to overall stock market
valuations. The portfolio manager focuses on factors that may vary in
particular cases and over time in seeking broad diversification of the Fund's
portfolio among industries and market sectors. Currently the portfolio
manager looks for:
o     companies with above-average growth potential,
o  stocks with reasonable valuations relative to their growth potential,
o     companies with the potential for positive earnings surprises, or
o     growth rates that the portfolio  manager  believes are sustainable  over
   time.

Who Is the Fund Designed For? The Fund's shares are available only as an
investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
capital appreciation in their investment over the long term, from investments
in common stocks of well-known companies.  Those investors should be willing
to assume the risks of short-term share price fluctuations that are typical
for a fund focusing on stock investments.  Since the Fund's income level will
fluctuate and will likely be small, it is not designed for investors needing
an assured level of current income.  The Fund is not a complete investment
program.

Main Risks of Investing in the Fund

      All investments have some degree of risk.  The Fund's investments are
subject to changes in their value from a number of factors described below.
There is also the risk that poor security selection by the Manager will cause
the Fund to underperform other funds having a similar objective.


      Changes in the overall market prices of securities and the income they
pay can occur at any time. The share price of the Fund will change daily
based on changes in market conditions, market prices of securities and in
response to other economic events.

|X|   Risks of Investing in Stocks.  Stocks fluctuate in price, and their
short-term volatility at times may be great. Because the Fund currently
invests primarily in common stocks of U. S. companies, the value of the
Fund's portfolio will be affected by changes in the stock markets.  Market
risk will affect the Fund's net asset values per share, which will fluctuate
as the values of the Fund's portfolio securities change.  A variety of
factors can affect the price of a particular stock and the prices of
individual stocks do not all move in the same direction uniformly or at the
same time.  Different stock markets may behave differently from each other.
Securities in the Fund's portfolio may not increase as much as the market as
a whole.  Growth stocks may at times be favored by the market and at other
times may be out of favor.  Some securities may be inactively traded, and
therefore, may not be readily bought or sold.  Although some growth stocks
may appreciate quickly, investors should not expect the Fund's investments to
act in this manner. The Fund is designed for long-term capital appreciation.


      Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the
issuer. The Fund invests mainly in securities of large companies, but can
also invest in small and medium-size companies, which may have more volatile
stock prices than large companies.

|X|   Industry and Sector Focus.  At times the Fund may increase the relative
emphasis of its investments in a particular industry or sector. The prices of
stocks of issuers in a particular industry or sector may go up and down in
response to changes in economic conditions, government regulations,
availability of basic resources or supplies, or other events that affect that
industry or sector more than others. To the extent that the Fund increases
the relative emphasis of its investments in a particular industry or sector,
its share values may fluctuate in response to events affecting that industry
or sector.  To some extent that risk may be limited by the Fund's policy of
not concentrating 25% or more of its total assets in investments in any one
industry.

|X|   Risks of Growth Stocks.  Stocks of growth companies, particularly newer
companies, may offer opportunities for greater capital appreciation but may
be more volatile than stocks of larger, more established companies. If the
company's earnings growth fails to increase as expected, the stock price of a
growth company may decline sharply.

|X|   Risks of Foreign Investing. The change in value of a foreign currency
against the U.S. dollar will result in a change in the U.S. dollar value of
securities denominated in that foreign currency. Foreign issuers are not
subject to the same accounting and disclosure requirements that U.S.
companies are subject to. The value of foreign investments may be affected by
exchange control regulations, expropriation or nationalization of a company's
assets, foreign taxes, delays in settlement of transactions, changes in
governmental economic or monetary policy in the U.S. or abroad, or other
economic or political factors.

How Risky is the Fund Overall?  The risks described above collectively form
the overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance and its prices per share. Particular
investments and investment strategies also have risks.  These risks mean that
you can lose money by investing in the Fund. When you redeem your shares,
they may be worth more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment objective.

      In the short term, stock markets can be volatile, and the prices of the
Fund's shares can go up and down substantially. The Fund generally does not
use income-oriented investments to a great extent to help cushion the Fund's
share prices from stock market volatility, except for defensive purposes.
Because it focuses on larger companies, the Fund generally may be less
volatile than funds focusing on investments in small-cap stocks, but the Fund
may have greater risk of volatility than funds that invest in both stocks and
fixed income securities.


An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.

The Fund's Past Performance


      The bar chart and table below show one measure of the risks of
investing in the Fund, by showing changes in the Fund's performance from year
to year for the last 10 calendar years for non-service shares and by showing
how the average annual total returns for 1, 5 and 10 years or life of class
of the Fund's two existing classes of shares compare to those of a
broad-based market index. The Fund's past investment performance is not
necessarily an indication of how the Fund will perform in the future.


Annual Total Returns (as of 12/31 each year)

[See appendix to prospectus for data in bar chart showing annual total
returns]

Charges imposed by the separate accounts that invest in the Fund are not
included in the calculations of return in this bar chart, and if those
charges were included, the returns would be less than those shown.  During
the periods shown in the bar chart, the highest return (not annualized) for a
calendar quarter was 28.49% (4th Q'99) and the lowest return (not annualized)
for a calendar quarter was -20.45% (3rd Q'01).

- ---------------------------------------------------------------------------------

   Average Annual
 Total Returns for   -------------------       5 Years            10 Years
 the periods ended                        (or life of class   (or life of class
 December 31, 2002         1 Year             or less)            or less)

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Oppenheimer Capital
Appreciation
Fund/VA Non-Service
Shares                     -26.86%              2.30%              10.15%
(inception date:
4/3/85)

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

S&P 500 Index
                           -22.09%             -0.58%              9.34%1

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Oppenheimer Capital
Appreciation Fund/VA
Service Shares
(inception date:           -27.09%             -12.50%               N/A
9/18/01)

- ---------------------------------------------------------------------------------

1.    From: 12/31/92.

The  Fund's  average  annual  total  returns   measure  the   performance  of  a
hypothetical  account without deducting charges imposed by the separate accounts
that  invest  in the Fund  and  assume  that all  dividends  and  capital  gains
distributions  have been reinvested in additional shares. The performance of the
Fund is  compared  to the  S&P  500  Index,  an  unmanaged  index of  equity
securities  that is a measure of the general  domestic  stock market.  The index
performance  includes  the  reinvestment  of income but does not  reflect  fees,
expenses,  or  transaction  costs.  Also, the Fund's  investments  vary from the
index.


The Fund's total returns should not be expected to be the same as the returns of
other  Oppenheimer  funds,  even if both funds have the same portfolio  managers
and/or similar names.


Fees and Expenses of the Fund

The  following  tables  are  provided  to help  you  understand  the  fees and
expenses  you may pay if you buy and hold shares of the Fund.  The Fund pays a
variety of expenses  directly for  management  of its assets,  administration,
distribution of its shares and other  services.  Those expenses are subtracted
from the Fund's  assets to  calculate  the Fund's net asset  values per share.
All shareholders  therefore pay those expenses  indirectly.  The numbers below
are based on the Fund's  expenses  during its fiscal year ended  December  31,
2002.

Shareholder Fees.  The Fund does not charge any initial sales charge to buy
shares or to reinvest dividends.  There are no exchange fees or redemption
fees and no contingent deferred sales charges. Please refer to the
accompanying prospectus of the participating insurance company for
information on initial or contingent deferred sales charges, exchange fees or
redemption fees for that variable life insurance policy, variable annuity or
other investment product.  Those charges and fees are not reflected in either
of the tables below.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)


- --------------------------------------------------------------------------------

                                    Non-Service Shares       Service Shares

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Management Fees                           0.65%                   0.65%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Distribution     and     Service           None                   0.25%
(12b-1) Fees

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Other Expenses                            0.01%                   0.01%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Total Annual Operating Expenses           0.66%                   0.91%

- --------------------------------------------------------------------------------

Prior to May 1, 2002,  the Service share class service fee was 0.15% per annum
and actual  service  class 12b-1 fees paid during the year ended  December 31,
2002 was 0.15% and total annual operating expenses were 0.81%.
Expenses  may vary in future  years.  "Other  expenses"  in the table  include
transfer  agent fees,  custodial  fees,  and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily  agreed to limit transfer
and  shareholder  servicing  agent  fees to 0.35% per  fiscal  year,  for both
classes.  That  undertaking  may be amended or withdrawn at any time.  For the
Fund's fiscal year ended  December 31, 2002,  the transfer  agent fees did not
exceed the expense limitation described above.

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The  example  assumes  that you  invest  $10,000 in shares of the Fund for the
time periods  indicated and then redeem all of your shares at the end of those
periods.  The example also assumes that your  investment  has a 5% return each
year and that the  Fund's  operating  expenses  remain the same.  Your  actual
costs may be higher or lower,  because  expenses will vary over time. Based on
these  assumptions  your  expenses  would be as  follows,  whether  or not you
redeem your investment at the end of each period:


- ------------------------------------------------------------------------------

                              1 Year      3 Years     5 Years     10 Years

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Non-Service Shares             $67         $211        $368         $822

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Service Shares                 $93         $290        $504        $1,120

- ------------------------------------------------------------------------------

About the Fund's Investments

The Fund's Principal Investment Policies.  The allocation of the Fund's
portfolio among different types of investments will vary over time based on
the Manager's evaluation of economic and market trends.  The Fund's portfolio
might not always include all of the different types of investments described
below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.

      The Manager tries to reduce risks by carefully researching securities
before they are purchased. The Fund attempts to reduce its exposure to market
risks by diversifying its investments, that is, by not holding a substantial
percentage of the stock of any one company and by not investing too great a
percentage of the Fund's assets in any one issuer.  Also, the Fund does not
concentrate 25% or more of its total assets in any one industry.

      However, changes in the overall market prices of securities can occur
at any time. The share prices of the Fund will change daily based on changes
in market prices of securities and market conditions and in response to other
economic events.

|X|   Stock Investments. The Manager looks for stocks of companies that have
   growth potential. Growth companies may be developing new products or
   services or may be expanding into new markets for their products. They may
   be newer companies or more established companies entering a growth cycle.
   The Fund's investments are not limited to issuers in a specific
   capitalization range, such as large-cap or small-cap companies, and the
   Fund can invest in issuers in all capitalization ranges. Market
   capitalization refers to the market value of all of a company's issued and
   outstanding stock. Currently, the Fund's stock investments are focused on
   mid-cap and large-cap issuers, but that emphasis can change over time.
   Because the stocks of companies that have smaller market capitalizations
   tend to be more volatile, to the extent that the Fund holds small-cap
   stocks, its share prices may fluctuate more and the risks of loss are
   greater.


      The Fund's equity investments may be exchange-traded or
over-the-counter securities. Over-the-counter securities may have less
liquidity than exchange-traded securities.


      Newer growth companies tend to retain a large part of their earnings
for research, development or investment in capital assets. Therefore, they do
not tend to emphasize paying dividends, and may not pay any dividends for a
protracted period. They are selected for the Fund's portfolio because the
Manager believes the price of the stock will increase over time.

|X|   Cyclical Opportunities.  The Fund may also seek to take advantage of
changes in the business cycle by investing in companies that are sensitive to
those changes if the Manager believes they have growth potential.  For
example, when the economy is expanding, companies in the consumer durables
and technology sectors might benefit and present long-term growth
opportunities.  The Fund might sometimes seek to take tactical advantage of
short-term market movements or events affecting particular issuers or
industries.

|X|   Foreign Securities. The Fund can buy foreign equity and debt
      securities. It would buy debt securities primarily for liquidity or
      defensive purposes, including debt securities issued by foreign
      companies or by foreign governments and their agencies. The Fund
      currently does not expect to have more than 35% of its assets invested
      in foreign securities, although it has the ability to invest in them
      without limit.

Special Portfolio Diversification Requirements.  To enable a variable annuity
or variable life insurance contract based on an insurance company separate
account to qualify for favorable tax treatment under the Internal Revenue
Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Fund's investment program is managed to
meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act of 1940, that
apply to publicly-sold mutual funds.

      Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income. Those diversification requirements might also
limit, to some degree, the Fund's investment decisions in a way that could
reduce its performance.

Can the Fund's Investment Objective and Policies Change?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.  Fundamental policies cannot be changed without the approval
of a majority of the Fund's outstanding voting shares.  The Fund's investment
objective is a fundamental policy.  Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the
Statement of Additional Information says that it is.

Other Investment Strategies.  To seek its objective, the Fund can use the
investment techniques and strategies described below.  The Fund might not
always use all of them.  These techniques have risks, although some are
designed to help reduce overall investment or market risks.

|X|   Other Equity Securities.  While the Fund emphasizes investments in
common stocks, it can also buy preferred stocks and securities convertible
into common stock. The Manager considers convertible securities to be "equity
equivalents" because of the conversion feature and in those cases their
rating has less impact on the Manager's investment decision than in the case
of other debt securities. Nevertheless, convertible debt securities are
subject to both "credit risk" (the risk that the issuer will not pay interest
or repay principal in a timely manner) and "interest rate risk" (the risk
that prices of the securities will be affected inversely by changes in
prevailing interest rates).  If the Fund buys convertible securities (or
other debt securities), it will focus primarily on investment-grade
securities which pose less credit risk than lower-grade debt securities.

|X|   Illiquid and Restricted Securities.  Investments may be illiquid
because they do not have an active trading market, making it difficult to
value them or dispose of them promptly at an acceptable price.  A restricted
security is one that has a contractual restriction on its resale or which
cannot be sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 15% of its net assets in illiquid or
restricted securities.  Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that
limit. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate
liquidity.

|X|   Derivative Investments.  The Fund can invest in a number of different
kinds of "derivative" investments. In general terms, a derivative investment
is an investment contract whose value depends on (or is derived from) the
value of an underlying asset, interest rate or index.  In the broadest sense,
options, futures contracts, and other hedging instruments the Fund might use
may be considered "derivative" investments. In addition to using derivatives
for hedging, the Fund might use certain derivative investments because they
offer the potential for increased value. The Fund currently does not use
derivatives to a significant degree and is not required to use them in
seeking its objective.

      Derivatives have risks. If the issuer of the derivative investment does
not pay the amount due, the Fund can lose money on the investment. The
underlying security or investment on which a derivative is based, and the
derivative itself, may not perform the way the Manager expected it to. As a
result of these risks, the Fund could realize less principal or income from
the investment than expected or its hedge might be unsuccessful. As a result,
the Fund's share prices could fall. Certain derivative investments held by
the Fund might be illiquid.

|X|   Hedging. The Fund can buy and sell futures contracts, put and call
options, and forward contracts. These are all referred to as "hedging
instruments."  The Fund does not currently use hedging extensively nor for
speculative purposes. It has limits on its use of hedging instruments and is
not required to use them in seeking its objective.

      Some of these strategies would hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call
options, would tend to increase the Fund's exposure to the securities
market.

      Options trading involves the payment of premiums and there are also
special risks in particular hedging strategies.  For example, if a covered
call written by the Fund is exercised on an investment that has increased in
value, the Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has increased in
value above the call price. If the Manager used a hedging instrument at the
wrong time or judged market conditions incorrectly, the strategy could reduce
the Fund's return.  The Fund could also experience losses if the prices of
its futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market.


|X|   Temporary Defensive and Interim Investments. For cash management
purposes, the Fund can hold cash equivalents such as commercial paper,
repurchase agreements, Treasury bills and other short-term U.S. government
securities. In times of adverse or unstable market or economic conditions,
the Fund can invest up to 100% of its assets in temporary investments that
are inconsistent with the Fund's principle investment strategies.  These
would ordinarily be U. S. government securities, highly-rated commercial
paper, bank deposits or repurchase agreements. The Fund can also hold these
types of securities pending the investment of proceeds from the sale of Fund
shares or portfolio securities or to meet anticipated redemptions of Fund
shares.  To the extent the Fund invests defensively in these securities, it
might not achieve its investment objective.

Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." The Fund can engage in active and
frequent trading to try to achieve its objective, and may have a high
portfolio turnover rate (for example, over 100%), although the Manger does
not expect turnover to be high.  Increased portfolio turnover creates higher
brokerage and transaction costs for the Fund.  If the Fund realizes capital
gains when it sells its portfolio investments, it must generally pay those
gains out to shareholders, increasing their taxable distributions. The
Financial Highlights table at the end of this Prospectus shows the Fund's
portfolio turnover rate during prior fiscal years.


How the Fund Is Managed

The Manager. The Manager chooses the Fund's investments and handles its
day-to-day business.  The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an investment
advisory agreement that states the Manager's responsibilities.  The agreement
sets the fees the Fund pays to the Manager and describes the expenses that
the Fund is responsible to pay to conduct its business.


      The Manager has been an investment advisor since January, 1960.  The
Manager and its subsidiaries and controlled affiliates managed more than $120
billion in assets as of March 31, 2003, including other Oppenheimer funds
with more than 7 million shareholder accounts. The Manager is located at 498
Seventh Avenue, New York, New York 10018.


|X|   Portfolio Manager.  The portfolio manager of the Fund is Jane Putnam.
She is a Vice President of the Fund and the Manager (since October 1995). She
has been the person principally responsible for the day-to-day management of
the Fund's portfolio since May 1994. Ms. Putnam also serves as an officer and
portfolio manager for other Oppenheimer funds.


|X|   Advisory Fees.  Under the investment advisory agreement, the Fund pays
the Manager an advisory fee at an annual rate that declines on additional
assets as the Fund grows: 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 its last fiscal year ended
December 31, 2002, was 0.65% of the Fund's average annual net assets for each
class of shares.


|X|   Possible Conflicts of Interest. The Fund offers its shares to separate
accounts of different insurance companies that are not affiliated with each
other, as an investment for their variable annuity, variable life and other
investment product contracts. While the Fund does not foresee any
disadvantages to contract owners from these arrangements, it is possible that
the interests of owners of different contracts participating in the Fund
through different separate accounts might conflict. For example, a conflict
could arise because of differences in tax treatment.

      The Fund's Board of Trustees has procedures to monitor the portfolio
for possible conflicts to determine what action should be taken. If a
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Fund. That
could force the Fund to sell securities at disadvantageous prices, and
orderly portfolio management could be disrupted. Also, the Board might refuse
to sell shares of the Fund to a particular separate account, or could
terminate the offering of the Fund's shares if required to do so by law or if
it would be in the best interests of the shareholders of the Fund to do so.


INVESTING IN THE FUND

How to Buy and Sell Shares

How Are Shares Purchased?  Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That Prospectus will indicate whether
you are eligible to purchase Service shares of the Fund. The Fund reserves
the right to refuse any purchase order when the Manager believes it would be
in the Fund's best interests to do so.

|X|   Market Timers.  The Fund has instructed its participating insurance
companies that it may restrict or refuse investments by their separate
accounts from market timers.  "Market timers" include persons whose separate
account transactions have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier exchange request, (ii) exchanges out of the
Fund more than twice in any calendar quarter, (iii) an exchange of Fund
shares equal to at least $5 million, or more than 1% of the Fund's net
assets, or (iv) other transactions in Fund shares that demonstrated a timing
pattern.  Separate accounts under common ownership or control are combined
for these limits. There can be no assurance that all such participating
insurance companies will be successful in controlling investments in their
respective separate accounts by market timers.

- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------


At What Price Are Shares Sold?  Shares are sold to participating insurance
companies at their offering price, which is the net asset value per share.
The Fund does not impose any sales charge on purchases of its shares. If
there are any charges imposed under the variable annuity, variable life or
other contract through which Fund shares are purchased, they are described in
the accompanying prospectus of the participating insurance company.

Net Asset Value.  The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange ("the Exchange"), on
each day the Exchange is open for trading (referred to in this Prospectus as
a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.


      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security. A security's valuation may differ depending on the method used
for determining value.


      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
owners to purchase Fund shares on a regular business day, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M. on
the next regular business day at the offices of its Transfer Agent in
Colorado.

|X|   Classes of Shares.  The Fund may offer two different classes of shares.
The class of shares designated as Service shares are subject to a
Distribution and Service Plan. The impact of the expenses of the Plan on
Service shares is described below.  The class of shares that are not subject
to a Plan has no class "name" designation. The different classes of shares
represent investments in the same portfolio of securities but are expected to
be subject to different expenses and will likely have different share prices.


Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution related services and personal services and account maintenance
for the Fund's Service shares. Under the Plan, payments are made quarterly at
an annual rate of up to 0.25% of the average annual net assets of Service
shares of the Fund.  The distributor currently uses all of those fees to
compensate sponsor(s) of the insurance product that offers Fund shares, for
providing personal service and maintenance of accounts of their variable
contract owners that hold Service shares.  The impact of the service plan is
to increase operating expenses of the Service shares, which results in lower
performance compared to the Fund's shares that are not subject to a service
fee.


How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares.  Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.

      The share price that applies to a redemption order is the next net
asset value per share that is determined after the participating insurance
company (as the Fund's designated agent) receives a redemption request on a
regular business day from its contract or policy holder, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M.
the next regular business day, at the office of its Transfer Agent in
Colorado.  The Fund normally sends payment by Federal Funds wire to the
insurance company's account the day after the Fund receives the order (and no
later than seven days after the Fund's receipt of the order).  Under unusual
circumstances determined by the Securities and Exchange Commission, payment
may be delayed or suspended.

Dividends, Capital Gains and Taxes

Dividends.  The Fund intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis, and to pay
those dividends in March.  Dividends and distributions will generally be
lower for Service shares, which normally have higher expenses. The Fund has
no fixed dividend rate and cannot guarantee that it will pay any dividends.

      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).

Capital Gains.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year.  The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

Taxes.  For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Fund from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable,
if at all, to the participating insurance company.

This information is only a summary of certain federal income tax information
about an investment in Fund shares.  You should consult with your tax advisor
or your participating insurance company representative about the effect of an
investment in the Fund under your contract or policy.

Financial Highlights


The Financial  Highlights  Table is presented to help you  understand the Fund's
financial  performance for its non-service  shares for the past ten fiscal years
and the past two  fiscal  years  for its  service  shares.  Certain  information
reflects  financial  results for a single Fund share.  The total  returns in the
table  represent  the rate that an  investor  would have  earned (or lost) on an
investment   in  the  Fund   (assuming   reinvestment   of  all   dividends  and
distributions).  This information has been audited by Deloitte & Touche LLP,
the Fund's independent  auditors,  whose report, along with the Fund's financial
statements,  is included in the  Statement of Additional  Information,  which is
available on request.

FINANCIAL HIGHLIGHTS
OPPENHEIMER CAPITAL APPRECIATION FUND/VA

Non-Service Shares    December 31                             2002
2001          2000          1999          1998
- --------------------------------------------------------------------------------


Per Share Operating Data
Net asset value, beginning of period                       $ 36.58       $
46.63       $ 49.84       $ 36.67       $ 32.44
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                          .11
..18           .27           .06           .13
Net realized and unrealized gain (loss)                      (9.89)
(5.86)          .02         14.68          7.28

- ----------------------------------------------------------------
Total from investment operations                             (9.78)
(5.68)          .29         14.74          7.41
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                          (.18)
(.27)         (.06)         (.13)         (.24)
Distributions from net realized gain                            --
(4.10)        (3.44)        (1.44)        (2.94)

- ----------------------------------------------------------------
Total dividends and/or distributions to shareholders          (.18)
(4.37)        (3.50)        (1.57)        (3.18)
- --------------------------------------------------------------------------------
Net asset value, end of period                              $26.62
$36.58        $46.63        $49.84        $36.67

================================================================

- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                          (26.86)%
(12.58)%       (0.23)%       41.66%        24.00%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                $1,338,769
$1,975,345    $2,095,803    $1,425,197      $768,550
- --------------------------------------------------------------------------------
Average net assets (in thousands)                       $1,630,430
$2,000,314    $1,922,099    $1,002,835      $609,246
- --------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                         0.35%
0.51%         0.66%         0.21%         0.50%
Expenses                                                      0.66%
0.68%         0.67%         0.70%         0.75% 3
- --------------------------------------------------------------------------------
Portfolio turnover rate                                         32%
45%           38%           56%           56%

1. Assumes an  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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.


Service Shares    December  31                           2002        2001 1
- --------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of
period                                                               $
36.56       $ 31.66
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
                                               .20            -- 2
Net realized and unrealized gain
(loss)
(10.05)         4.90
- -----------------------
Total from investment
operations
(9.85)         4.90
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income
(.18)           --
Distributions from net realized
gain
- --            --
- -----------------------
Total dividends and/or distributions to
shareholders                                                  (.18)
- --
- --------------------------------------------------------------------------------
Net asset value, end of
period
$26.53        $36.56

=======================
- --------------------------------------------------------------------------------
Total Return, at Net Asset Value
3
(27.09)%       15.51%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in
thousands)
$18,260           $90
- --------------------------------------------------------------------------------
Average net assets (in
thousands)                                                                  $
6,263           $16
- --------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment
income
0.26%         0.11%
Expenses
0.81%         0.81%
Expenses, net of reduction to custodian expenses and/or voluntary waiver of
transfer agent fees       0.81% 5       0.81%
- --------------------------------------------------------------------------------
Portfolio turnover
rate
32%           45%


1. For the period from September 18, 2001 (inception of offering) to December
31, 2001.
2. Less than $0.005 per share.
3. Assumes an  investment on the business day before the first day of the fiscal
period  (or  inception  of  offering),  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.
4. Annualized for periods of less than one full year.
5. Less than 0.01%.

INFORMATION AND SERVICES

For More Information on Oppenheimer Capital Appreciation Fund/VA

The following additional information about Oppenheimer Capital Appreciation
Fund is available without charge upon request:

STATEMENT OF ADDITIONAL INFORMATION
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into
this Prospectus (which means it is legally part of this Prospectus).

ANNUAL AND SEMI-ANNUAL REPORTS
Additional information about the Fund's investments and performance is
available in the Fund's Annual and Semi-Annual Reports to shareholders.
The Annual Report includes a discussion of market conditions and
investment strategies that significantly affected the Fund's performance
during its last fiscal year.

How to Get More Information

You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund, or instructions on how to contact the
sponsor of your insurance product:
- --------------------------------------------------------------------------------
By Telephone                          Call OppenheimerFunds Services
                                      toll-free:
                                      1.800.981.2871
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
By Mail                               Write to:
                                      OppenheimerFunds Services
                                      P.O. Box 5270
                                      Denver, Colorado 80217-5270
- --------------------------------------------------------------------------------

Information about the Fund including the Statement of Additional
Information can be reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1.202.942.8090.  Reports and
other information about the Fund are available on the EDGAR database on
the SEC's Internet website at www.sec.gov. Copies may be obtained after
                              -----------
payment of a duplicating fee by electronic request at the SEC's e-mail
address: publicinfo@sec.gov or by writing to the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

No one has been authorized to provide any information about the Fund or
to make any representations about the Fund other than what is contained
in this Prospectus. This Prospectus is not an offer to sell shares of the
Fund, nor a solicitation of an offer to buy shares of the Fund, to any
person in any state or other jurisdiction where it is unlawful to make
such an offer.

The Fund's SEC File No.: 811-4108
PR0610.001.0503 Printed on recycled paper.

                         Appendix to Prospectus of
                 Oppenheimer Capital Appreciation Fund/VA
             (a series of Oppenheimer Variable Account Funds)


      Graphic  material  included in the Prospectus of Oppenheimer  Capital
Appreciation  Fund/VA (the "Fund")  under the heading  "Annual Total Return
(as of 12/31 each year)":


     A bar chart will be included in the  Prospectus of the Fund  depicting
the  annual  total  returns  of  a  hypothetical   $10,000   investment  in
non-service  shares  of the Fund for  each of the 10 most  recent  calendar
years,  without deducting  separate account  expenses.  Set forth below are
the relevant data that will appear on the bar chart:


Calendar
Year
Ended                               Annual Total Returns
- -----                               --------------------


12/31/93                                   7.25%
12/31/94                                   0.97%
12/31/95                                  36.66%
12/31/96                                  25.20%
12/31/97                                  26.69%
12/31/98                                  24.00%
12/31/99                                  41.66%
12/31/00                                        -0.23%
12/31/01                                        -12.58%
12/31/02                                  -26.86%

Oppenheimer
Global Securities Fund/VA
A series of Oppenheimer Variable         Oppenheimer Global Securities Fund/VA
Account Funds                            is a mutual fund that seeks long-term
                                         capital appreciation by investing a
Prospectus dated May 1, 2003             substantial portion of its assets in
                                         securities of foreign issuers,
                                         "growth-type" companies, cyclical
                                         industries and special situations that
                                         are considered to have appreciation
                                         possibilities.  It invests mainly in
                                         common stocks of U.S. and foreign
                                         issuers.
                                                   Shares of the Fund are sold
                                               only as the underlying
                                               investment for variable life
                                               insurance policies, variable
                                               annuity contracts and other
                                               insurance company separate
                                               accounts. A prospectus for the
                                               insurance product you have
                                               selected accompanies this
                                               Prospectus and explains how to
                                               select shares of the Fund as an
                                               investment under that insurance
                                               product, and whether you are
As with all mutual funds, the                  only eligible to purchase
Securities                                     Service shares or Class 3 shares
and Exchange Commission has not                of the Fund.
approved or disapproved the Fund's                 This Prospectus contains
securities nor has it determined that          important information about the
this Prospectus is accurate or                 Fund's objective, its investment
complete.                                      policies, strategies and risks.
It is a criminal offense to represent          Please read this Prospectus (and
otherwise.                                     your insurance product
                                               prospectus) carefully before you
                                               invest and keep them for future
                                               reference about your account.

                                                                          1234


Contents

            About the Fund
- ------------------------------------------------------------------------------

            The Fund's Objective and Investment Strategies

            Main Risks of Investing in the Fund

            The Fund's Past Performance


            Fees and Expenses of the Fund


            About the Fund's Investments

            How the Fund is Managed

            Investing in the Fund
- ------------------------------------------------------------------------------

            How to Buy and Sell Shares

            Dividends, Capital Gains and Taxes

            Financial Highlights


About the Fund

The Fund's Objective and Investment Strategies

- ------------------------------------------------------------------------------

What Is the Fund's Investment Objective? The Fund seeks long-term capital
appreciation by investing a substantial portion of its assets in securities
of foreign issuers, "growth-type" companies, cyclical industries and special
situations that are considered to have appreciation possibilities.

- ------------------------------------------------------------------------------

What Does the Fund Mainly Invest In?  The Fund invests mainly in common
stocks, and can also buy other equity securities, including preferred stocks
and securities convertible into common stock. The Fund buys securities of
issuers in the U.S. and foreign countries.  The Fund can invest without limit
in foreign securities and can invest in any country, including countries with
developed or emerging markets.  However, the Fund's investment Manager,
OppenheimerFunds, Inc., currently emphasizes investments in developed markets.

      The Fund has no requirements to allocate its investments in any set
percentages in any particular countries, but normally will invest in at least
three countries (one of which may be the United States).  Typically the Fund
invests in a number of different countries.

      The Fund can invest in securities of issuers in any market
capitalization range. The Fund can also use hedging instruments and certain
derivative investments to try to manage investment risks. These investments
are more fully explained in "About the Fund's Investments," below.

How Does the Portfolio Manager Decide What Securities to Buy or Sell? In
selecting securities for the Fund, the Fund's portfolio manager looks
primarily for foreign and U.S. companies with high growth potential, using
fundamental analysis of a company's financial statements and management
structure, and analysis of the company's operations and product development,
as well as the industry of which the issuer is part.

      The portfolio manager considers overall and relative economic
conditions in U.S. and foreign markets, and seeks broad diversification in
different countries to help moderate the special risks of foreign investing.
The portfolio manager currently focuses on the factors below (which may vary
in particular cases and may change over time), looking for:

o     companies of small-, medium- and large-capitalization ranges worldwide,
o     stocks to provide growth opportunities, and
o     companies with strong competitive positions and high demand for their
         products or services.


      In applying these and other selection criteria, the portfolio manager
considers the effect of worldwide trends on the growth of various business
sectors. The trends, or global "themes," currently considered include
technological change, demographic/geopolitical change, and changing resource
needs. The Fund does not invest a fixed or specific amount of its assets in
any one sector, and these themes and this strategy may change over time.



Who Is the Fund Designed For? The Fund's shares are available only as an
investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
capital growth in their investment over the long term, from a fund that
normally has substantial investments in foreign securities.  Those investors
should be willing to assume the risks of short-term share price fluctuations
that are typical for a fund focusing on stock investments and investments in
foreign securities.  Since the Fund does not invest with the goal of seeking
income, and its current income will likely be small, it is not designed for
investors needing an assured level of current income. The Fund is not a
complete investment program.

Main Risks of Investing in the Fund


All investments carry risks to some degree.  The Fund's investments are
subject to changes in their value from a number of factors described below.
There is also the risk that poor security selection by the Fund's investment
Manager, OppenheimerFunds, Inc., will cause the Fund to underperform other
funds having a similar objective.


      However, changes in the overall market prices of securities and the
income they pay can occur at any time. The share prices of the Fund will
change daily based on changes in market prices of securities and market
conditions and in response to other economic events.

      |X|  Risks of Investing in Stocks.  Stocks fluctuate in price, and
their short-term volatility at times may be great. Because the Fund currently
focuses its investments primarily on common stocks for capital appreciation,
the value of the Fund's portfolio will be affected by changes in the stock
markets. Market risk will affect the Fund's net asset values per share, which
will fluctuate as the values of the Fund's portfolio securities change.  A
variety of factors can affect the price of a particular stock, and the prices
of individual stocks do not all move in the same direction uniformly or at
the same time. Different stock markets may behave differently from each
other.

      Additionally, stocks of issuers in a particular industry may be
affected by changes in economic conditions that affect that industry more
than others, or by changes in government regulations, availability of basic
resources or supplies, or other events. To the extent that the Fund has
greater emphasis on investments in a particular industry using its "global
themes" strategy, its share values may fluctuate in response to events
affecting that industry.

      Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the
issuer. The Fund can invest in securities of large companies and also small
and medium-size companies, which may have more volatile stock prices than
large companies.

      |X|  Risks of Foreign Investing.  The Fund expects to invest
substantial amounts of its assets in foreign securities. While foreign
securities offer special investment opportunities, there are also special
risks.


      The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that
foreign currency.  Foreign issuers are not subject to the same accounting and
disclosure requirements that U.S. companies are subject to. The value of
foreign investments may be affected by exchange control regulations,
expropriation or nationalization of a company's assets, foreign taxes, delays
in settlement of transactions, changes in governmental economic or monetary
policy in the U.S. or abroad, or other political and economic factors.

      |X| There are Special Risks in Using Derivative Investments. The Fund
can use derivatives to seek increased returns or to try to hedge investment
risks.  In general terms, a derivative investment is one whose value depends
on (or is derived from) the value of an underlying asset, interest rate or
index.  Options, futures, and forward contracts are examples of derivatives.

      If the issuer of the derivative does not pay the amount due, the Fund
can lose money on the investment.  Also, the underlying security or
investment on which the derivative is based, and the derivative itself, might
not perform the way the Manager expected it to perform. If that happens, the
Fund's share prices could decline or the Fund could get less income than
expected. The Fund has limits on the amount of particular types of
derivatives it can hold. However, using derivatives can cause the Fund to
lose money on its investment and/or increase the volatility of its share
prices.

How Risky is the Fund Overall?  The risks described above collectively form
the overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its prices per share.  Particular
investments and investment strategies also have risks.  These risks mean that
you can lose money by investing in the Fund.  When you redeem your shares,
they may be worth more or less than what you paid for them.  There is no
assurance that the Fund will achieve its investment objective.

      In the short term, domestic and foreign stock markets can be volatile,
and the prices of the Fund's shares can go up and down substantially. The
Fund does not invest in debt securities to try to reduce the volatility of
its share prices. The Fund generally may be less volatile than funds focusing
on investments in emerging markets or small-cap stocks, but the Fund has
greater risks than funds that focus solely on large-cap domestic stocks or
stocks and bonds.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund's Past Performance


      The bar chart and table below show one measure of the risks of
investing in the Fund, by showing changes in the Fund's performance from year
to year for the last 10 calendar years for non-service shares and by showing
how the average annual total returns for 1, 5 and 10 years or life of class
of the Fund's two existing classes of shares compare to those of a
broad-based market index. Because Class 3 shares were recently made
available, no performance information is available for that share class. The
Fund's past investment performance is not necessarily an indication of how
the Fund will perform in the future.


Annual Total Returns (as of 12/31 each year)

[See appendix to prospectus for data in bar chart showing annual total
returns]


Charges imposed by the separate accounts that invest in the Fund are not
included in the calculations of return in this bar chart, and if those
charges were included, the returns would be less than those shown.  During
the period shown in the bar chart, the highest return (not annualized) for a
calendar quarter was 36.93% (4th Q `99) and the lowest return (not
annualized) for a calendar quarter was '01).-18.34% (3rd Q `02).



Average       Annual
Total   Returns  for                           5 Years            10 Years
the  periods   ended       1 Year         (or life of class   (or life of class
December 31, 2002                             if less)            if less)

- --------------------------------------------------------------------------------

Oppenheimer Global
Securities   Fund/VA
Non-Service Shares
(inception 11/12/90)       -22.13%            5.41%            11.91%

- --------------------------------------------------------------------------------

Morgan Stanley
World Index                -19.54%           -1.76%            6.69%1

- --------------------------------------------------------------------------------

Oppenheimer Global
Securities Fund/VA         -22.37%           -16.93%            N/A
Service Shares
(inception 7/13/00)

- --------------------------------------------------------------------------------

1.    From 12/31/92

The Fund's average annual total returns measure the performance of a
hypothetical account without deducting charges imposed by the separate
accounts that invest in the Fund and assume that all dividends and capital
gains distributions have been reinvested in additional shares.  The
performance of the Fund is compared to the Morgan Stanley Capital
International World Index, an unmanaged index of equity securities listed on
stock exchanges of 20 foreign countries and the U.S.  The index performance
includes the reinvestment of income but does not reflect fees, expenses, or
transaction costs. The Fund's investments vary from the index.


The Fund's total returns should not be expected to be the same as the returns
of other Oppenheimer funds, even if both funds have the same portfolio
managers and/or similar names.


Fees and Expenses of the Fund

The  following  tables  are  provided  to help  you  understand  the  fees and
expenses  you may pay if you buy and hold shares of the Fund.  The Fund pays a
variety of expenses  directly for  management  of its assets,  administration,
distribution of its shares and other  services.  Those expenses are subtracted
from the Fund's  assets to  calculate  the Fund's net asset  values per share.
All shareholders  therefore pay those expenses  indirectly.  The numbers below
are based on the Fund's  expenses  during its fiscal year ended  December  31,
2002.

Please refer to the  accompanying  prospectus of the  participating  insurance
company for  information  on initial or  contingent  deferred  sales  charges,
additional  exchange fees or redemption  fees,  and other charges and fees for
that variable life  insurance  policy,  variable  annuity or other  investment
product.  Those  charges  and fees are not  reflected  in either of the tables
below.

Shareholder Fees (fees paid directly from your investment)
(% of average daily net assets)


- ---------------------------------------------------------------------------------

                                   Non-Service   Service Shares  Class 3 Shares
                                     Shares

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Redemption Fee*                       None            None             1%*

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Exchange Fee*                         None            None             1%*

- ---------------------------------------------------------------------------------

* The Fund  assesses  a 1% fee on the  proceeds  of  Class 3  shares  that are
  redeemed  (either by selling or  exchanging to another  Oppenheimer  fund or
  other  investment  option  offered  through your variable life  insurance or
  variable annuity contract) within 60 days of their purchase.

The Fund does not charge any initial sales charge to buy shares or to
reinvest dividends.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)


- --------------------------------------------------------------------------------

                                 Non-Service    Service Shares  Class 3 Shares
                                    Shares

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Management Fees                     0.65%            0.65%           0.65%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Distribution    and    Service       None            0.25%            N/A
(12b-1) Fees

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Other Expenses                      0.02%            0.02%           N/A1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Total     Annual     Operating      0.67%            0.92%           N/A1
Expenses

- --------------------------------------------------------------------------------

1.    Because  this is a new  class of  shares,  expense  data for the  period
  specified is not available.
Prior to May 1,  2002,  the  Service  class  service  fee was 0.15% and actual
service  class 12b-1 fees paid by the Fund during the year ended  December 31,
2002 was 0.23%, and total annual operating expenses were 0.90%.
Expenses  may vary in future  years.  "Other  expenses"  in the table  include
transfer  agent fees,  custodial  fees,  and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily  agreed to limit transfer
and  shareholder  servicing agent fees to 0.35% per fiscal year, for all three
classes.  That  undertaking  may be amended or withdrawn at any time.  For the
Fund's fiscal year ended  December 31, 2002,  the transfer  agent fees did not
exceed the expense limitation described above.

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The  example  assumes  that you  invest  $10,000 in shares of the Fund for the
time periods  indicated and then redeem all of your shares at the end of those
periods.  The example also assumes that your  investment  has a 5% return each
year and that the  Fund's  operating  expenses  remain the same.  Your  actual
costs may be higher or lower,  because  expenses will vary over time. Based on
these  assumptions  your  expenses  would be as  follows,  whether  or not you
redeem your investment at the end of each period:


- ------------------------------------------------------------------------------

                              1 Year      3 Years     5 Years     10 Years

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Non-Service Shares             $68         $214        $373         $835

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Service Shares                 $94         $293        $509        $1,131

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Class 3 Shares                 $68         $214        $373         $835

- ------------------------------------------------------------------------------

About the Fund's Investments

The Fund's Principal Investment Policies.  The allocation of the Fund's
portfolio among  different types of investments will vary over time based on
the Manager's evaluation of economic and market trends.  The Fund's portfolio
might not always include all of the different types of investments described
below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.

      The Manager tries to reduce risks by carefully researching securities
before they are purchased. The Fund attempts to reduce its exposure to market
risks by diversifying its investments, that is, by not holding a substantial
percentage of the stock of any one company and by not investing too great a
percentage of the Fund's assets in any one issuer.  Also, the Fund does not
concentrate 25% or more of its total assets in any one industry.

      |X| Stock Investments.  The Fund invests in securities issued by
domestic or foreign companies that the Manager believes have appreciation
potential.  The Fund invests primarily in a diversified portfolio of common
stocks (and may buy other equity securities) of issuers that may be of small,
medium or large size.  Equity securities include common stocks, preferred
stocks and securities convertible into common stock. The Manager considers
some convertible securities to be "equity equivalents" because of the
conversion feature and in that case their rating has less impact on the
Manager's investment decision than in the case of other debt securities.
Nevertheless, convertible debt securities are subject to both "credit risk"
(the risk that the issuer will not pay interest or repay principal in a
timely manner) and "interest rate risk" (the risk that prices of the security
will be affected inversely by changes in prevailing interest rates).  If the
Fund buys convertible securities, it will focus primarily on investment-grade
securities.

      |_| Cyclical Opportunities. The Fund may also seek to take advantage of
changes in the business cycle at home and abroad by investing in companies
that are sensitive to those changes if the Manager believes they have growth
potential. For example, when the economy is expanding, companies in the
consumer durables and technology sectors might benefit and present long-term
growth opportunities. The Fund might sometimes seek to take tactical
advantage of short-term market movements or events affecting particular
issuers or industries.

      |_| Industry Focus. At times, the Fund may increase the relative
emphasis of its investments in a particular industry. Stocks of issuers in a
particular industry are subject to changes in economic conditions, government
regulations, availability of basic resources or supplies, or other events
that affect that industry more than others. To the extent that the Fund has
greater emphasis on investments in a particular industry, its share values
may fluctuate in response to events affecting that industry. To some extent
that risk may be limited by the Fund's policy of not concentrating 25% or
more of its total assets in investments in any one industry.

      |X| Special Risks of Emerging and Developing Markets.  Securities of
issuers in emerging and developing markets may offer special investment
opportunities, but present risks not found in more mature markets.  Those
securities may be more difficult to sell at an acceptable price and their
prices may be more volatile than securities of issuers in more developed
markets.  Settlements of trades may be subject to greater delays so that the
Fund might not receive the proceeds of a sale of a security on a timely
basis.  These investments may be very speculative.

      These countries might have less developed trading markets and
exchanges.  Emerging market countries may have less developed legal and
accounting systems and investments may be subject to greater risks of
government restrictions on withdrawing the sale proceeds of securities from
the country.  Economics of developing countries may be more dependent on
relatively few industries that may be highly vulnerable to local and global
changes.  Governments may be more unstable and present greater risks of
nationalization or restrictions on foreign ownership of stocks of local
companies.


      |X|    Special Portfolio Diversification Requirements. To enable a
variable annuity or variable life insurance contract based on an insurance
company separate account to qualify for favorable tax treatment under the
Internal Revenue Code, the underlying investments must follow special
diversification requirements that limit the percentage of assets that can be
invested in securities of particular issuers. The Fund's investment program
is managed to meet those requirements, in addition to other diversification
requirements under the Internal Revenue Code and the Investment Company Act
that apply to publicly-sold mutual funds.


      Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income. Those diversification requirements might also
limit, to some degree, the Fund's investment decisions in a way that could
reduce its performance.

      |X|   Can the Fund's Investment Objective and Policies Change?  The
Fund's Board of Trustees can change non-fundamental investment policies
without shareholder approval, although significant changes will be described
in amendments to this Prospectus. Fundamental policies cannot be changed
without the approval of a majority of the Fund's outstanding voting shares.
The Fund's investment objective is a fundamental policy. Investment
restrictions that are fundamental policies are listed in the Statement of
Additional Information. An investment policy is not fundamental unless this
Prospectus or the Statement of Additional Information says that it is.

      |X|   Portfolio Turnover. The Fund may engage in short-term trading to
try to achieve its objective.  It might have a turnover rate in excess of
100% annually.  Portfolio turnover affects brokerage costs the Fund pays. The
Financial Highlights table at the end of this Prospectus shows the Fund's
portfolio turnover rates during prior fiscal years.

Other Investment Strategies.  To seek its objective, the Fund can also use
the investment techniques and strategies described below. The Fund might not
always use all of them.  These techniques have risks, although some of them
are designed to help reduce overall investment or market risks.

      |X|  Illiquid and Restricted Securities. Investments may be illiquid
because they do not have an active trading market, making it difficult to
value them or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual restriction on its resale or which
cannot be sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 15% of its net assets in illiquid or
restricted securities.  Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that
limit. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate
liquidity.

      |X|  Derivative Investments. The Fund can invest in a number of
different kinds of "derivative" investments.  In the broadest sense,
exchange-traded options, futures contracts, and other hedging instruments the
Fund might use may be considered "derivative investments."  In addition to
using hedging instruments, the Fund can use other derivative investments
because they offer the potential for increased income and principal value.

      Markets, underlying securities and indices might move in a direction
not anticipated by the Manager.  Interest rate and stock market changes in
the U.S. and abroad may also influence the performance of derivatives.  As a
result of these risks the Fund could realize less principal or income from
the investment than expected.  Certain derivative investments held by the
Fund may be illiquid.

      |X|  Hedging.  The Fund can buy and sell forward contracts, futures
contracts, and put and call options, including options on futures and
broadly-based securities indices.  These are all referred to as "hedging
instruments."  The Fund is not required to hedge to seek its objective. The
Fund has limits on its use of hedging instruments and does not use them for
speculative purposes.

      The Fund could buy and sell options, futures and forward contracts for
a number of purposes. It might do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities.  It might do so to try to manage its
exposure to changing interest rates. Forward contracts can be used to try to
manage foreign currency risks on the Fund's foreign investments.

      Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is exercised
on an investment that has increased in value, the Fund will be required to
sell the investment at the call price and will not be able to realize any
profit if the investment has increased in value above the call price.  In
writing a put, there is a risk that the Fund may be required to buy the
underlying security at a disadvantageous price.

      If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Fund's return.
The Fund could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or if it
could not close out a position because of an illiquid market.

      |X| Repurchase Agreements.  The Fund can enter into repurchase
agreements.  In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized.  However, if the vendor
fails to pay the resale price on the delivery date, the Fund could incur
costs in disposing of the collateral and might experience losses if there is
any delay in its ability to do so.  There is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements of seven days
or less.



|X|   Temporary Defensive and Interim Investments. For cash management
   purposes, the Fund can hold cash equivalents such as commercial paper,
   repurchase agreements, Treasury bills and other short-term U.S. government
   securities. In times of adverse or unstable market or economic conditions,
   the Fund can invest up to 100% of its assets in temporary defensive
   investments that are inconsistent with the Fund's principle investment
   strategies.  These would ordinarily be U. S. government securities,
   highly-rated commercial paper, bank deposits or repurchase agreements. The
   Fund can also hold these types of securities pending the investment of
   proceeds from the sale of Fund shares or portfolio securities or to meet
   anticipated redemptions of Fund shares. To the extent the Fund invests
   defensively in these securities, it might not achieve its investment
   objective.


How the Fund Is Managed

The Manager. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an investment
advisory agreement that states the Manager's responsibilities.  The agreement
sets the fees the Fund pays to the Manager and describes the expenses that
the Fund is responsible to pay to conduct its business.


      The Manager has been an investment advisor since January, 1960.  The
Manager and its subsidiaries and controlled affiliates managed more than $120
billion in assets as of 31,March 31, 2003, including other Oppenheimer funds
with more than 7 million shareholder accounts.  The Manager is located at 498
Seventh Avenue, New York, New York 10018.The Manager is located at 498
Seventh Avenue, New York, New
      York 10018.


      |X|  Portfolio Manager.  The portfolio manager of the Fund is William
L. Wilby. He is a Vice President of the Fund and a Senior Vice President of
the Manager (since July 1994). He has been the person principally responsible
for the day-to-day management of the Fund's portfolio since December 1995.
Mr. Wilby also serves as a Senior Vice President of HarbourView Asset
Management Corporation (since May 1999); a Senior Investment Officer,
Director of International Equities (since May 2000) of the Manager; and an
officer and portfolio manager for other Oppenheimer funds. He was formerly
Vice President of the Manager (October 1991 - July 1994) and of HarbourView
Asset Management Corporation (June 1992 - May 1999).


      |X|  Advisory Fees.  Under the investment advisory agreement, the Fund
pays the Manager an advisory fee at an annual rate that declines on
additional assets as the Fund grows: 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 its last fiscal year
ended December 31, 2002, was 0.65% of the Fund's average annual net assets
for each class of shares.


      |X|  Possible Conflicts of Interest. The Fund offers its shares to
separate accounts of different insurance companies that are not affiliated
with each other, as an investment for their variable annuity, variable life
and other investment product contracts. While the Fund does not foresee any
disadvantages to contract owners from these arrangements, it is possible that
the interests of owners of different contracts participating in the Fund
through different separate accounts might conflict. For example, a conflict
could arise because of differences in tax treatment.

      The Fund's Board of Trustees has procedures to monitor the portfolio
for possible conflicts to determine what action should be taken. If a
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Fund. That
could force the Fund to sell securities at disadvantageous prices, and
orderly portfolio management could be disrupted. Also, the Board might refuse
to sell shares of the Fund to a particular separate account, or could
terminate the offering of the Fund's shares if required to do so by law or if
it would be in the best interest of the shareholders of the Fund to do so.

Investing in the Fund

How to Buy and Sell Shares


How Are Shares Purchased? Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products.  Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That prospectus will indicate whether
you are only eligible to purchase Class 3 shares or Service shares of the
Fund. The Fund reserves the right to refuse any purchase order when the
Manager believes it would be in the Fund's best interest to do so. Class 3
shares are currently offered only as an investment option through separate
accounts offered by certain insurance companies. Please refer to the
accompanying prospectus of the participating insurance company for more
details.


      |X| Market Timers.  The Fund has instructed its participating  insurance
companies  that it may  restrict  or  refuse  investments  by  their  separate
accounts from market timers.  "Market  timers"  include persons whose separate
account  transactions  have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier  exchange  request,  (ii)  exchanges out of the
Fund  more than  twice in any  calendar  quarter,  (iii) an  exchange  of Fund
shares  equal  to at least  $5  million,  or more  than 1% of the  Fund's  net
assets,  or (iv) other  transactions in Fund shares that demonstrated a timing
pattern.  Separate  accounts  under  common  ownership or control are combined
for  these  limits.  There  can be no  assurance  that all such  participating
insurance  companies  will be successful in  controlling  investments in their
respective separate accounts by market timers.

- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------


At What Price Are Shares Sold? Shares are sold to participating insurance
companies at their offering price, which is the net asset value per share.
The Fund does not impose any sales charge on purchases of its shares. If
there are any charges imposed under the variable annuity, variable life or
other contract through which Fund shares are purchased, they are described in
the accompanying prospectus of the participating insurance company.

Net Asset Value.  The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange ("the Exchange"), on
each day the Exchange is open for trading (referred to in this Prospectus as
a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.


      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security. A security's valuation may differ depending on the method used
for determining value.


      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
or policy owners to purchase Fund shares on a regular business day, provided
that the Fund receives the order from the insurance company, generally by
9:30 A.M. on the next regular business day at the offices of its Transfer
Agent in Colorado.


     |X| Classes of Shares. The Fund offers three different classes of
shares. The class of shares designated as Service shares are subject to a
distribution and service plan.  The impact of the expenses of that plan on
Service shares is described below.  The class of shares that are not subject
to a plan has no class name designation. The different classes of shares
represent investments in the same portfolio of securities but are expected to
be subject to different expenses and will likely have different share prices.

     |X|  Distribution and Service Plan for Service shares. The Fund has
adopted a Distribution and Service Plan for Service shares to pay the
distributor, for distribution related services and personal service and
account maintenance for the Fund's Service shares. Under the Plan, payments
are made quarterly at an annual rate of up to 0.25% of the average annual net
assets of Service shares of the Fund.  The distributor currently uses all of
those fees to compensate sponsor(s) of the insurance product that offers Fund
shares, for providing personal service and maintenance of accounts of their
variable contract owners that hold Service shares.  The impact of the service
plan is to increase operating expenses of the Service shares, which results
in lower performance compared to the Fund's shares that are not subject to a
service fee.


How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.

      The share price that applies to a redemption order is the next net
asset value per share that is determined after the participating insurance
company (as the Fund's designated agent) receives a redemption request on a
regular business day from its contract or policy holder, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M.
the next regular business day at the office of its Transfer Agent in
Colorado. The Fund normally sends payment by Federal Funds wire to the
insurance company's account the day after the Fund receives the order (and no
later than seven days after the Fund's receipt of the order). Under unusual
circumstances determined by the Securities and Exchange Commission, payment
may be delayed or suspended.


      The Fund assesses a 1% fee on the proceeds of Class 3 shares that are
redeemed (either by selling or exchanging to another Oppenheimer fund or
other investment option offered through your variable life insurance or
variable annuity contract) within 60 days of their purchase.  The redemption
fee is paid to the Fund, and is intended to offset the trading costs, market
impact and other costs associated with short-term money movements in and out
of the Fund.  The redemption fee is imposed to the extent that Class 3 shares
redeemed exceed Class 3 shares that have been held more than 60 days. For
Class 3 shares of the Fund acquired by exchange, the holding period prior to
the exchange is not considered in determining whether to apply the redemption
fee.


Dividends, Capital Gains and Taxes

Dividends.  The Fund intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis, and to pay
those dividends in March. Dividends and distributions will generally be lower
for Service shares, which normally have higher expenses. The Fund has no
fixed dividend rate and cannot guarantee that it will pay any dividends.

      All dividends (and any capital gains distributions will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).

Capital Gains.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year. The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

Taxes. For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Fund from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable,
if at all, to the participating insurance company.

     This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your
tax advisor or your participating insurance company representative about the
effect of an investment in the Fund under your contract or policy.

Financial Highlights


The Financial Highlights Table is presented to help you understand the Fund's
financial performance for its non-service shares for the past ten fiscal
years and the past three fiscal years for its service shares. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, the Fund's independent auditors, whose report, along with the
Fund's financial statements, is included in the Statement of Additional
Information, which is available on request.  Because Class 3 shares of the
Fund will not be issued prior to May 1, 2003, no financial information is
shown for Class 3 shares in the Financial Highlights table or in the
financial statements included in the Statement of Additional Information.

FINANCIAL HIGHLIGHTS
OPPENHEIMER GLOBAL SECURITIES FUND/VA

Non-service Shares    Year Ended December 31,                    2002
2001         2000         1999         1998
- --------------------------------------------------------------------------------


Per Share Operating Data
Net asset value, beginning of period                       $    22.84   $
30.33   $    33.41   $    22.07  $     21.37
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..16          .17          .27          .14          .24
Net realized and unrealized gain (loss)                         (5.19)
(3.85)        1.82        12.21         2.64

- --------------------------------------------------------------------
Total from investment operations                                (5.03)
(3.68)        2.09        12.35         2.88
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                             (.11)
(.19)        (.09)        (.14)        (.46)
Dividends in excess of net investment income
- --           --           --         (.13)          --
Distributions from net realized gain                               --
(3.62)       (5.08)        (.74)       (1.72)

- --------------------------------------------------------------------
Total dividends and/or distributions to shareholders             (.11)
(3.81)       (5.17)       (1.01)       (2.18)
- --------------------------------------------------------------------------------
Net asset value, end of period                             $    17.70   $
22.84   $    30.33   $    33.41  $     22.07

====================================================================

- --------------------------------------------------------------------------------
Total Return, At Net Asset Value 1                             (22.13)%
(12.04)%       5.09%       58.48%       14.11%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                   $1,549,993
$1,905,890   $2,136,420   $1,762,366  $ 1,135,029
- --------------------------------------------------------------------------------
Average net assets (in thousands)                          $1,776,289
$1,918,335   $2,116,100   $1,251,190  $ 1,055,123
- --------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                            0.80%
0.70%        0.83%        0.57%        1.22%
Expenses                                                         0.67%
0.70%        0.68%        0.69%        0.74% 3
- --------------------------------------------------------------------------------
Portfolio turnover rate
34%          39%          50%          64%          81%


1. Assumes an  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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.


Service Shares   Year Ended December 31,
2002             2001          2000 1
- --------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of period                            $
22.78        $   30.30       $   32.65
- --------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income
..12              .21             .03
Net realized and unrealized loss
(5.19)           (3.92)          (2.38)

- -------------------------------------------
Total from investment operations
(5.07)           (3.71)          (2.35)
- --------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income
(.10)            (.19)             --
Distributions from net realized gain
- --            (3.62)             --

- -------------------------------------------
Total dividends and/or distributions to shareholders
(.10)           (3.81)             --
- --------------------------------------------------------------------------------
Net asset value, end of period                                  $
17.61        $   22.78       $   30.30

===========================================

- --------------------------------------------------------------------------------
Total Return, At Net Asset Value 2
(22.37)%         (12.17)%         (7.20)%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                        $
52,830        $  20,467       $     983
- --------------------------------------------------------------------------------
Average net assets (in thousands)                               $
34,847        $   8,502       $     325
- --------------------------------------------------------------------------------
Ratios to average net assets:
3
Net investment income
0.51%            0.44%           0.60%
Expenses
0.90%            0.85%           0.83%
- --------------------------------------------------------------------------------
Portfolio turnover rate
34%              39%             50%


1.For the period from July 13, 2000 (inception of offering) to December 31, 2000.
2.Assumes an  investment  on the business day before the first day of the fiscal
period  (or  inception  of  offering),  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 on full year.  Total  return
information  does not reflect  expenses that apply at the separate account level
or to related insurance  porducts.  Inclusion of these chareges would reduce the
total return figures for all periods shown.
3.Annualized for periods of less than one full year.

INFORMATION AND SERVICES
For More Information on Oppenheimer Global Securities Fund/VA

The following additional information about the Fund is available without
charge upon request:

Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into
this Prospectus (which means it is legally part of this Prospectus).

Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is
available in the Fund's Annual and Semi-Annual Reports to shareholders.
The Annual Report includes a discussion of market conditions and
investment strategies that significantly affected the Fund's performance
during its last fiscal year.

How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund, or instructions on how to contact the
sponsor of your insurance product:
- ---------------------------------------------------------------------------
By Telephone
Call OppenheimerFunds Services toll-free:
1.800.981.2871

By Mail
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
Information about the Fund including the Statement of Additional
Information can be reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1.202.942.8090.  Reports and
other information about the Fund are available on the EDGAR database on
the SEC's Internet website at www.sec.gov. Copies may be obtained after
                              -----------
payment of a duplicating fee by electronic request at the SEC's e-mail
address: publicinfo@sec.gov or by writing to the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

No one has been authorized to provide any information about the Fund or
to make any representations about the Fund other than what is contained
in this Prospectus. This Prospectus is not an offer to sell shares of the
Fund, nor a solicitation of an offer to buy shares of the Fund, to any
person in any state or other jurisdiction where it is unlawful to make
such an offer.
The Fund's SEC File No.: 811-4108

PR0485.001.0503
Printed on recycled paper.

                         Appendix to Prospectus of
                   Oppenheimer Global Securities Fund/VA
             (a series of Oppenheimer Variable Account Funds)


      Graphic material included in the Prospectus of Oppenheimer Global
Securities Fund/VA (the "Fund") under the heading "Annual Total Return
(as of 12/31 each year)":


     A bar chart will be included in the Prospectus of the Fund depicting
the annual total returns of a hypothetical $10,000 investment in
non-service shares of the Fund for each of the ten most recent calendar
years, without deducting separate account expenses.  Set forth below are
the relevant data that will appear on the bar chart:


Calendar
Year
Ended                               Annual Total Returns
- -----                               --------------------


12/31/93                                  70.32%
12/31/94                                  -5.72%
12/31/95                                   2.24%
12/31/96                                  17.80%
12/31/97                                  22.42%
12/31/98                                  14.11%
12/31/99                                  58.48%
12/31/00                                    5.09%
12/31/01                                  -12.04%
12/31/02                                  -22.13%


NIA\OVAF\485PSP_2003(b).doc

Oppenheimer
High Income Fund/VA
A series of Oppenheimer Variable
Account Funds


Prospectus dated May 1, 2003                   Oppenheimer High Income Fund/VA
                                         is a mutual fund that seeks a high
                                         level of current income. The Fund
                                         invests primarily in lower-grade,
                                         high-yield debt securities.

                                                     Shares of the Fund are
                                               sold only as the underlying
                                               investment for variable life
                                               insurance policies, variable
                                               annuity contracts and other
                                               insurance company separate
                                               accounts. A prospectus for the
                                               insurance product you have
                                               selected accompanies this
                                               Prospectus and explains how to
                                               select shares of the Fund as an
                                               investment under that insurance
                                               product, and whether you are
                                               only eligible to purchase
                                               Service shares of the Fund.
                                         This Prospectus contains important
                                         information about the Fund's
                                         objective, its investment policies,
                                         strategies and risks. Please read this
                                         Prospectus (and your insurance product
                                         prospectus) carefully before you

As with all mutual funds, the            invest and keep them for future
Securities and Exchange Commission has   reference about your account.
not approved or disapproved the Fund's
securities nor has it determined that
this Prospectus is accurate or
complete. It is a criminal offense to
represent otherwise.


                                                                          1234



CONTENTS

- ------------------------------------------------------------------------------



                  ABOUT THE FUND


                  The Fund's Objective and Investment Strategies

                  Main Risks of Investing in the Fund

                  The Fund's Past Performance


                  Fees and Expenses of the Fund


                  About the Fund's Investments

                  How the Fund is Managed



                  INVESTING IN THE FUND

- ------------------------------------------------------------------------------

                  How to Buy and Sell Shares

                  Dividends, Capital Gains and Taxes

                  Financial Highlights


About the Fund

The Fund's Objective and Investment Strategies

What Is the  Fund's  Investment  Objective?  The  Fund  seeks a high  level of
current income from investment in high-yield fixed-income securities.

What Does the Fund Mainly Invest In?  The Fund invests mainly in a variety of
high-yield fixed-income securities of domestic and foreign issuers.  The
Fund's investments typically include:
o     lower-grade, high-yield domestic and foreign corporate bonds and notes
         (these are the main focus of the Fund's portfolio),

o     mortgage-related securities and asset-backed securities,
o     "preferred" stocks,
o     "structured" notes,
o     foreign government bonds and notes, and

      "zero-coupon" and "step" bonds.

      Under normal market conditions, the Fund invests at least 65% of its
total assets, and can invest without limit, in high-yield, lower-grade
fixed-income securities, commonly called "junk bonds."  Lower-grade
securities are below investment-grade securities, and are rated below "Baa"
by Moody's Investors Service or below "BBB" by Standard & Poor's or have
comparable ratings by other nationally-recognized rating organizations (or,
in the case of unrated securities, have comparable ratings assigned by the
Fund's investment Manager, OppenheimerFunds, Inc.).

      The Fund's foreign investments can include securities of issuers in
developed markets as well as emerging markets, which have special risks. The
Fund can also invest in loan participations and can use hedging instruments
and certain derivative investments, primarily mortgage-related securities and
"structured" notes, to try to increase income or to try to manage investment
risks. These investments are more fully explained in "About the Fund's
Investments," below.

How Do the Portfolio Managers Decide What Securities to Buy or Sell? In
selecting securities for the Fund, the Fund's portfolio managers analyze the
overall investment opportunities and risks in different market sectors,
industries and countries. The portfolio managers' overall strategy is to
build a broadly diversified portfolio of debt securities to help moderate the
special risks of investing in lower-grade, high yield debt instruments. The
portfolio managers currently focus on the factors below (some of which may
vary in particular cases and may change over time), looking for:
      |_|  Securities offering high current income,
      |_|  Issuers in industries that are currently undervalued,
      |_|  Issuers with strong cash flows,
      |_|  Changes in the business cycle that might affect corporate profits.

      The Fund's diversification strategies, both with respect to securities
issued by different companies and within different industries, are intended
to reduce the volatility of the Fund's share prices while providing
opportunities for high current income.

Who Is the Fund Designed For? The Fund's shares are available only as an
investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
high current income from a portfolio emphasizing lower-grade domestic and
foreign debt securities. Those investors should be willing to assume the
special risks of lower-grade debt securities. Since the Fund's income level
will fluctuate, it is not designed for investors needing an assured level of
current income. Also, the Fund does not seek capital appreciation. The Fund
is designed as a long-term investment. However, the Fund is not a complete
investment program.

Main Risks of Investing in the Fund

      All investments carry risks to some degree.  The Fund's investments in
debt securities are subject to changes in their value from a number of
factors described below. There is also the risk that the value of your
investment could be eroded over time by the effects of inflation and that
poor security selection by the Fund's investment manager, OppenheimerFunds,
Inc., will cause the Fund to underperform other funds having similar
objectives.

Credit Risk.  Debt securities are subject to credit risk.  Credit risk
   relates to the ability of the issuer of a security to make interest and
   principal payments on the security as they become due. If the issuer fails
   to pay interest, the Fund's income might be reduced, and if the issuer
   fails to repay principal, the value of that security and of the Fund's
   shares might be reduced. The Fund's investments in debt securities,
   particularly high-yield, lower-grade debt securities, are subject to risks
   of default.


Credit Derivatives.  The Fund may enter into credit default swaps, both (i)
   directly and (ii) indirectly in the form of a swap embedded within a
   structured note, to protect against the risk that a security will default.
   The Fund pays a fee to enter into the trade and receives a fixed payment
   during the life of the swap. If there is a credit event, the Fund either
   delivers the defaulted bond (if the Fund has taken the short position in
   the credit default swap) or pays the par amount of the defaulted bond (if
   the Fund has taken the long position in the credit default swap note).
   Risks of credit default swaps include the cost of paying for credit
   protection if there are no credit events.

            |_|  Special Risks of Lower-Grade Securities.  Because the Fund
can invest without limit in securities below investment grade to seek high
income and emphasizes these securities in its investment program, the Fund's
credit risks are greater than those of funds that buy only investment-grade
bonds. Lower-grade debt securities may be subject to greater market
fluctuations and greater risks of loss of income and principal than
investment-grade debt securities. Securities that are (or that have fallen)
below investment grade are exposed to a greater risk that the issuers of
those securities might not meet their debt obligations.  These risks can
reduce the Fund's share prices and the income it earns.  The market for
lower-grade securities may be less liquid, especially during times of
economic distress, and therefore they may be harder to value and to sell at
an acceptable price.

Interest Rate Risks. The values of debt securities, including government
   securities, are subject to change when prevailing interest rates change.
   When interest rates fall, the values of already-issued debt securities
   generally rise.  When interest rates rise, the values of already-issued
   debt securities generally fall, and they may sell at a discount from their
   face amount. The magnitude of these fluctuations will often be greater for
   longer-term debt securities than shorter-term debt securities.  The Fund's
   share prices can go up or down when interest rates change because of the
   effect of the changes on the value of the Fund's investments in debt
   securities.

Risks of Foreign Investing.  The Fund can invest its assets without limit in
   foreign debt securities and can buy securities of governments and
   companies in both developed markets and emerging markets. The Fund
   normally invests part of its assets in foreign securities. While foreign
   securities offer special investment opportunities, there are also special
   risks that can reduce the Fund's share prices and returns.

The change in value of a foreign currency against the U.S. dollar will result
   in a change in the U.S. dollar value of securities denominated in that
   foreign currency.  Currency rate changes can also affect the distributions
   the Fund makes from the income it receives from foreign securities as
   foreign currency values change against the U.S. dollar. Foreign investing
   can result in higher transaction and operating costs for the Fund. Foreign
   issuers are not subject to the same accounting and disclosure requirements
   that U.S. companies are subject to.

The value of foreign investments may be affected by exchange control
   regulations, expropriation or nationalization of a company's assets,
   foreign taxes, delays in settlement of transactions, changes in
   governmental economic or monetary policy in the U.S. or abroad, or other
   political and economic factors.

Prepayment Risk. Prepayment risk occurs when the mortgages underlying a
   mortgage-related security are prepaid at a rate faster than anticipated
   (usually when interest rates fall) and the issuer of the security can
   prepay the principal prior to the security's maturity. Mortgage-related
   securities that are subject to prepayment risk, including the
   mortgage-related securities that the Fund buys, generally offer less
   potential for gains when prevailing interest rates decline, and have
   greater potential for loss than other debt securities when interest rates
   rise.

   The impact of prepayments on the price of a security may be difficult to
   predict and may increase the volatility of the price. The Fund might have
   to reinvest the proceeds of prepaid securities in new securities offering
   lower yields.  Additionally, the Fund can buy mortgage-related securities
   at a premium. Accelerated prepayments on those securities could cause the
   Fund to lose the portion of its principal investment represented by the
   premium the Fund paid.

There are Special Risks in Using Derivative Investments. The Fund can use
   derivatives to seek increased income or to try to hedge investment risks.
   In general terms, a derivative investment is an investment contract whose
   value depends on (or is derived from) the value of an underlying asset,
   interest rate or index. Options, futures, interest rate swaps, credit
   derivatives, structured notes and mortgage-related securities are examples
   of derivatives the Fund can use.

   If the issuer of the derivative does not pay the amount due, the Fund can
   lose money on the investment. Also, the underlying security or investment
   on which the derivative is based, and the derivative itself, might not
   perform the way the Manager expected it to perform. If that happens, the
   Fund's share price could decline or the Fund could get less income than
   expected.

   The Fund has limits on the amount of particular types of derivatives it
   can hold. However, using derivatives can cause the Fund to lose money on
   its investment and/or increase the volatility of its share prices.

      How Risky is the Fund Overall? The risks described above collectively
form the risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its price per share. These risks
mean that you can lose money by investing in the Fund. When you redeem your
shares, they may be worth more or less than what you paid for them. There is
no assurance that the Fund will achieve its investment objective. In the
short term, the values of debt securities can fluctuate substantially because
of interest rate changes. Foreign debt securities, particularly those of
issuers in emerging markets, and high yield securities can be volatile, and
the price of the Fund's shares can go up and down substantially because of
events affecting foreign markets or issuers or events affecting the high
yield market. The Fund's security diversification strategy may help cushion
the Fund's shares prices from that volatility, but debt securities are
subject to other credit and interest rate risks that can affect their values
and the share prices of the Fund. The Fund generally has more risks than bond
funds that focus on U.S. government securities and investment-grade bonds but
may be less volatile than funds that focus solely on investments in a single
foreign sector, such as emerging markets.


An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund's Past Performance


      The bar chart and table below show one measure of the risks of
investing in the Fund, by showing changes in the Fund's performance (for its
non-service shares) from year to year for the last 10 calendar years and by
showing how the average annual total returns of the Fund's shares compare to
those of a broad-based market index.  The Fund's past investment performance
is not necessarily an indication of how the Fund will perform in the future.


                 Annual Total Returns (as of 12/31 each year)

    [See appendix to prospectus for data in bar chart showing annual total
                                   returns]

Charges imposed by the separate accounts that invest in the Fund are not
included in the calculations of return in this bar chart, and if those
charges were included, the returns would be less than those shown.


During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 9.98% (1st Qtr `93) and the lowest return (not
annualized) for a calendar quarter was -7.12% (3rd Qtr `98).


- --------------------------------------------------------------------------------
Average Annual Total

Returns for the         ----------------       5 Years            10 Years
periods ended December       1 Year       (or life of class
31, 2002                                      if less)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Oppenheimer High

Income Fund/VA               -2.40%             0.04%               6.68%
Non-Service Shares

(inception 4/30/86)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Merrill Lynch High

Yield Master Index           -1.14%             1.24%               6.35%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Oppenheimer High

Income Fund/VA Service       -2.67%            -0.82%                N/A
Shares (inception

9/18/01)
- --------------------------------------------------------------------------------


The Fund's returns in the table measure the performance of a hypothetical
account without deducting charges imposed by the separate accounts that
invest in the Fund and assume that all dividends and capital gains
distributions have been reinvested in additional shares. The Fund's
performance is compared to the Merrill Lynch High Yield Master Index, an
unmanaged index of U.S. corporate and government bonds that is a measure of
the performance of the high-yield corporate bond market. It must be
remembered that the index performance reflects the reinvestment of income but
does not consider the effects of fees, expenses or transaction costs. Also,
the Fund may have investments that vary from the index.


The Fund's total returns should not be expected to be the same as the returns
of other Oppenheimer funds, even if both funds have the same portfolio
managers and/or similar names.


Fees and Expenses of the Fund

The following tables are provided to help you understand the fees and
expenses you may pay if you buy and hold shares of the Fund. The Fund pays a
variety of expenses directly for management of its assets, administration,
distribution of its shares and other services. Those expenses are subtracted
from the Fund's assets to calculate the Fund's net asset values per share.
All shareholders therefore pay those expenses indirectly. The numbers below
are based on the Fund's expenses during its fiscal year ended December 31,
2002.

Shareholder Fees.  The Fund does not charge any initial sales charge to buy
shares or to reinvest dividends.  There are no exchange fees or redemption
fees and no contingent deferred sales charges. Please refer to the
accompanying prospectus of the participating insurance company for
information on initial or contingent deferred sales charges, exchange fees or
redemption fees for that variable life insurance policy, variable annuity or
other investment product.  Those charges and fees are not reflected in either
of the tables below.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)


- --------------------------------------------------------------------------------

                                    Non-Service Shares       Service Shares

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Management Fees                           0.74%                   0.74%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Distribution and Service                   None                   0.25%
(12b-1) Fees

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Other Expenses                            0.03%                   0.03%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Total Annual Operating Expenses           0.77%                   1.02%

- --------------------------------------------------------------------------------


Expenses may vary in future years. "Other expenses" in the table include
transfer agent fees, custodial fees, and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily agreed to limit transfer
and shareholder servicing agent fees to 0.35% per fiscal year, for both
classes. That undertaking may be amended or withdrawn at any time. For the
Fund's fiscal year ended December 31, 2002, the transfer agent fees did not
exceed the expense limitation described above.

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in shares of the Fund for the
time periods indicated, reinvest your dividends and distributions and then
redeem all of your shares at the end of those periods.  The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same.  Your actual costs may be higher or
lower, because expenses will vary over time.  Based on these assumptions your
expenses would be as follows, whether or not you redeem your investment at
the end of each period:


- ------------------------------------------------------------------------------

                              1 Year      3 Years     5 Years     10 Years

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Non-Service Shares             $79         $246        $428         $954

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Service Shares                 $104        $325        $563        $1,248

- ------------------------------------------------------------------------------

About the Fund's Investments

The Fund's Principal Investment Policies. The allocation of the Fund's
portfolio among different types of investments will vary over time based upon
the Manager's evaluation of economic and market trends. The Fund's portfolio
might not always include all of the different types of investments described
below.  The Statement of Additional Information contains more details about
the Fund's investment policies and risks.

      The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce
risks by carefully researching securities before they are purchased, and in
some cases by using hedging techniques. The Fund attempts to reduce its
exposure to market risks by diversifying its investments, that is, by not
holding a substantial percentage of securities of any one issuer and by not
investing too great a percentage of the Fund's assets in any one issuer.
Also, the Fund does not concentrate 25% or more of its investments in the
securities of any one foreign government or in the debt and equity securities
of companies in any one industry.

      A debt security is essentially a loan by the buyer to the issuer of the
debt security. The issuer promises to pay back the principal amount of the
loan and normally pays interest, at a fixed or variable rate, on the debt
while it is outstanding. The debt securities the Fund buys may be rated by
nationally recognized rating organizations or they may be unrated securities
assigned an equivalent rating by the Manager. While the Fund's investments
may be investment grade or below investment grade in credit quality, it is
expected to invest mainly in lower-grade securities, commonly called "junk
bonds." They typically offer higher yields than investment-grade bonds,
because investors assume greater risks of default of these securities.  The
ratings definitions of the principal national rating organizations are
included in Appendix A to the Statement of Additional Information.

      The Fund has no limit on the range of maturity of the debt securities
it can buy, and therefore may hold obligations with short, medium or
long-term maturities.  However, longer term securities typically offer higher
yields than shorter-term securities and therefore the Fund will focus on
longer-term debt to seek higher income.  However, longer-term securities
fluctuate more in price when interest rates change than shorter-term
securities.

      The Fund can invest some of its assets in other types of securities,
including common stocks and other equity securities of foreign and U.S.
companies. However, the Fund does not anticipate having significant
investments in those types of securities as part of its normal portfolio
strategy.


      |X| Forward Rolls.  The Fund may enter into "forward roll" (also
referred to as "mortgage dollar rolls") transactions with respect to
mortgage-related securities.  In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase
a similar security at a later date at a set price.

      During the period between the sale and the purchase, the Fund 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
Fund sells may decline below the price at which the Fund is obligated to
repurchase securities, or that the counterparty might default in its
obligation.

     |X|  High-Yield,   Lower-Grade  Fixed-Income   Securities.   There  are  no
restrictions  on the amount of the Fund's  assets  that can be  invested in debt
securities  below  investment  grade. The Fund can invest in securities rated as
low as "C" or "D",  in unrated  bonds or bonds  which are in default at the time
the Fund buys them.  While securities rated "Baa" by Moody's or "BBB" by S&P
are considered "investment grade," they have some speculative characteristics.


      The Manager does not rely solely on ratings issued by rating
organizations when selecting investments for the Fund. The Fund can buy
unrated securities that offer high current income. The Manager assigns a
rating to an unrated security that is equivalent to the rating of a rated
security that the Manager believes offers comparable yields and risks.


      While investment-grade securities are subject to risks of non-payment
of interest and principal, generally, higher yielding lower-grade bonds,
whether rated or unrated, have greater risks than investment-grade
securities.  They may be subject to greater market fluctuations and risk of
loss of income and principal than investment-grade securities. There may be
less of a market for them and therefore they may be harder to value and to
sell at an acceptable price. There is a relatively greater possibility that
the issuer's earnings may be insufficient to make the payments of interest
and principal due on the bonds.


      These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may be
affected by declines in value of these securities.


      |X| Private Issuer and Mortgage-Backed Securities. The Fund can invest
a substantial portion of its assets in mortgage-backed securities issued by
private issuers, which do not offer the credit backing of U.S. government
securities. Primarily these include multi-class debt or pass-through
certificates secured by mortgage loans. They may be issued by banks, savings
and loans, mortgage bankers and other non-governmental issuers. Private
issuer mortgage-backed securities are subject to the credit risks of the
issuers (as well as the interest rate risks and prepayment risks of CMOs that
are U.S. government securities, discussed below), although in some cases they
may be supported by insurance or guarantees.

      |X| Mortgage-Related U.S. Government Securities. The Fund can buy
interests in pools of residential or commercial mortgages, in the form of
collateralized mortgage obligations ("CMOs") and other "pass-through"
mortgage securities. CMOs that are U.S. government securities have collateral
to secure payment of interest and principal. They may be issued in different
series each having different interest rates and maturities. The collateral is
either in the form of mortgage pass-through certificates issued or guaranteed
by a U.S. agency or instrumentality or mortgage loans insured by a U.S.
government agency. The Fund can have substantial amounts of its assets
invested in mortgage-related U.S. government securities.


      The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when interest rates rise.

      If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be
reduced. Additionally, the Fund may have to reinvest the prepayment proceeds
in other securities paying interest at lower rates, which could reduce the
Fund's yield.

      If interest rates rise rapidly, prepayments may occur at slower rates
than expected, which could have the effect of lengthening the expected
maturity of a short or medium-term security. That could cause its value to
fluctuate more widely in response to changes in interest rates. In turn, this
could cause the value of the Fund's shares to fluctuate more.


      |X| Asset-Backed Securities. The Fund can buy asset-backed securities,
which are fractional interests in pools of loans collateralized by the loans
or other assets or receivables. They are issued by trusts and special purpose
corporations that pass the income from the underlying pool to the buyer of
the interest. These securities are subject to the risk of default by the
issuer as well as by the borrowers of the underlying loans in the pool.


      |X| Foreign Debt Securities.  The Fund can buy debt securities issued
by foreign governments and companies, as well as "supra-national" entities,
such as the World Bank. The Fund will not invest 25% or more of its total
assets in debt securities of any one foreign government or in debt securities
of companies in any one industry. The Fund has no requirements as to the
maturity range of the foreign debt securities it can buy, or as to the market
capitalization range of the issuers of those securities.

      The Fund's foreign debt investments can be denominated in U.S. dollars
or in foreign currencies. The Fund will buy foreign currency only in
connection with the purchase and sale of foreign securities and not for
speculation.


            |_|  Special Risks of Emerging and Developing Markets.
Securities of issuers in emerging and developing markets may offer special
investment opportunities but present risks not found in more mature markets.
Those securities may be more difficult to value and to sell at an acceptable
price and their prices may be more volatile than securities of issuers in
more developed markets. They may be very speculative.  Settlements of trades
may be subject to greater delays so that the Fund may not receive the
proceeds of a sale of a security on a timely basis.


      These countries might have less developed trading markets and
exchanges. Emerging market countries may have less developed legal and
accounting systems, and investments may be subject to greater risks of
government restrictions on withdrawing the sales proceeds of securities from
the country. Economies of developing countries may be more dependent on
relatively few industries that may be highly vulnerable to local and global
changes. Governments may be more unstable and present greater risks of
nationalization or restrictions on foreign ownership of securities of local
companies.

      |X| "Structured" Notes. The Fund can buy "structured" notes, which are
specially-designed derivative debt investments.  Their principal payments or
interest payments are linked to the value of an index (such as a currency or
securities index) or commodity. The terms of the instrument may be
"structured" by the purchaser (the Fund) and the borrower issuing the note.

      The principal and/or interest payments depend on the performance of one
or more other securities or indices, and the values of these notes will
therefore fall or rise in response to the changes in the values of the
underlying security or index. They are subject to both credit and interest
rate risks and therefore the Fund could receive more or less than it
originally invested when the notes mature, or it might receive less interest
than the stated coupon payment if the underlying investment or index does not
perform as anticipated. Their values may be very volatile and they may have a
limited trading market, making it difficult for the Fund to sell its
investment at an acceptable price.


SPECIAL PORTFOLIO DIVERSIFICATION REQUIREMENTS.  To enable a variable annuity
or variable life insurance contract based on an insurance company separate
account to qualify for favorable tax treatment under the Internal Revenue
Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers.  The Fund's investment program is managed
to meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.


      Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income.  Those diversification requirements might also
limit, to some degree, the Fund's investment decisions in a way that could
reduce its performance.


CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Fundamental policies cannot be changed without the approval
of a majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy. Investment restrictions that are
fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the
Statement of Additional Information says that it is.

            |_| Portfolio Turnover. The Fund may engage in short-term trading
to try to achieve its objective.  Portfolio turnover affects brokerage and
transaction costs the Fund pays. The Financial Highlights table below shows
the Fund's portfolio turnover rates during prior fiscal years.


Other Investment Strategies.  To seek its objective, the Fund can also use
   the investment techniques and strategies described below. The Manager
   might not always use all of them. These techniques involve risks, although
   some are designed to help reduce overall investment or market risks.


      |X| U.S. Government Securities.  The Fund can invest in securities
issued or guaranteed by the U.S. Treasury or other government agencies or
federally-chartered corporate entities referred to as "instrumentalities."
These are referred to as "U.S. government securities" in this Prospectus.


            |_|  U.S. Treasury Obligations. These include Treasury bills
(which have maturities of one year or less when issued), Treasury notes
(which have maturities of from one to ten years), and Treasury bonds (which
have maturities of more than ten years). Treasury securities are backed by
the full faith and credit of the United States as to timely payments of
interest and repayments of principal. The Fund can also buy U.S. Treasury
securities that have been "stripped" of their coupons by a Federal Reserve
Bank, zero-coupon U.S. Treasury securities described below, and Treasury
Inflation-Protection Securities ("TIPS").


            |_|  Obligations of U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the U.S.
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association pass-through
mortgage certificates (called "Ginnie Maes"). Some are supported by the right
of the issuer to borrow from the U.S. Treasury under certain circumstances,
such as Federal National Mortgage Association bonds ("Fannie Maes"). Others
are supported only by the credit of the entity that issued them, such as
Federal Home Loan Mortgage Corporation obligations ("Freddie Macs").

      |X| Zero-Coupon and "Stripped" Securities.  Some of the government and
corporate debt securities the Fund buys are zero-coupon bonds that pay no
interest. They are issued at a substantial discount from their face value.
"Stripped" securities are the separate income or principal components of a
debt security. Some CMOs or other mortgage-related securities may be
stripped, with each component having a different proportion of principal or
interest payments. One class might receive all the interest and the other all
the principal payments.


      Zero-coupon and stripped securities are subject to greater fluctuations
in price from interest rate changes than conventional interest-bearing
securities. The Fund may have to pay out the imputed income on zero-coupon
securities without receiving the actual cash currently. Interest-only
securities are particularly sensitive to changes in interest rates.

      The values of interest-only mortgage-related securities are also very
sensitive to prepayments of underlying mortgages. Principal-only securities
are also sensitive to changes in interest rates. When prepayments tend to
fall, the timing of the cash flows to these securities increases, making them
more sensitive to changes in interest rates. The market for some of these
securities may be limited, making it difficult for the Fund to dispose of its
holdings at an acceptable price. The Fund can invest up to 50% of its total
assets in zero-coupon securities issued by either the U.S. Treasury or
companies.


      |X| Participation Interests in Loans. These securities represent an
undivided fractional interest in a loan obligation by a borrower. They are
typically purchased from banks or dealers that have made the loan or are
members of the loan syndicate. The loans may be to foreign or U.S. companies.
The Fund does not invest more than 5% of its net assets in participation
interests of any one borrower. They are subject to the risk of default by the
borrower. If the borrower fails to pay interest or repay principal, the Fund
can lose money on its investment.


      |X| Preferred Stock.  Unlike common stock, preferred stock typically
has a stated dividend rate.  Preferred stock dividends may be cumulative
(they remain a liability of the company until they are paid) or
non-cumulative. When prevailing interest rates rise, the value of preferred
stock having a fixed dividend rate tends to fall.  The right to payment of
dividends on preferred stock is generally subordinate to the rights of a
corporation's debt securities.


      |X| Illiquid and Restricted Securities. Investments may be illiquid
because they do not have an active trading market, making it difficult to
value them or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual restriction on its resale or which
cannot be sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 15% of its net assets in illiquid or
restricted securities.  Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that
limit. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate
liquidity.

      |X| Derivative Investments. The Fund can invest in a number of
different kinds of "derivative" investments.  In the broadest sense,
exchange-traded options, futures contracts, structured notes, CMOs and other
hedging instruments the Fund can use may be considered "derivative
investments."  In addition to using hedging instruments, the Fund can use
other derivative investments because they offer the potential for increased
income.


      Markets underlying securities and indices may move in a direction not
anticipated by the Manager.  Interest rate and stock market changes in the
U.S. and abroad may also influence the performance of derivatives.  As a
result of these risks the Fund could realize less principal or income from
the investment than expected.  Certain derivative investments held by the
Fund may be illiquid.


      |X| Hedging.  The Fund can buy and sell futures contracts, put and call
options, forward contracts and options on futures and broadly-based
securities indices.  These are all referred to as "hedging instruments." The
Fund does not use hedging instruments for speculative purposes, and has
limits on its use of them. The Fund is not required to use hedging
instruments in seeking its goal.


      The Fund could buy and sell options, futures and forward contracts for
a number of purposes. It might do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities.  It might do so to try to manage its
exposure to changing interest rates.  The Fund can use forward contracts to
try to manage foreign currency risks on the Fund's foreign investments.

      Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an
investment that has increased in value, the Fund will be required to sell the
investment at the call price and will not be able to realize any profit if
the investment has increased in value above the call price.  In writing a
put, there is a risk that the Fund may be required to buy the underlying
security at a disadvantageous price.

      If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Fund's return.
The Fund could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or if it
could not close out a position because of an illiquid market.


Temporary Defensive and Interim Investments.  In times of unstable adverse
market or economic conditions, the Fund can invest up to 100% of its assets
in temporary investments that are inconsistent with the Funds' principal
investment strategies. Generally they would be cash or cash equivalents, such
as U.S. Treasury Bills and other short-term U.S. government obligations or
high-grade commercial paper.  The Fund can also hold these types of
securities pending the investment of proceeds from the sale of Fund shares or
portfolio securities or to meet anticipated redemptions of Fund shares.  To
the extent the Fund invests defensively in these securities, it might not
achieve its investment objectives.


How the Fund Is Managed

The Manager. The Fund's investment Manager, OppenheimerFunds, Inc., chooses
the Fund's investments and handles its day-to-day business.  The Manager
carries out its duties, subject to the policies established by the Fund's
Board of Trustees, under an investment advisory agreement that states the
Manager's responsibilities.  The agreement sets the fees the Fund pays to the
Manager and describes the expenses that the Fund is responsible to pay to
conduct its business.

      The Manager has been an investment adviser since 1960.  The Manager and
its subsidiaries and affiliates managed $120 billion in assets as of March
31, 2003, including other Oppenheimer funds, with more than 7 million
shareholder accounts.  The Manager is located at 498 Seventh Avenue, New
York, New York 10018.

      |X| Portfolio Managers.  The portfolio managers of the Fund are Arthur
P. Steinmetz and Dimitrios Kourkoulakos. They are the persons principally
responsible for the day-to-day management of the Fund's portfolio, Mr.
Steinmetz since February 5, 2003 and Mr. Kourkoulakos since June 2002.  Both
are Vice Presidents of the Fund, and Mr. Kourkoulakos is Vice President and
Mr. Steinmetz is Senior Vice President of the Manager. They also serve as
officers and portfolio managers for other Oppenheimer funds.  Mr. Steinmetz
has been employed by the Manager since 1986 and Mr. Kourkoulakos since 1995.

      |X| Advisory Fees.  Under the Investment Advisory Agreement, the Fund
pays the Manager an advisory fee at an annual rate that declines on
additional assets as the Fund grows: 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% on the next $200 million
and 0.50% of average annual net assets over $1 billion. The Fund's management
fee for its fiscal year ended December 31, 2002, was 0.74% of the Fund's
average annual net assets for each class of shares.

|X|   |X| Possible Conflicts of Interest. The Fund offers its shares to
          separate accounts of different insurance companies that are not
          affiliated with each other, as an investment for their variable
          annuity, variable life and other investment product contracts.
          While the Fund does not foresee any disadvantages to contract
          owners from these arrangements, it is possible that the interests
          of owners of different contracts participating in the Fund through
          different separate accounts might conflict. For example, a conflict

could arise because of differences in tax treatment.

      The Fund's Board has procedures to monitor the portfolio for possible
conflicts to determine what action should be taken. If a conflict occurs, the
Board might require one or more participating insurance company separate
accounts to withdraw their investments in the Fund. That could force the Fund
to sell securities at disadvantageous prices, and orderly portfolio
management could be disrupted. Also, the Board might refuse to sell shares of
the Fund to a particular separate account, or could terminate the offering of
the Fund's shares if required to do so by law or if it would be in the best
interests of the shareholders of the Fund to do so.

- ------------------------------------------------------------------------------

INVESTING IN THE FUND

- ------------------------------------------------------------------------------

How to Buy and Sell Shares

How Are Shares Purchased? Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That Prospectus will indicate whether
you are eligible to purchase Service shares of the Fund. The Fund reserves
the right to refuse any purchase order when the Manager believes it would be
in the Fund's best interests to do so.

      |X| Market Timers.  The Fund has instructed its participating insurance
companies that it may restrict or refuse investments by their separate
accounts from market timers.  "Market timers" include persons whose separate
account transactions have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier exchange request, (ii) exchanges out of the
Fund more than twice in any calendar quarter, (iii) an exchange of Fund
shares equal to at least $5 million, or more than 1% of the Fund's net
assets, or (iv) other transactions in Fund shares that demonstrated a timing
pattern.  Separate accounts under common ownership or control are combined
for these limits. There can be no assurance that all such participating
insurance companies will be successful in controlling investments in their
respective separate accounts by market timers.

- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------

At What Price Are Shares Sold? Shares are sold at their offering price, which
is the net asset value per share. The Fund does not impose any sales charge
on purchases of its shares. If there are any charges imposed under the
variable annuity, variable life or other contract through which Fund shares
are purchased, they are described in the accompanying prospectus of the
participating insurance company.


Net Asset Value.  The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange ("the Exchange"), on
each day the Exchange is open for trading (referred to in this Prospectus as
a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.

      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security.

      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
owners to purchase Fund shares on a regular business day, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M. on
the next regular business day at the offices of its Transfer Agent in
Colorado.


     |X| Classes of Shares.  The Fund may offer two different classes of
shares.  The class of shares designated as Service shares are subject to a
Distribution and Service Plan. The impact of the expenses of the Plan on
Service shares is described below.  The class of shares that are not subject
to a Plan has no class "name" designation.  The different classes of shares
represent investments in the same portfolio of securities but are expected to
be subject to different expenses and will likely have different share prices.

Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution related services and personal service and maintenance accounts
for the Fund's Service shares. Under the Plan, payments are made quarterly at
an annual rate of up to 0.25% of the average annual net assets of Service
shares of the Fund.  The distributor currently uses all of those fees to
compensate sponsor(s) of the insurance product that offers Fund shares, for
providing personal service and maintenance of accounts of their variable
contract owners that hold Service shares.  The impact of the service plan is
to increase operating expenses of the Service shares, which results in lower
performance compared to the Fund's shares that are not subject to a service
fee.


How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.

      The share price that applies to a redemption order is the next net
asset value per share that is determined after the participating insurance
company (as the Fund's designated agent) receives a redemption request on a
regular business day from its contract or policy holder, provided that the
Fund receives the order from the insurance company by 9:30 A.M. the next
regular business day at the office of its Transfer Agent in Denver, Colorado.
The Fund normally sends payment by Federal Funds wire to the insurance
company's account the day after the Fund receives the order (and no later
than 7 days after the Fund's receipt of the order). Under unusual
circumstances determined by the Securities and Exchange Commission, payment
may be delayed or suspended.

Dividends, Capital Gains and Taxes

Dividends.  The Fund intends to declare dividends separately for each class
of shares from net investment income on an annual basis, and to pay those
dividends in March.  Dividends and distributions will generally be lower for
Service shares, which normally have higher expenses. The Fund has no fixed
dividend rate and cannot guarantee that it will pay any dividends.


      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).


Capital Gains.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year.  The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

Taxes. For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Fund from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable,
if at all, to the participating insurance company.

      This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your
tax advisor or your participating insurance company representative about the
effect of an investment in the Fund under your contract or policy.

Financial Highlights


The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past five fiscal years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
the Fund's independent auditors, whose report, along with the Fund's
financial statements, is included in the Statement of Additional Information,
which is available on request.

FINANCIAL HIGHLIGHTS
OPPENHEIMER HIGH INCOME FUND/VA

- --------------------------------------------------------------------------------
Non-Service shares  Year Ended December 31,    2002      2001      2000
1999      1998
- --------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of period          $8.54     $9.27    $10.72
$11.02    $11.52
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                           .58       .84      1.00
1.01       .95
Net realized and unrealized loss               (.76)     (.62)    (1.36)
(.55)     (.90)

- ------------------------------------------------
Total from investment operations               (.18)      .22      (.36)
..46       .05
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income           (.85)     (.95)    (1.09)
(.76)     (.25)
Distributions from net realized gain             --        --
- --        --      (.30)
- ------------------------------------------------
Total dividends and/or distributions
to shareholders                                (.85)     (.95)    (1.09)
(.76)     (.55)
- --------------------------------------------------------------------------------
Net asset value, end of period                $7.51     $8.54     $9.27
$10.72    $11.02

================================================
- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 1            (2.40)%    1.97%    (3.74)%
4.29%     0.31%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)   $345,670  $344,788  $333,533
$340,829  $328,563
- --------------------------------------------------------------------------------
Average net assets (in thousands)          $335,894  $347,723  $329,260
$340,519  $322,748
- --------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                          8.29%     9.94%    10.47%
9.61%     8.65%
Expenses                                       0.77%     0.79%     0.79%
0.75%     0.78% 3
- --------------------------------------------------------------------------------
Portfolio turnover rate                          75%       46%
31%       33%      161%

1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.


Service shares  Year Ended December 31,                     2002     2001 1
- ---------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period                       $8.54    $8.40
- ---------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                        .88      .20
Net realized and unrealized loss                           (1.08)    (.06)
                                                          -----------------
Total from investment operations                            (.20)     .14
- ---------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                        (.85)      --
Distributions from net realized gain                          --       --
                                                          -----------------
Total dividends and/or distributions to shareholders        (.85)      --
- ---------------------------------------------------------------------------
Net asset value, end of period                             $7.49    $8.54
                                                          =================
- ---------------------------------------------------------------------------
Total Return, at Net Asset Value 2                         (2.67)%   1.67%

- ---------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                 $17,705       $3
- ---------------------------------------------------------------------------
Average net assets (in thousands)                        $ 5,602       $2
- ---------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                       8.91%   12.51%
Expenses                                                    1.02%    0.96%
Expenses, net of reduction to custodian expenses and/or
voluntary waiver of transfer agent fees                     1.02% 4  0.96%
- ---------------------------------------------------------------------------
Portfolio turnover rate                                       75%      46%

1. For the period from  September  18, 2001  (inception of offering) to December
31, 2001.
2. Assumes an  investment on the business day before the first day of the fiscal
period  (or  inception  of  offering),  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 of less than one full year.
4. Less than 0.01%.

INFORMATION AND SERVICES


For More Information on Oppenheimer High Income Fund/VA
The following additional information about the Fund is available without
charge upon request:

STATEMENT OF ADDITIONAL INFORMATION. This document includes additional
information about the Fund's investment policies, risks, and operations. It
is incorporated by reference into this Prospectus (which means it is legally
part of this Prospectus).

ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.


How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund or instructions on how to contact the
sponsor of your insurance product:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

By Telephone:                 Call OppenheimerFunds Services toll-free:
                              1.800.981.2871

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

By Mail:                      Write to:
                              OppenheimerFunds Services
                              P.O. Box 5270
                              Denver, Colorado 80217-5270

- ------------------------------------------------------------------------------


Information about the Fund including the Statement of Additional Information
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1.202.942.8090.  Reports and other information
about the Fund are available on the EDGAR database on the SEC's Internet
website at www.sec.gov. Copies may be obtained after payment of a duplicating
fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or
by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102.


No one has been authorized to provide any information about the Fund or to
make any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any
state or other jurisdiction where it is unlawful to make such an offer.


The Fund's shares are distributed by:                [logo]   OppenheimerFunds
Distributor, Inc.

The Fund's SEC File No. 811-4108

PR0640.001.0503
Printed on recycled paper

                         Appendix to Prospectus of
                      Oppenheimer High Income Fund/VA
             (a series of Oppenheimer Variable Account Funds)

      Graphic material included in the Prospectus of Oppenheimer High
Income Fund/VA (the "Fund") under the heading "Annual Total Return (as of
12/31 each year)":


      A bar chart will be included in the Prospectus of the Fund
depicting the annual total returns of a hypothetical $10,000 investment
in Non-Service shares of the Fund for each of the ten most recent
calendar years, without deducting separate account expenses.  Set forth
below are the relevant data that will appear on the bar chart:


Calendar
Year
Ended                               Annual Total Returns
- -----                               --------------------


12/31/93                                  26.34%
12/31/94                                  -3.18%
12/31/95                                  20.37%
12/31/96                                  15.25%
12/31/97                                  12.22%
12/31/98                                   0.31%
12/31/99                                   4.29%
12/31/00                                  -3.74%
12/31/01                                   1.97%
12/31/02                                  -2.40%

Oppenheimer Main Street Fund(R)/VA
A series of Oppenheimer Variable
Account Funds

Prospectus dated May 1, 2003
                                         Oppenheimer Main Street Fund(R)/VA is a
                                         mutual fund that seeks high total
                                         return (which includes growth in the
                                         value of its shares as well as current
                                         income) from equity and debt
                                         securities. The Fund invests mainly in
                                         common stocks of U.S. companies.
                                                     Shares of the Fund are
                                         sold only as the underlying investment
                                         for variable life insurance policies,
                                         variable annuity contracts and other
                                         insurance company separate accounts.
                                         A prospectus for the insurance product
                                         you have selected accompanies this
                                         Prospectus.  It explains how to select
                                         shares of the Fund as an investment
                                         under the insurance product, and
                                         whether you are only eligible to
                                         purchase Service shares of the Fund.
                                               This Prospectus contains
As with all mutual funds, the            important information about the Fund's
Securities and Exchange Commission has   objective, its investment policies,
not approved or disapproved the Fund's   strategies and risks. Please read this
securities nor has it determined that    Prospectus (and your insurance product
this Prospectus is accurate or           prospectus) carefully before you
complete. It is a criminal offense to    invest and keep it for future
represent otherwise.                     reference about your account.


                                                                          1234



Contents

            About the Fund
- ------------------------------------------------------------------------------

            The Fund's Objective and Investment Strategies

            Main Risks of Investing in the Fund

            The Fund's Past Performance


            Fees and Expenses of the Fund


            About the Fund's Investments

            How the Fund is Managed

            Investing in the Fund
- ------------------------------------------------------------------------------

            How to Buy and Sell Shares

            Dividends, Capital Gains and Taxes

            Financial Highlights



About the Fund

The Fund's Objective and Investment Strategies

- ------------------------------------------------------------------------------
What Is the Fund's Investment Objective? The Fund seeks high total return
(which includes growth in the value of its shares as well as current income)
from equity and debt securities.
- ------------------------------------------------------------------------------

What Does the Fund Mainly Invest In? The Fund currently invests mainly in
common stocks of U.S. companies of different capitalization ranges, presently
focusing on large-capitalization issuers.  It also can buy debt securities,
such as bonds and debentures, but does not currently emphasize these
investments.

How Do the Portfolio Managers Decide What Securities to Buy or Sell?  In
selecting securities for purchase or sale by the Fund, the Fund's portfolio
managers use an investment process that combines quantitative models,
fundamental research about particular securities and individual judgment.
While this process and the inter-relationship of the factors used may change
over time and its implementation may vary in particular cases, in general the
selection process involves the use of:

o     Multi-factor quantitative models: These include a group of "top-down"
         models that analyze data such as relative valuations, relative price
         trends, interest rates and the shape of the yield curve. These help
         direct portfolio emphasis by market capitalization (small, mid, or
         large), industries, and value or growth styles. A group of "bottom
         up" models helps to rank stocks in a universe typically including
         more than 2000 stocks, selecting stocks for relative attractiveness
         by analyzing fundamental stock and company characteristics.
o     Fundamental research: The portfolio managers use internal research and
         analysis by other market analysts, with emphasis on current company
         news and industry-related events.
o     Judgment: The portfolio is then continuously rebalanced by the
         portfolio managers, using all of the tools described above.

Who Is the Fund Designed For? The Fund's shares are available only as an
investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
high total return from their investment over the long term.  Those investors
should be willing to assume the risks of short-term share price fluctuations
that are typical for a fund with significant investments in stocks. Since the
Fund's income level will fluctuate, it is not designed for investors needing
an assured level of current income.  The Fund is not a complete investment
program.

Main Risks of Investing in the Fund

      All investments have risks to some degree.  The Fund's investments are
subject to changes in their value from a number of factors described below.
There is also the risk that poor security selection by the Fund's investment
Manager, OppenheimerFunds, Inc. will cause the Fund to underperform other
funds having similar objectives.

     At times, the Fund may increase the relative emphasis of its investments in
a particular  industry compared to the weighting of that industry in the S&P
500 Index, which the Fund uses as a performance benchmark.  Therefore, it may be
subject  to the  risks  that  economic,  political  or other  events  can have a
negative effect on the values of securities of issuers in that industry (this is
referred to as "industry risk"). Changes in interest rates can also affect stock
and bond prices (this is known as "interest rate risk").

      However, changes in the overall market prices of securities and the
income they pay can occur at any time. The share prices of the Fund will
change daily based on changes in market prices of securities and market
conditions and in response to other economic events.

      |X| Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times may be great. Because the Fund currently
emphasizes investments in common stocks, the value of the Fund's portfolio
will be affected by changes in the stock markets. Market risk will affect the
Fund's net asset values per share, which will fluctuate as the values of the
Fund's portfolio securities change.

      A variety of factors can affect the price of a particular stock and the
prices of individual stocks do not all move in the same direction uniformly
or at the same time. Different stock markets may behave differently from each
other. In particular, because the Fund currently intends to focus its
investments in stocks of U.S. issuers, it will be affected primarily by
changes in U.S. stock markets.

      Additionally, stocks of issuers in a particular industry may be
affected by changes in economic conditions that affect that industry more
than others, or by changes in government regulations, availability of basic
resources or supplies, or other events. Other factors can affect a particular
stock's price, such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in government
regulations affecting the issuer.

How Risky is the Fund Overall?  The risks described above collectively form
the overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its prices per share.  Particular
investments and investment strategies also have risks.  These risks mean that
you can lose money by investing in the Fund.  When you redeem your shares,
they may be worth more or less than what you paid for them.  There is no
assurance that the Fund will achieve its investment objective.

      In the short term, stock markets can be volatile, and the prices of the
Fund's shares will go up and down in response to those changes. The Fund's
income-oriented investments, if any, may help cushion the Fund's total return
from changes in stock prices, but debt securities are subject to credit and
interest rate risks and are not the main focus of the Fund. The Fund may be
less volatile than funds that focus only on small-cap, foreign or sector
stock investments, but may be more volatile than funds that place more
emphasis on debt securities, particularly on investment grade bonds.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.


The Fund's Past Performance


      The bar chart and table below show one measure of the risks of
investing in the Fund, by showing changes in the Fund's performance from year
to year for the last seven calendar years for non-service shares and by
showing how the average annual total returns for 1, 5 and 10 years or life of
class of the Fund's two existing classes of shares compare to those of a
broad-based market index. The Fund's past investment performance is not
necessarily an indication of how the Fund will perform in the future.


Annual Total Returns (as of 12/31 each year)

[See appendix to prospectus for data in bar chart showing annual total
returns]

Charges imposed by the separate accounts that invest in the Fund are not
included in the calculations of return in this bar chart, and if those
charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 19.28% ( 4th  Q `98) and the lowest return (not
annualized) for a calendar quarter was -22.38% ( 3rd Q `98).

- ---------------------------------------------------------------------------------

Average Annual
Total Returns for    1 Year              5 Years             10 Years
the periods ended                        (or life of  class  (or life of  class
December 31, 2002                        if less)            if less)

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Oppenheimer Main
Street Fund(R)/VA
Non-Service Shares
(inception 7/5/95)         -18.80%             -3.24%               8.68%

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

S&P 500 Index
                           -22.09%             -0.58%              8.33%1

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Oppenheimer Main
Street Fund(R)/VA
Service Shares
(inception 7/13/00)        -18.99%             -16.42%               N/A

- ---------------------------------------------------------------------------------
1.    From 6/30/95.


The Fund's average annual total returns measure the performance of a
hypothetical account without deducting charges imposed by the separate
accounts that invest in the Fund and assume that all dividends and capital
gains distributions have been reinvested in additional shares. The
performance of the Fund is compared to the Standard & Poor's 500 Index, an
unmanaged index of U.S. equity securities. The index performance includes the
reinvestment of income but does not reflect fees, expenses, or transaction
costs. Also, the Fund's investments vary from the index.


The Fund's total returns should not be expected to be the same as the returns
of other Oppenheimer funds, even if both funds have the same portfolio
managers and/or similar names.


Fees and Expenses of the Fund

The  following  tables  are  provided  to help  you  understand  the  fees and
expenses  you may pay if you buy and hold shares of the Fund.  The Fund pays a
variety of expenses  directly for  management  of its assets,  administration,
distribution of its shares and other  services.  Those expenses are subtracted
from the Fund's  assets to  calculate  the Fund's net asset  values per share.
All shareholders  therefore pay those expenses  indirectly.  The numbers below
are based on the Fund's  expenses  during its fiscal year ended  December  31,
2002.


Shareholder Fees.  The Fund does not charge any initial sales charge to buy
shares or to reinvest dividends.  There are no exchange fees or redemption
fees and no contingent deferred sales charges. Please refer to the
accompanying prospectus of the participating insurance company for
information on initial or contingent deferred sales charges, exchange fees or
redemption fees for that variable life insurance policy, variable annuity or
other investment product.  Those charges and fees are not reflected in either
of the tables below.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)


- --------------------------------------------------------------------------------

                                    Non-Service Shares       Service Shares

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Management Fees                           0.68%                   0.68%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Distribution     and     Service           None                   0.25%
(12b-1) Fees

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Other Expenses                            0.01%                   0.01%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Total Annual Operating Expenses           0.69%                   0.94%

- --------------------------------------------------------------------------------

Prior to May 1, 2002,  the Service share class service fee was 0.15% per annum
and actual  service  class 12b-1 fees paid during the year ended  December 31,
2002 was 0.15% and total annual operating expenses were 0.84%.
Expenses  may vary in future  years.  "Other  expenses"  in the table  include
transfer  agent fees,  custodial  fees,  and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily  agreed to limit transfer
and  shareholder  servicing  agent  fees to 0.35% per  fiscal  year,  for both
classes.  That  undertaking  may be amended or withdrawn at any time.  For the
Fund's fiscal year ended  December 31, 2002,  the transfer  agent fees did not
exceed the expense limitation described above

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The  example  assumes  that you  invest  $10,000 in shares of the Fund for the
time periods  indicated and then redeem all of your shares at the end of those
periods.  The example also assumes that your  investment  has a 5% return each
year and that the  Fund's  operating  expenses  remain the same.  Your  actual
costs may be higher or lower,  because  expenses will vary over time. Based on
these  assumptions  your  expenses  would be as  follows,  whether  or not you
redeem your investment at the end of each period:


- ------------------------------------------------------------------------------

                              1 Year      3 Years     5 Years     10 Years

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Non-Service Shares             $70         $221        $384         $859

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Service Shares                 $96         $300        $520        $1,155

- ------------------------------------------------------------------------------

About the Fund's Investments

The Fund's Principal Investment Policies. The allocation of the Fund's
portfolio among different types of investments will vary over time based upon
the Manager's evaluation of economic and market trends. The Fund's portfolio
might not always include all the different types of investments described
below. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.



      The Manager tries to reduce risks by carefully researching securities
before they are purchased. The Fund attempts to reduce its exposure to market
risks by diversifying its investments, that is, by not holding a substantial
percentage of stock of any one company and by not investing too great a
percentage of the Fund's assets in any one issuer. Also, the Fund does not
concentrate 25% or more of its total assets in any one industry.


      The Fund's equity investments may be exchange-traded or
over-the-counter securities. Over-the-counter securities may have less
liquidity than exchange-traded securities.


      |X| Stock Investments. The Fund currently invests mainly in common
stocks. The Fund currently focuses on securities of issuers that have large
capitalizations.  Historically their stock prices have tended to be less
volatile than securities of smaller issuers.  However, the Fund can buy
stocks of issuers in all capitalization ranges. "Capitalization" refers to
the market value of all of the issuers' outstanding common stock.

      |X|  Special Portfolio Diversification Requirements. To enable a
variable annuity or variable life insurance contract based on an insurance
company separate account to qualify for favorable tax treatment under the
Internal Revenue Code, the underlying investments must follow special
diversification requirements that limit the percentage of assets that can be
invested in securities of particular issuers. The Fund's investment program
is managed to meet those requirements, in addition to other diversification
requirements under the Internal Revenue Code and the Investment Company Act
that apply to publicly-sold mutual funds.

      Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income. Those diversification requirements might also
limit, to some degree, the Fund's investment decisions in a way that could
reduce its performance.


Can the Fund's Investment Objective and Policies Change?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Fundamental policies cannot be changed without the approval
of a majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy. Investment restrictions that are
fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the
Statement of Additional Information says that it is.


Portfolio Turnover. The Fund can engage in short-term trading to try to
achieve its objective.  Portfolio turnover affects brokerage costs the Fund
pays. It might have a turnover rate in excess of 100% annually. The Financial
Highlights table at the end of this Prospectus shows the Fund's portfolio
turnover rates during prior fiscal years.

Other Investment Strategies.  To seek its objective, the Fund can use the
investment techniques and strategies described below. The Fund might not
always use all of them. These techniques have risks, although some of them
are designed to help reduce overall investment or market risks.



|X|   Other Equity Securities. Equity securities include common stocks, as
   well as "equity equivalents" such as preferred stocks and securities
   convertible into common stock.  Preferred stock has a set dividend rate
   and ranks after bonds and before common stocks in its claim for dividends
   and on assets if the issuer is liquidated or becomes bankrupt.  The
   Manager considers some convertible securities to be "equity equivalents"
   because of the conversion feature and in that case their rating has less
   impact on the Manager's investment decision than in the case of debt
   securities.

      |X| Debt Securities.  The Fund can also invest in debt securities, such
as U.S. government securities, foreign government securities, and foreign and
domestic corporate bonds, notes and debentures, for their income
possibilities.  Currently the Fund does not invest a significant percentage
of its assets in debt securities, although their relative emphasis in the
portfolio may change if the Manager believes they offer opportunities to
increase the Fund's total return.

      The debt securities the Fund buys may be rated by nationally recognized
rating organizations such as Moody's Investors Service, Inc. or Standard &
Poor's Rating Service or they may be unrated securities assigned a rating by
the Manager. The Fund's investments may be above or below investment grade in
credit quality.  The Manager does not rely solely on ratings by rating
organizations in selecting debt securities but evaluates business and
economic factors affecting an issuer as well.


      |_| Interest Rate Risks. The values of debt securities, including U.S.
Government securities, are subject to change when prevailing interest rates
change.  When interest rates fall, the values of already-issued debt
securities generally rise. When interest rates rise, the values of
already-issued debt securities generally fall. The magnitude of these
fluctuations will typically be greater for longer-term debt securities than
shorter-term debt securities.  The Fund's share prices can go up or down when
interest rates change because of the effect of the changes on the value of
the Fund's investments in debt securities.


      |_|  Credit Risk. Debt securities are subject to credit risk.  Credit
risk relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. If the issuer fails to
pay interest, the Fund's income might be reduced and if the issuer fails to
repay principal, the value of that security and of the Fund's shares might be
reduced.  A downgrade in an issuer's credit rating or other adverse news
about an issuer can reduce the value of that issuer's securities.  While the
Fund's investments in U.S. government securities are subject to little credit
risk, the Fund's other investments in debt securities are subject to risks of
default.

      |_| U.S. Government Securities. The Fund can invest in securities
issued or guaranteed by the U.S. Treasury or other U.S. government agencies
or federally-chartered corporate entities referred to as "instrumentalities."
These are referred to as "U.S. government securities" in this Prospectus.
Although not rated, Treasury obligations have little credit risk but prior to
their maturity are subject to interest rate risk.

      |X| Risks of Foreign Investing.  The Fund can buy securities of
companies or governments in any country, including developed and
underdeveloped countries. There are no limits on the amounts it can invest in
foreign securities, but the Fund currently does not expect to have
substantial investments in foreign securities. While foreign securities offer
special investment opportunities, there are also special risks.

      The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that
foreign currency.  Foreign issuers are not subject to the same accounting and
disclosure requirements that U.S. companies are subject to. The value of
foreign investments may be affected by exchange control regulations, currency
devaluation, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in governmental economic
or monetary policy in the U.S. or abroad, or other political and economic
factors.

      |X| Illiquid and Restricted Securities. Investments may be illiquid
because they do not have an active trading market, making it difficult to
value them or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual restriction on its resale or which
cannot be sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 15% of its net assets in illiquid or
restricted securities. Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that
limit. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate
liquidity.

      |X| Derivative Investments. The Fund can invest in a number of
different kinds of "derivative" investments. In general terms, a derivative
investment is an investment contract whose value depends on (or is derived
from) the value of an underlying asset, interest rate or index.  In the
broadest sense, exchange-traded options, futures contracts, mortgage-related
securities and other hedging instruments the Fund can use may be considered
"derivative investments."  In addition to using hedging instruments, the Fund
may use other derivative investments because they offer the potential for
increased income and principal value.

      |X| There Are Special Risks in Using Derivative Investments.  If the
issuer of the derivative does not pay the amount due, the Fund can lose money
on the investment. Also, the underlying security or investment on which the
derivative is based, and the derivative itself, might not perform the way the
Manager expected it to perform. If that happens, the Fund's share prices
could decline or the Fund could get less income than expected. The Fund has
limits on the amount of particular types of derivatives it can hold. However,
using derivatives can cause the Fund to lose money on its investment and/or
increase the volatility of its share prices.

      Markets underlying securities and indices may move in a direction not
anticipated by the Manager. Interest rate and stock market changes in the
U.S. and abroad may also influence the performance of derivatives.  As a
result of these risks the Fund could realize less principal or income from
the investment than expected.  Certain derivative investments held by the
Fund may be illiquid.

      |X| Hedging.  The Fund can buy and sell futures contracts, put and call
options, forward contracts and options on futures and broadly-based
securities indices.  These are all referred to as "hedging instruments."  The
Fund is not required to use hedging instruments to seek its objective. The
Fund does not use hedging instruments for speculative purposes, and has
limits on its use of them.


      The Fund could buy and sell options, futures and forward contracts for
a number of purposes.  It might do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities. It might do so to try to manage its
exposure to changing interest rates.

      Options trading involves the payment of premiums and there are also
special risks in particular hedging strategies. For example, if a covered
call written by the Fund is exercised on an investment that has increased in
value, the Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has increased in
value above the call price.  In writing a put, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.

      If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Fund's return.
The Fund could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or if it
could not close out a position because of an illiquid market.

|X|   Temporary Defensive and Interim Investments. In times of unstable
   adverse market or economic conditions, the Fund can invest up to 100% of
   its assets in temporary investments that are inconsistent with the Fund's
   principal investment strategies.  Generally they would be U.S. government
   securities, highly-rated commercial paper, bank deposits or repurchase
   agreements.  The Fund may also hold these types of securities pending the
   investment of proceeds from the sale of Fund shares or portfolio
   securities or to meet anticipated redemptions of Fund shares.  To the
   extent the Fund invests defensively in these securities, it may not
   achieve its investment objective of high total return.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

How the Fund Is Managed

The Manager. The Manager chooses the Fund's investments and handles its
day-to-day business.  The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an investment
advisory agreement that states the Manager's responsibilities.  The agreement
sets the fees the Fund pays to the Manager and describes the expenses that
the Fund is responsible to pay to conduct its business.


      The Manager has been an investment advisor since January, 1960.  The
Manager and its subsidiaries and controlled affiliates managed more than $120
billion in assets as of March 31, 2003, including other Oppenheimer funds
with more than 7 million shareholder accounts.  The Manager is located at 498
Seventh Avenue, New York, New York 10018.


      |X|  Portfolio Managers. The portfolio managers of the Fund are Charles
Albers and Nikolaos Monoyios, who are also Vice Presidents of the Fund.  They
have been responsible for the day-to-day management of the Fund's portfolio
since May 1, 1999.  Mr. Albers is a Senior Vice President of the Manager and
Mr. Monoyios is a Vice President of the Manager.  Both are Certified
Financial Analysts, officers and portfolio managers of other Oppenheimer
funds. Prior to joining the Manager in April 1998, they were portfolio
managers at Guardian Investor Services (from 1972 and 1979, respectively),
the investment management subsidiary of The Guardian Life Insurance Company.


      |X|  Advisory Fees.  Under the investment advisory agreement, the Fund
pays the Manager an advisory fee at an annual rate that declines on
additional assets as the Fund grows: 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 its last fiscal year
ended December 31, 2002, was 0.68% of the Fund's average annual net assets
for each class of shares.


      |X| Possible Conflicts of Interest. The Fund offers its shares to
separate accounts of different insurance companies that are not affiliated
with each other, as an investment for their variable annuity, variable life
and other investment product contracts. While the Fund does not foresee any
disadvantages to contract owners from these arrangements, it is possible that
the interests of owners of different contracts participating in the Fund
through different separate accounts might conflict. For example, a conflict
could arise because of differences in tax treatment.

      The Fund's Board of Trustees has procedures to monitor the portfolio
for possible conflicts to determine what action should be taken. If a
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Fund. That
could force the Fund to sell securities at disadvantageous prices, and
orderly portfolio management could be disrupted. Also, the Board might refuse
to sell shares of the Fund to a particular separate account, or could
terminate the offering of the Fund's shares if required to do so by law or if
it would be in the best interests of the shareholders of the Fund to do so.

Investing in the Fund

How to Buy and Sell Shares

How Are Shares Purchased? Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the
participating insurance company for information on how to select the Fund as
an investment option for that variable life insurance policy, variable
annuity or other investment product. That prospectus will indicate whether
you are only eligible to purchase Service shares of the Fund. The Fund
reserves the right to refuse any purchase order when the Manager believes it
would be in the Fund's best interests to do so.

      |X|  Market Timers.  The Fund has instructed its participating
insurance companies that it may restrict or refuse investments by their
separate accounts from market timers.  "Market timers" include persons whose
separate account transactions have, or have attempted (i) an exchange out of
the Fund within two weeks of an earlier exchange request, (ii) exchanges out
of the Fund more than twice in any calendar quarter, (iii) an exchange of
Fund shares equal to at least $5 million, or more than 1% of the Fund's net
assets, or (iv) other transactions in Fund shares that demonstrated a timing
pattern.  Separate accounts under common ownership or control are combined
for these limits. There can be no assurance that all such participating
insurance companies will be successful in controlling investments in their
respective separate accounts by market timers.

- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------


At What Price Are Shares Sold? Shares are sold to participating insurance
companies at their offering price, which is the net asset value per share.
The Fund does not impose any sales charge on purchases of its shares. If
there are any charges imposed under the variable annuity, variable life or
other contract through which Fund shares are purchased, they are described in
the accompanying prospectus of the participating insurance company.

Net Asset Value.  The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange ("the Exchange"), on
each day the Exchange is open for trading (referred to in this Prospectus as
a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.


      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security.  A security's valuation may differ depending on the method
used for determining value.


      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
or policy owners to purchase Fund shares on a regular business day, provided
that the Fund receives the order from the insurance company, generally by
9:30 A.M. on the next regular business day at the offices of its Transfer
Agent in Colorado.

     |X| Classes of Shares.  The Fund offers two different classes of
shares.  The class of shares designated as Service shares are subject to a
distribution and service plan.  The impact of the expenses of that plan on
Service shares is described below.  The class of shares that are not subject
to a plan has no class "name" designation. The different classes of shares
represent investments in the same portfolio of securities but are expected to
be subject to different expenses and will likely have different share prices.


Distribution and Service Plan for Service shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution related services and personal services and account maintenance
for the Fund's Service shares. Under the Plan, payments are made quarterly at
an annual rate of up to 0.25% of the average annual net assets of Service
shares of the Fund.  The distributor currently uses all of those fees to
compensate sponsor(s) of the insurance product that offers Fund shares, for
providing personal service and maintenance of accounts of their variable
contract owners that hold Service shares.  The impact of the service plan is
to increase operating expenses of the Service shares, which results in lower
performance compared to the Fund's shares that are not subject to a service
fee.


How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares.  Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.

The share price that applies to a redemption order is the next net asset
value per share that is determined after the participating insurance company
(as the Fund's designated agent) receives a redemption request on a regular
business day from its contract or policy holder, provided that the Fund
receives the order from the insurance company, generally by 9:30 A.M. the
next regular business day, at the office of its Transfer Agent in Colorado.
The Fund normally sends payment by Federal Funds wire to the insurance
company's account the day after the Fund receives the order (and no later
than seven days after the Fund's receipt of the order). Under unusual
circumstances determined by the Securities and Exchange Commission, payment
may be delayed or suspended.

Dividends, Capital Gains and Taxes

Dividends.  The Fund intends to declare dividends separately for each class
of shares from net investment income on an annual basis, and to pay those
dividends in March. Dividends and distributions will generally be lower for
Service shares, which normally have higher expenses.  The Fund has no fixed
dividend rate and cannot guarantee that it will pay any dividends.

      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).

Capital Gains.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year.  The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

Taxes.  For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company.  Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Fund from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable,
if at all, to the participating insurance company.

      This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your
tax advisor or your participating insurance company representative about the
effect of an investment in the Fund under your contract or policy.

Financial Highlights


The Financial Highlights Table is presented to help you understand the Fund's
financial performance for its non-service shares for the past seven fiscal
years and the past three fiscal years for its service shares. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Deloitte &
Touche LLP, the Fund's independent auditors, whose report, along with the
Fund's financial statements, is included in the Statement of Additional
Information, which is available on request.

FINANCIAL HIGHLIGHTS
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA

Non-Service shares  Year Ended December 31,                     2002
2001          2000          1999          1998
- --------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of period                          $18.99
$21.26        $24.63        $20.48        $20.58
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..16           .13           .10           .11           .13
Net realized and unrealized gain (loss)                        (3.70)
(2.29)        (2.14)         4.29           .92

- --------------------------------------------------------------------
Total from investment operations                               (3.54)
(2.16)        (2.04)         4.40          1.05
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                            (.13)
(.11)         (.09)         (.09)         (.05)
Distributions from net realized gain
- --            --         (1.24)         (.16)        (1.10)

- --------------------------------------------------------------------
Total dividends and/or distributions to shareholders            (.13)
(.11)        (1.33)         (.25)        (1.15)
- --------------------------------------------------------------------------------
Net asset value, end of period                                $15.32
$18.99        $21.26        $24.63        $20.48

====================================================================

- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                            (18.80)%
(10.16)%       (8.78)%       21.71%         4.70%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                    $890,740
$1,074,945    $1,009,823      $555,311      $308,353
- --------------------------------------------------------------------------------
Average net assets (in thousands)                           $999,275
$1,028,913    $  809,662      $391,063      $234,306
- --------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                           0.94%
0.73%         0.69%         0.63%         0.74%
Expenses                                                        0.69%
0.73%         0.73%         0.78%         0.79% 3
- --------------------------------------------------------------------------------
Portfolio turnover rate
98%           69%           63%          118%           86%


1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

Service shares  Year Ended December 31,                            2002
    2001        2000 1
- --------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of period
$18.95        $21.24        $24.04
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..13           .14           .02
Net realized and unrealized loss
(3.70)        (2.32)        (2.82)

- -------------------------------------
Total investment operations
(3.57)        (2.18)        (2.80)
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.12)         (.11)           --
Distributions from net realized gain
- --            --            --

- -------------------------------------
Total dividends and/or distributions to shareholders
(.12)         (.11)           --
- --------------------------------------------------------------------------------
Net asset value, end of period
$15.26        $18.95        $21.24

=====================================

- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 2
(18.99)%      (10.27)%      (11.61)%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                        $51,929
$21,545        $1,698
- --------------------------------------------------------------------------------
Average net assets (in thousands)                               $34,604
$10,306        $  543
- --------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income
0.87%         0.66%         0.50%
Expenses
0.84%         0.88%         0.88%
- --------------------------------------------------------------------------------
Portfolio turnover rate
98%           69%           63%


1. For the period from July 13, 2000 (inception of offering) to December 31,
2000.
2. Assumes an  investment on the business day before the first day of the fiscal
period  (or  inception  of  offering),  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 of less than one full year.

INFORMATION AND SERVICES


For More Information on Oppenheimer Main Street Fund(R)/VA


The following additional information about the Fund is available without
charge upon request:

Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into
this Prospectus (which means it is legally part of this Prospectus).

Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is
available in the Fund's Annual and Semi-Annual Reports to shareholders.
The Annual Report includes a discussion of market conditions and
investment strategies that significantly affected the Fund's performance
during its last fiscal year.

How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund, or instructions on how to contact the
sponsor of your insurance product:
- ---------------------------------------------------------------------------
By Telephone
Call OppenheimerFunds Services toll-free:
1.800.981.2871

By Mail
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270

Information about the Fund including the Statement of Additional
Information can be reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1.202.942.8090.  Reports and
other information about the Fund are available on the EDGAR database on
the SEC's Internet website at www.sec.gov. Copies may be obtained after
                              -----------
payment of a duplicating fee by electronic request at the SEC's e-mail
address: publicinfo@sec.gov or by writing to the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

No one has been authorized to provide any information about the Fund or
to make any representations about the Fund other than what is contained
in this Prospectus. This Prospectus is not an offer to sell shares of the
Fund, nor a solicitation of an offer to buy shares of the Fund, to any
person in any state or other jurisdiction where it is unlawful to make
such an offer.
The Fund's SEC File No. 811-4108

PR0650.001.0503
Printed on recycled paper.

                         Appendix to Prospectus of

                     Oppenheimer Main Street Fund(R)/ VA
             (a series of Oppenheimer Variable Account Funds)


      Graphic material included in the Prospectus of Oppenheimer Main
Street Fund(R)/VA (the "Fund") under the heading "Annual Total Return (as
of 12/31 each year)":

     A bar chart will be included in the Prospectus of the Fund depicting
the annual total returns of a hypothetical investment in non-service
shares of the Fund for each of the seven most recent calendar years,
without deducting separate account expenses.  Set forth below are the
relevant data that will appear on the bar chart:


Calendar
Year
Ended                               Annual Total Returns
- -----                               --------------------


12/31/96                                        32.51%
12/31/97                                  32.48%
12/31/98                                   4.70%
12/31/99                                  21.71%
12/31/00                                  -8.78%
12/31/01                                  -10.16%
12/31/02                                  -18.80%

NIA\OVAF\650PSP_2003(b).doc

Oppenheimer
Main Street Small Cap Fund(R)/VA
A series of Oppenheimer Variable
Account Funds

Prospectus dated May 1, 2003

                                         Oppenheimer Main Street Small Cap
                                         Fund/VA is a mutual fund that seeks
                                         capital appreciation. The Fund invests
                                         mainly in common stocks of "small-cap"
                                         companies.
                                               Shares of the Fund are sold only
                                         as the underlying investment for
                                         variable life insurance policies,
                                         variable annuity contracts and other
                                         insurance company separate accounts. A
                                         prospectus for the insurance product
                                         you have selected accompanies this
                                         Prospectus and explains how to select
                                         shares of the Fund as an investment
                                         under that insurance product, and
                                         whether you are only eligible to
                                         purchase Service shares of the Fund.
                                         This Prospectus contains important
                                         information about the Fund's
                                         objective, its investment policies,
                                         strategies and risks. Please read this
                                         Prospectus (and your insurance product
As with all mutual funds, the            prospectus) carefully before you
Securities                               invest and keep them for future
and Exchange Commission has not          reference about your account.
approved or disapproved the Fund's
securities nor has it determined that
this Prospectus is accurate or
complete.
It is a criminal offense to represent
otherwise.

                                                                          1234


Contents

            About the Fund

- ------------------------------------------------------------------------------

            The Fund's Objective and Investment Strategies

            Main Risks of Investing in the Fund

            The Fund's Past Performance


            Fees and Expenses of the Fund


            About the Fund's Investments

            How the Fund is Managed


            Investing in the Fund

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            How to Buy and Sell Shares

            Dividends, Capital Gains and Taxes

            Financial Highlights


About the Fund

The Fund's Objective and Investment Strategies

What is the Fund's Investment Objective? The Fund seeks capital appreciation.

What Does The Fund Mainly Invest In?  The Fund invests mainly in common
stocks of small-capitalization ("small cap") U.S. companies that the Fund's
investment manager, OppenheimerFunds, Inc. (the "Manager") believes have
favorable business trends or prospects. Under normal market conditions, the
Fund will invest at least 80% of its net assets (including any borrowings for
investment purposes) in securities of companies having a small market
capitalization.  These may include "growth" and/or "value" common stocks and
other equity securities. A "value" investment style attempts to find
companies whose securities are believed to be undervalued in the
marketplace.  A "growth" investment style encompasses a search for companies
whose earnings are expected to increase at a greater rate than the overall
market. The Fund incorporates a blended style of investing combining both
growth and value styles.

      The Fund currently considers an issuer having a market capitalization
of up to $2.5 billion to be a "small-cap" issuer. The Fund measures that
capitalization at the time the Fund buys the security, and it is not required
to sell the security if the issuer's capitalization grows above $2.5 billion.
Over time, the Fund may change the range of assets it uses to define
"small-cap" issuers, as market conditions change. The Fund's investment
program is more fully explained in "About the Fund's Investments," below.

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     What is "Market Capitalization"?
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     In general, the market capitalization is the value of a company
     determined by the total market value of its issued and outstanding
     common stock.
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How Do The Portfolio Managers Decide What Securities To Buy Or Sell?  In
selecting securities for purchase or sale by the Fund, the Fund's portfolio
managers use an investment process that combines quantitative models,
fundamental research about particular securities and individual judgment.
While this process and the inter-relationship of the factors used may change
over time and its implementation may vary in particular cases, in general the
selection process involves the use of:

o     Multi-factor quantitative models: These include a group of "top-down"
   models that analyze data such as relative valuations, relative price
   trends, interest rates and the shape of the yield curve. These help direct
   portfolio emphasis by industries and value or growth styles. A group of
   "bottom up" models helps to rank stocks in a universe, selecting stocks
   for relative attractiveness by analyzing fundamental stock and company
   characteristics.
o     Fundamental research: The portfolio managers use internal research and
   analysis by other market analysts, with emphasis on current company news
   and industry-related events.
o     Judgment: The portfolio is then continuously re-balanced by the
   portfolio managers, based upon the quantitative tools and quantitative
   factors described above.



      In seeking broad diversification of the Fund's portfolio, the portfolio
managers currently search primarily for the following characteristics
(although these may vary over time and in different cases):
o     Companies with a small market capitalization.
o     Companies with financial characteristics attractive to our quantitative
   models.
o     Companies experiencing positive changes in operations due to enhanced
   competitive ability and/or beneficial industry trends.

      The portfolio managers employ a disciplined approach in deciding
whether to sell particular portfolio securities based on quantitative models
and fundamental research.  If a particular stock exhibits a material decrease
in revenue and earnings growth, they will consider selling the stock. In
addition, if the reason that the portfolio managers originally purchased the
stock of a particular company materially changes then they may also decide to
sell the stock.


Who is the Fund Designed For? The Fund's shares are available only as an
investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
capital growth in their investment over the long term, from a fund that
invests in small-cap stocks.  Those investors should be willing to assume the
greater risks of short-term share price fluctuations that are typical for an
aggressive fund focusing on small-cap stocks.  Since the Fund does not invest
for income and the income from its investments will likely be small, it is
not designed for investors needing an assured level of current income.  The
Fund is not a complete investment program.


Main Risks of Investing in the Fund

      All investments have some degree of risk.  The Fund's investments, in
particular, are subject to changes in their value from a number of factors
described below.  Investments in stocks can be volatile and are subject to
changes in general stock market movements (this is referred to as "market
risk").  There is also the risk that poor security selection by the Manager
will cause the Fund to underperform other funds having a similar objective.
There may be events or changes affecting particular industries that might
have a relatively greater weighting in the Fund's portfolio (this is referred
to as "industry risk") or the change in value of a particular stock because
of an event affecting the issuer.

      Stocks of growth companies may provide greater opportunities for
capital appreciation but may be more volatile than other stocks. That
volatility is likely to be even greater for small-cap companies. The Fund can
also buy foreign securities that have special risks not associated with
investments in domestic securities, such as the effects of currency
fluctuations on relative prices.

The Manager tries to reduce risks by carefully researching securities before
      they are purchased. The Fund attempts to reduce its exposure to market
      risks by diversifying its investments, that is, by not holding a
      substantial percentage of the stock of any one company and by not
      investing too great a percentage of the Fund's assets in any one
      company. Also, the Fund does not concentrate 25% or more of its assets
      in investments in any one industry. However, changes in the overall
      market prices of securities can occur at any time. The share price of
      the Fund will change daily based on changes in market prices of
      securities and market conditions, and in response to other economic
      events.


      |X| Risks Of Investing In Stocks.  Because the Fund invests primarily
in common stocks of small-cap companies, the value of the Fund's portfolio
will be affected by changes in the stock market and the special economic and
other factors that might primarily affect the prices of small cap stocks.
Market risk will affect the Fund's net asset value per share, which will
fluctuate as the values of the Fund's portfolio securities change.  The
prices of individual stocks do not all move in the same direction uniformly
or at the same time. Different stock markets may behave differently from each
other.


      Securities in the Fund's portfolio may not increase as much as the
market as a whole. Some small cap securities may be inactively traded, and
therefore, may not be readily bought or sold.  Although profits in some Fund
holdings may be realized quickly, investors should not expect the Fund's
investments to appreciate rapidly.  Other factors can affect a particular
stock's price, such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in government
regulations affecting the issuer or its industry.


      |X| Industry, Sector and Investment Style Focus.  At times the Fund may
increase the relative emphasis of its investments in a particular industry or
sector, and in the growth or value investment styles. The prices of stocks of
issuers in a particular industry, sector or investment style may go up and
down in response to changes in economic conditions, government regulations,
availability of basic resources or supplies, or other events that affect that
industry or sector or style more than others. To the extent that the Fund
increases the relative emphasis of its investments in a particular industry,
sector or investment style, its share values may fluctuate in response to
events affecting that industry, sector or investment style.  To some extent
that risk may be limited by the Fund's policy of not concentrating 25% or
more of its assets in investments in any one industry.


The growth and value investment styles each have their own investment risks,
      and either may be out of favor at any point in time.  Stocks of growth
      companies, particularly newer companies, may offer opportunities for
      greater capital appreciation but may be more volatile than stocks of
      larger, more established companies. If the company's earnings growth or
      stock price fails to increase as expected the stock price of a growth
      company may decline sharply.  If value stocks prove not to be
      undervalued, the stock price may not appreciate and may even decline.


      |X| Special Risks of Small-Cap Stocks. The Fund focuses its investments
on securities of companies having a small market capitalization, which can
include both established and newer companies. While newer emerging growth
companies might offer greater opportunities for capital appreciation than
larger, more established companies, they involve substantially greater risks
of loss and price fluctuations than larger, more-established issuers.


      Small-cap companies may have limited product lines or markets for their
      products, limited access to financial resources and less depth in
      management skill than larger, more established companies. Their stocks
      may be less liquid than those of larger issuers. That means the Fund
      could have greater difficulty selling a security of a small cap issuer
      at an acceptable price, especially in periods of market volatility.
      That factor increases the potential for losses to the Fund. Also, it
may take a substantial period of time before the Fund realizes a gain on an
investment in a small-cap company, if it realizes any gain at all.


      |X| How Risky is the Fund Overall? The risks described above
collectively form the overall risk profile of the Fund and can affect the
value of the Fund's investments, its investment performance and its price per
share. Particular investments and investment strategies also have risks.
These risks mean that you can lose money by investing in the Fund. When you
redeem your shares, they may be worth more or less than what you paid for
them. There is no assurance that the Fund will achieve its investment
objective. In the short term, the markets for small-cap stocks can be
volatile, and the price of the Fund's shares can go up and down
substantially. The Fund generally does not use income-oriented investments to
help cushion the Fund's total return from changes in stock prices, except for
defensive purposes.  The Fund is a very aggressive investment vehicle,
designed for investors willing to assume greater risks in the hope of
achieving greater gains.  It generally may be less volatile than funds
focusing on emerging markets but its share price is likely to fluctuate more
than the price of shares of Funds emphasizing large-cap stocks. The Fund is
not a complete investment program.


An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund's Past Performance


The bar chart and table below show one measure of the risks of investing in
the Fund, by showing changes in the Fund's performance from year to year for
the last four calendar years for non-service shares and by showing how the
average annual total returns for 1 and 5 years or life of class of the Fund's
two existing classes of shares compare to those of a small-capitalization
sector index. The Fund's past investment performance is not necessarily an
indication of how the Fund will perform in the future.


Annual Total Returns (as of 12/31 each year)

[See  appendix  to  prospectus  for data in bar  chart  showing  annual  total
returns]

Charges  imposed  by the  separate  accounts  that  invest in the Fund are not
included  in the  calculations  of  return  in this  bar  chart,  and if those
charges were included, the returns would be less than those shown.

During the period shown in the bar chart,  the highest return (not annualized)
for a calendar  quarter  was 49.05%  (4th  Q'99) and the  lowest  return  (not
annualized) for a calendar quarter was -18.40% (1st Q'01)

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   Average Annual
 Total Returns for         1 Year              5 Years
 the periods ended    (or  life of class  (or  life of class
 December 31, 2002   if less)            if less)

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- -------------------------------------------------------------

- -------------------------------------------------------------
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Oppenheimer     Main
Street Small Cap
Fund(R)/VA
Non-Service Shares         -15.75%             -0.77%
(inception 5/1/98)

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- -------------------------------------------------------------

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Russell 2000(R)Index        -20.48%             -3.57%1

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- -------------------------------------------------------------

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Oppenheimer     Main
Street   Small   Cap
Fund(R)/VA
Service Shares             -15.93%             -8.71%
(inception
7/16/2001)

- -------------------------------------------------------------

1. From 4/30/98.

The Fund's returns in the table measure the performance of a hypothetical
account without deducting charges imposed by the separate accounts that
invest in the Fund and assume that all dividends and capital gains
distributions have been reinvested in additional shares. Because the Fund
invests primarily in small-cap stocks, the Fund's performance is compared to
the Russell 2000 Index, an unmanaged index of equity securities of small
capitalization companies that is a measure of the small company market.
However, it must be remembered that the index performance reflects the
reinvestment of income but does not consider the effects of fees, expenses,
or transaction costs. Also, the Fund may have investments that vary from the
index.


The Fund's total returns should not be expected to be the same as the returns
of other Oppenheimer funds, even if both funds have the same portfolio
managers and/or similar names.


Fees and Expenses of the Fund

The  following  tables  are  provided  to help  you  understand  the  fees and
expenses  you may pay if you buy and hold shares of the Fund.  The Fund pays a
variety of expenses  directly for  management  of its assets,  administration,
distribution of its shares and other  services.  Those expenses are subtracted
from the Fund's  assets to  calculate  the Fund's net asset  values per share.
All shareholders  therefore pay those expenses  indirectly.  The numbers below
are based on the Fund's  expenses  during its fiscal year ended  December  31,
2002.

Shareholder Fees.  The Fund does not charge any initial sales charge to buy
shares or to reinvest dividends.  There are no exchange fees or redemption
fees and no contingent deferred sales charges. Please refer to the
accompanying prospectus of the participating insurance company for
information on initial or contingent deferred sales charges, exchange fees or
redemption fees for that variable life insurance policy, variable annuity or
other investment product.  Those charges and fees are not reflected in either
of the tables below.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)

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                                    Non-Service Shares       Service Shares

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Management Fees                           0.75%                   0.75%

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Distribution     and     Service           None                   0.25%
(12b-1) Fees

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Other Expenses                            0.25%                   0.22%

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Total Annual Operating Expenses           1.00%                   1.22%

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Prior to May 1, 2002,  the Service  class  service fee was 0.15% per annum and
actual  service class 12b-1 fees paid during the year ended  December 31, 2002
was 0.24% and total annual operating expenses were 1.21%.
Expenses  may vary in future  years.  "Other  expenses"  in the table  include
transfer  agent fees,  custodial  fees,  and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily  agreed to limit transfer
and  shareholder  servicing  agent  fees to 0.35% per  fiscal  year,  for both
classes.  That  undertaking may be amended or withdrawn at any time. After the
waiver,  the actual Other  Expenses and Total Annual  Operating  Expenses were
0.20% and 1.19% for the Service class.

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The  example  assumes  that you  invest  $10,000 in shares of the Fund for the
time periods  indicated and then redeem all of your shares at the end of those
periods.  The example also assumes that your  investment  has a 5% return each
year and that the  Fund's  operating  expenses  remain the same.  Your  actual
costs may be higher or lower,  because  expenses will vary over time. Based on
these  assumptions  your  expenses  would be as  follows,  whether  or not you
redeem your investment at the end of each period:


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                              1 Year      3 Years     5 Years     10 Years

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Non-Service Shares             $102        $318        $552        $1,225

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Service Shares                 $124        $387        $670        $1,477

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About the Fund's Investments

The Fund's Principal Investment Policies.  The allocation of the Fund's
portfolio among the different types of permitted investments will vary over
time based upon the evaluation of economic and market trends by the Manager.
The Fund's portfolio might not always include all of the different types of
investments described below. The Statement of Additional Information contains
more detailed information about the Fund's investment policies and risks.


|X| Small-Cap Stocks. The Fund invests mainly in a diversified portfolio of
      common stocks of smaller companies to seek capital appreciation.
      Small-cap growth companies could include, for example, companies that
      are developing new products or services, that have relatively favorable
      prospects, or that are expanding into new and growing markets. They may
      be providing new products or services that can enable them to capture a
      dominant or important market position. They may have a special area of
      expertise or the capability to take advantage of changes in demographic

factors in a more profitable way than larger, more established companies.
Current examples include companies in the fields of telecommunications,
biotechnology, computer software, and new consumer products. Small-cap value
companies are those companies believed to be undervalued by the marketplace.
Current examples may include consumer and retail stocks.

The definition of small capitalization issuers used by the Manager is based
      on the current market capitalization measurement used by Lipper
      Analytical Services, Inc., an independent mutual fund rating company.
      The range of assets can change and the Manager may choose another basis
      for determining its definition of "small cap."


      The Fund's equity investments may be exchange-traded or
over-the-counter securities. Over-the-counter securities may have less
liquidity than exchange-traded securities.

|X| Investing in Small, Unseasoned Companies.  The Fund can invest in small,
      unseasoned companies. These are companies that have been in operation
      less than three years, including the operations of any predecessors.
      Because these companies have a limited operating history and may be

more dependent on the efforts of individual managers, their securities may
have limited liquidity and their prices may be very volatile. The Fund
currently does not intend to invest more than 20% of its net assets in these
securities.

      Newer companies typically retain a large part of their earnings for
research, development or investment in capital assets. Therefore, they do not
tend to emphasize paying dividends, and may not pay any dividends for some
time after the Fund buys their stock.  However, the Fund does not have
current income as a goal.


      |X| Portfolio Turnover. The Fund may engage in short-term trading to
try to achieve its objective, and will likely have a portfolio turnover rate
in excess of 100% annually. Portfolio turnover affects brokerage costs the
Fund pays. The Financial Highlights table at the end of this Prospectus shows
the Fund's portfolio turnover rates during prior fiscal years.

 Special Portfolio Diversification Requirements. To enable a variable annuity
or variable life insurance contract based on an insurance company separate
account to qualify for favorable tax treatment under the Internal Revenue
Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Fund's investment program is managed to
meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.


Failure by the Fund to meet those special requirements could cause earnings
      on a contract owner's interest in an insurance company separate account
      to be taxable income. Those diversification requirements might also
      limit, to some degree, the Fund's investment decisions in a way that
      could reduce its performance.


Can The Fund's Investment Objective And Policies Change?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Shareholders will receive 60 days advance notice of any
change in the 80% requirement described above under "What Does The Fund
Mainly Invest in?"  Fundamental policies are those that cannot be changed
without the approval of a majority of the Fund's outstanding voting shares.
The Fund's investment objective is a fundamental policy. Investment
restrictions that are fundamental policies are listed in the Statement of
Additional Information. An investment policy is not fundamental unless this
Prospectus or the Statement of Additional Information says that it is.

Other Investment Strategies.  To seek its objective, the Fund can also use
the investment techniques and strategies described below. The Manager might
not always use all of the different types of techniques and investments
described below. These techniques involve certain risks, although some are
designed to help reduce investment or market risks.

      |X| Other Equity Securities. While the Fund emphasizes investments in
      common stocks, it may also buy preferred stocks and securities
      convertible into common stock. While some convertible securities are
      debt securities, the Manager considers some of them to be "equity
      equivalents" because of the conversion feature and in that case their
      rating has less impact on the investment decision than in the case of
      other debt securities. Nevertheless, convertible securities are subject
      to both "credit risk" (the risk that the issuer will not pay interest
      or repay principal in a timely manner) and "interest rate risk" (the
      risk that the prices of the securities will be affected inversely by
      changes prevailing interest rates). If the Fund buys convertible

securities (or other debt securities) it will focus primarily on
investment-grade securities, which pose less credit risk than lower-grade
debt securities.


Other Investments. The Fund's investments are not limited only to small-cap
      issuers.  Under normal market conditions, up to 20% of the assets of
      the Fund can be invested in securities of mid and large capitalization
      companies, if the Manager believes they offer opportunities for growth.

Special Risks of Initial Public Offerings (IPOs).  The Fund has no limit on
      the amount of its assets that can be invested in IPOs.  By definition,
      securities issued in IPOs have not traded publicly until the time of
      their offerings.  Special risks associated with IPOs may include, among
      others, the fact that there may be only a limited number of shares
      available for trading.  The market for those securities may be
      unseasoned.  The issuer may have a limited operating history.  These
      factors may contribute to price volatility.  The limited number of
      shares available for trading in some IPOs may also make it more
      difficult for the Fund to buy or sell significant amounts of shares
      without an unfavorable impact on prevailing prices.  In addition, some
      companies initially offering their shares publicly are involved in
      relatively new industries or lines of business, which may not be widely
      understood by investors.  Some of the companies involved in new
      industries may be regarded as developmental stage companies, without
      revenues or operating income, or the near-term prospects of them.  Many
      IPOs are by small-or micro-cap companies that are undercapitalized.

      |X| Foreign Securities.  The Fund can invest in foreign securities,
although most of the small cap stocks the Fund holds are issued by domestic
companies. The Fund currently emphasizes investments in U.S. companies and
does not expect its investments in foreign securities to exceed 25% of its
net assets.


      While foreign securities offer special investment opportunities, there
are also special risks. The change in value of a foreign currency against the
U.S. dollar will result in a change in the U.S. dollar value of securities
denominated in that foreign currency.  Foreign issuers are not subject to the
same accounting and disclosure requirements that U.S. companies are subject
to.



The value of foreign investments may be affected by exchange control
      regulations, currency devaluations, expropriation or nationalization of
      a company's assets, foreign taxes, delays in settlement of
      transactions, changes in governmental economic or monetary policy in
      the U.S. or abroad, or other political and economic factors.


      |X| Illiquid and Restricted Securities. Investments may be illiquid
      because there is no active trading market for them, making it difficult
      to value them or dispose of them promptly at an acceptable price. A
      restricted security is one that has a contractual restriction on its
      resale or which cannot be sold publicly until it is registered under
      the Securities Act of 1933. The Fund will not invest more than 15% of
      its net assets in illiquid or restricted securities.  Certain

restricted securities that are eligible for resale to qualified institutional
purchasers may not be subject to that limit. The Manager monitors holdings of
illiquid securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity.


      |X| Derivative Investments. The Fund can invest in a number of
different kinds of "derivative" investments. In general terms, a derivative
investment is an investment contract whose value depends on (or is derived
from) the value of an underlying asset, interest rate or index. In the
broadest sense, options, futures contracts, and other hedging instruments the
Fund might use may be considered "derivative" investments. In addition to
using derivatives for hedging, the Fund might use other derivative
investments because they offer the potential for increased value. The Fund
currently does not use derivatives to a significant degree and is not
required to use them in seeking its objective.


      Derivatives have risks. If the issuer of the derivative investment does
not pay the amount due, the Fund can lose money on the investment. The
underlying security or investment on which a derivative is based, and the
derivative itself, may not perform the way the Manager expected it to. As a
result of these risks the Fund could realize less principal or income from
the investment than expected or its hedge might be unsuccessful. As a result,
the Fund's share prices could fall. Certain derivative investments held by
the Fund might be illiquid.


      |X| Hedging. The Fund can buy and sell futures contracts, put and call
options, and forward contracts. These are all referred to as "hedging
instruments."  The Fund does not currently use hedging extensively nor for
speculative purposes. It has limits on its use of hedging instruments and is
not required to use them in seeking its objective.


      Some of these strategies would hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call
options, would tend to increase the Fund's exposure to the securities market.

Options trading involves the payment of premiums and has special tax effects
      on the Fund.  If a covered call written by the Fund is exercised on an
      investment that has increased in value, the Fund will be required to
      sell the investment at the call price and will not be able to realize
      any profits  if the investment has increased in value above the call
      price.  There are also special risks in particular hedging strategies.
      If the Manager used a hedging instrument at the wrong time or judged
      market conditions incorrectly, the strategy could reduce the Fund's
      return.  The Fund could also experience losses if the prices of its
      futures and options positions were not correlated with its other
      investments or if it could not close out a position because of an
      illiquid market.


      |X| Temporary Defensive and Interim Investments.  In times of unstable
adverse market or economic conditions, the Fund can invest up to 100% of its
assets in temporary investments that are inconsistent with the Funds'
principal investment strategies. Generally they would be cash or cash
equivalents, such as U.S. Treasury Bills and other short-term U.S. government
obligations or high-grade commercial paper. The Fund can also hold these
types of securities pending the investment of proceeds from the sale of Fund
shares or portfolio securities or to meet anticipated redemptions of Fund
shares. To the extent the Fund invests defensively in these securities, it
might not achieve its investment objectives.


How the Fund Is Managed

The Manager.  The Fund's investment Manager, OppenheimerFunds, Inc., chooses
the Fund's investments and handles its day-to-day business.  The Manager
carries out its duties, subject to the policies established by the Board of
Trustees, under an Investment Advisory Agreement that states the Manager's
responsibilities.  The Agreement sets the fees paid by the Fund to the
Manager and describes the expenses that the Fund is responsible to pay to
conduct its business.


      The Manager has been an investment adviser since 1960. The Manager and
its subsidiaries and controlled affiliates managed more than $120 billion in
assets as of March 31, 2003, including other Oppenheimer funds with more than
7 million shareholder accounts.  The Manager is located at 498 Seventh
Avenue, New York, New York 10018.

      |X| Portfolio Managers. The portfolio managers of the Fund are Charles
Albers and Mark Zavanelli. They have been principally responsible for the
management of the Fund since May 1, 2001. Mr. Albers is a Vice President of
the Fund, a Senior Vice President of the Manager and an officer and portfolio
manager of other Oppenheimer funds. Mr. Zavanelli is a Vice President of the
Fund and of the Manager and an officer and portfolio Manager of other
Oppenheimer funds. Prior to joining the Manager in April 1998, Mr. Albers was
a portfolio manager at Guardian Investor Services (from 1972), the investment
management subsidiary of The Guardian Life Insurance Company. Before joining
the Manager in April 1998, Mr. Zavanelli was President of Waterside Capital
Management, a registered investment advisor (from August 1995), and a
financial research analyst for Elder Research (from June 1997).

      |X| Advisory Fees.  Under the Investment Advisory Agreement, the Fund
pays the Manager an advisory fee at an annual rate that declines on
additional assets as the Fund grows: 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 its last fiscal year
ended December 31, 2002, was 0.75% of the Fund's average annual net assets
for each class of shares.

      |X|  Possible  Conflicts  of  Interest.  The Fund  offers  its shares to
separate  accounts of different  insurance  companies  that are not affiliated
with each other,  as an investment for their variable  annuity,  variable life
and other investment  product  contracts.  While the Fund does not foresee any
disadvantages to contract owners from these arrangements,  it is possible that
the  interests  of owners of  different  contracts  participating  in the Fund
through different  separate accounts might conflict.  For example,  a conflict
could arise because of differences in tax treatment.


      The Fund's Board has  procedures  to monitor the  portfolio for possible
      conflicts  to  determine  what  action  should be taken.  If a  conflict
      occurs,  the Board  might  require one or more  participating  insurance
      company  separate  accounts to withdraw  their  investments in the Fund.
      That could force the Fund to sell securities at disadvantageous  prices,
      and orderly  portfolio  management  could be disrupted.  Also, the Board
      might refuse to sell shares of the
      Fund to a particular  separate account,  or could terminate the offering
      of the Fund's  shares if  required  to do so by law or if it would be in
      the best interests of the shareholders of the Fund to do so.

Investing in the Fund

How to Buy and Sell Shares

How Are Shares Purchased? Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That Prospectus will indicate whether
you are only eligible to purchase Service shares of the Fund.  The Fund
reserves the right to refuse any purchase order when the Manager believes it
would be in the Fund's best interests to do so.


      |X| Market Timers.  The Fund has instructed its participating  insurance
companies  that it may  restrict  or  refuse  investments  by  their  separate
accounts from market timers.  "Market  timers"  include persons whose separate
account  transactions  have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier  exchange  request,  (ii)  exchanges out of the
Fund  more than  twice in any  calendar  quarter,  (iii) an  exchange  of Fund
shares  equal  to at least  $5  million,  or more  than 1% of the  Fund's  net
assets,  or (iv) other  transactions in Fund shares that demonstrated a timing
pattern.  Separate  accounts  under  common  ownership or control are combined
for  these  limits.  There  can be no  assurance  that all such  participating
insurance  companies  will be successful in  controlling  investments in their
respective separate accounts by market timers.


- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------


At What Price Are Shares Sold? Shares are sold to participating insurance
companies at their offering price, which is the net asset value per share.
The Fund does not impose any sales charge on purchases of its shares. If
there are any charges imposed under the variable annuity, variable life or
other contract through which Fund shares are purchased, they are described in
the accompanying prospectus of the participating insurance company.

Net Asset Value.  The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange ("the Exchange"), on
each day the Exchange is open for trading (referred to in this Prospectus as
a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.


      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security. A security's valuation may differ depending on the method used
for determining value.


      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
owners to purchase Fund shares on a regular business day, provided that the
Fund receives the order from the insurance company by 9:30 A.M. on the next
regular business day at the offices of its Transfer Agent in Denver, Colorado.


      |X| Classes of Shares. The Fund may offers two different classes of
shares. The class designated as Service shares are subject to a Distribution
and Service Plan. The impact of the expenses of the Plan on Service shares is
described below.  The class of shares that are not subject to a Plan has no
class "name" designation. The different classes of shares represent
investments in the same portfolio of securities but are expected to have
different expenses and share prices.

Distribution and Service Plan for Service Shares.      The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution related services and personal services and account maintenance
for the Fund's Service shares. Under the Plan, payments are made quarterly at
an annual rate of up to 0.25% of the average annual net assets of Service
shares of the Fund. The distributor currently uses all of those fees to
compensate sponsor(s) of the insurance product that offers Fund shares, for
providing personal service and maintenance of accounts of their variable
contract owners that hold Service shares.  The impact of the service plan is
to increase operating expenses of the Service shares, which results in lower
performance compared to the Fund's shares that are not subject to a service
fee.


How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.

      The share price that applies to a redemption order is the next net
asset value per share that is determined after the participating insurance
company (as the Fund's designated agent) receives a redemption request on a
regular business day from its contract or policy holder, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M.
the next regular business day at the office of its Transfer Agent in Denver,
Colorado. The Fund normally sends payment by Federal Funds wire to the
insurance company's account the day after the Fund receives the order (and no
later than 7 days after the Fund's receipt of the order). Under unusual
circumstances determined by the Securities and Exchange Commission, payment
may be delayed or suspended.

Dividends, Capital Gains and Taxes

Dividends.  The Fund intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis, and to pay
those dividends in March.  Dividends and distributions will generally be
lower for Service shares, which normally have higher expenses. The Fund has
no fixed dividend rate and cannot guarantee that it will pay any dividends.

      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).

Capital Gains  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year.  The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

Taxes.  For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Fund from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable,
if at all, to the participating insurance company.

      This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your
tax advisor or your participating insurance company representative about the
effect of an investment in the Fund under your contract or policy.


Financial Highlights


The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past four fiscal years for its non-service
shares and the past two fiscal years for its service shares. Certain
information reflects financial results for a single Fund share. The total
return in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Deloitte & Touche
LLP, the Fund's independent auditors, whose report, along with the Fund's
financial statements, is included in the Statement of Additional Information,
which is available on request.



 FINANCIAL HIGHLIGHTS
 OPPENHEIMER MAIN STREET SMALL CAP FUND(R)/VA

 Non-Service shares   Year Ended December 31,            2002
2001          2000          1999          1998 1

- --------------------------------------------------------------------------------
 Per Share Operating Data
 Net asset value, beginning of period                   $11.05
$11.09        $14.07         $9.60        $10.00

- --------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                             (.01)           --
2        (.03)         (.02)         (.02)
 Net realized and unrealized gain (loss)                 (1.73)
(.04)        (2.35)         4.49          (.38)

- ----------------------------------------------------------------
 Total from investment operations                        (1.74)
(.04)        (2.38)         4.47          (.40)

- --------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Distributions from net realized gain                       --
- --          (.60)           --            --

- --------------------------------------------------------------------------------
 Net asset value, end of period                         $ 9.31
$11.05        $11.09        $14.07        $ 9.60

================================================================
- --------------------------------------------------------------------------------
 Total Return, at Net Asset Value 3                     (15.75)%
(0.36)%      (18.34)%       46.56%        (4.00)%


- --------------------------------------------------------------------------------
 Ratios/Supplemental Data
 Net assets, end of period (in thousands)              $19,577
$18,514       $14,599        $6,927          $994

- --------------------------------------------------------------------------------
 Average net assets (in thousands)                     $20,505
$15,307       $12,576        $2,738          $441

- --------------------------------------------------------------------------------
 Ratios to average net assets: 4
 Net investment loss                                     (0.09)%
(0.01)%       (0.29)%       (0.37)%       (0.79)%
 Expenses                                                 1.00%
1.05%         1.37%         1.83%         0.87% 5
 Expenses, net of reduction to custodian expenses         1.00%
1.05%         1.35%         1.34%         0.87%

- --------------------------------------------------------------------------------
 Portfolio turnover rate                                   121%
213%          162%          176%           61%

1. For the period from May 1, 1998 (inception of offering) to December 31, 1998.
2. Less than $0.005 per share.
3. Assumes an  investment on the business day before the first day of the fiscal
period  (or  inception  of  offering),  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.
4. Annualized for periods of less than one full year.
5. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

 Service shares  Year Ended December
31,
2002          2001 1

- --------------------------------------------------------------------------------
 Per Share Operating Data

 Net asset value, beginning of period
                                               $11.05       $ 10.61

- --------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income
(loss)
(.01)           -- 2
 Net realized and unrealized gain
(loss)
(1.75)          .44


- ----------------------
 Total from investment
operations
(1.76)          .44

- --------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Distributions from net realized
gain
- --            --
- --------------------------------------------------------------------------------
 Net asset value, end of
period
$9.29        $11.05

======================

- --------------------------------------------------------------------------------
 Total Return, at Net Asset Value
3
(15.93)%        4.15%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 Ratios/Supplemental Data
 Net assets, end of period (in
thousands)
$6,111          $108

- --------------------------------------------------------------------------------
 Average net assets (in
thousands)
$2,228          $ 26

- --------------------------------------------------------------------------------
 Ratios to average net assets: 4
 Net investment
loss
 (0.26)%       (0.34)%

Expenses
1.21%         1.19%
 Expenses, net of reduction to custodian expenses and/or voluntary waiver of
transfer agent fees        1.19%         1.19%

- --------------------------------------------------------------------------------
 Portfolio turnover
rate
121%          213%

1.For the period from July 16, 2001 (inception of offering) to December 31, 2001.
2.Less than $0.005 per share.
3.Assumes an  investment  on the business day before the first day of the fiscal
period  (or  inception  of  offering),  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 on full year.  Total  return
information  does not reflect  expenses that apply at the separate account level
or to related insurance  porducts.  Inclusion of these chareges would reduce the
total return figures for all periods shown.
4.Annualized for periods of less than one full year.

INFORMATION AND SERVICES
For More Information on Oppenheimer Main Street Small Cap Fund(R)/VA
The following additional information about the Fund is available without
charge upon request:

Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into
this Prospectus (which means it is legally part of this Prospectus).

Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is
available in the Fund's Annual and Semi-Annual Reports to shareholders.
The Annual Report includes a discussion of market conditions and
investment strategies that significantly affected the Fund's performance
during its last fiscal year.
- ---------------------------------------------------------------------------
How to Get More Information
- ---------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund or instructions on how to contact the
sponsor of your insurance product:
By Telephone
Call OppenheimerFunds Services toll-free:
1.800.981.2871
By Mail
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
Information about the Fund, including the Statement of Additional
Information, can be reviewed and copies at the SEC's Public Reference
Room in Washington, D.C.  Information on the operation  of the Public
Reference Library may be obtained by calling the SEC at 202.942.8090.
Reports and other information about the Fund are available on the EDGAR
database on the SEC's Internet website at www.sec.gov. Copies may be
                                          -----------
obtained after payment of a duplicating fee by electronic request at the
SEC's e-mail address: publicinfo@sec.gov or by writing to the SEC's
Public Reference Section, Washington, D.C. 20549-0102.

No one has been authorized to provide any information about the Fund or
to make any representations about the Fund other than what is contained
in this Prospectus. This Prospectus is not an offer to sell shares of the
Fund, nor a solicitation of an offer to buy shares of the Fund, to any
person in any state or other jurisdiction where it is unlawful to make
such an offer.

The Fund's SEC File No.: 811-4108

PR0297.001.0503
Printed on recycled paper.


                         Appendix to Prospectus of
                 Oppenheimer Main Street Small Cap Fund/VA
             (a series of Oppenheimer Variable Account Funds)

      Graphic material included in the Prospectus of Oppenheimer Main
Street Small Cap Fund/VA (the "Fund") under the heading "Annual Total
Return (as of 12/31 each year)":


     A bar chart will be included in the Prospectus of the Fund depicting
the annual total returns of a hypothetical $10,000 investment in
non-service shares of the Fund for each of the four most recent calendar
years, without deducting separate account expenses.  Set forth below are
the relevant data that will appear on the bar chart:


Calendar
Year
Ended                               Annual Total Return
- -----                               -------------------


12/31/99                                  46.56%
12/31/00                                  -18.34%
12/31/01                                  -0.36%
12/31/02                                  -15.75%


N1A/OVAF/297PS_2003(b).doc



Oppenheimer
Money Fund/VA
A series of Oppenheimer Variable
Account Funds


Prospectus dated May 1, 2003

                                               Oppenheimer Money Fund/VA is a
                                         money market mutual fund. Its goal is
                                         to seek the maximum current income
                                         from investments in money market
                                         securities that is consistent with low
                                         risk and maintenance of liquidity.
                                                     Shares of the Fund are
                                               sold only as the underlying
                                               investment for variable life
                                               insurance policies, variable
                                               annuity contracts and other
                                               insurance company separate
                                               accounts. A prospectus for the
                                               insurance product you have
                                               selected accompanies this
                                               Prospectus and explains how to
                                               select shares of the Fund as an
                                               investment under that insurance
                                               product.
                                               This     Prospectus      contains
                                         important  information about the Fund's
                                         objective,   its  investment  policies,
                                         strategies   and  risks.   Please  read
                                         this  Prospectus  (and  your  insurance
                                         product  prospectus)  carefully  before
As with all mutual funds, the            you  invest  and keep  them for  future
Securities and Exchange Commission has   reference about your account.
not approved or disapproved the Fund's
securities nor has it determined that
this Prospectus is accurate or
complete. It is a criminal offense to
represent otherwise.

                                                                          1234

CONTENTS


                  ABOUT THE FUND

                  The Fund's Objective and Investment Strategies

                  Main Risks of Investing in the Fund

                  The Fund's Past Performance


                  Fees and Expenses of the Fund


                  About the Fund's Investments

                  How the Fund is Managed


                  INVESTING IN THE FUND

                  How to Buy and Sell Shares


                  Dividends, Capital Gains and Taxes


                  Financial Highlights


About the Fund

The Fund's Objective and Investment Strategies

What is the Fund's Investment Objective? The Fund seeks maximum current
income from investments in "money market" securities consistent with low
capital risk and the maintenance of liquidity.


What Does the Fund Mainly Invest In?  The Fund invests in a variety of
high-quality money market securities to seek current income.  Money market
securities are short-term debt instruments issued by the U.S. government,
domestic and foreign corporations or financial institutions and other
entities.  They include, for example, bank obligations, repurchase
agreements, commercial paper, other corporate debt obligations and government
debt obligations.

      "High quality" instruments must be rated in one of the two highest
credit-quality categories for short-term securities by at least two
nationally recognized rating services (or by one, if only one rating service
has rated the security).  If unrated, a security must be determined by the
Fund's investment manager to be of comparable quality to rated securities in
the two highest credit-quality categories.

Who is the Fund Designed For?  The Fund's shares are available only as an
underlying investment option for certain variable annuities, variable life
insurance policies and insurance company separate accounts.  The Fund is an
option under those insurance products for investors who want to earn income
at current money market rates while preserving the value of their investment,
because the Fund is managed to keep its share price stable at $1.00.  Income
on short-term securities tends to be lower than income on longer-term debt
securities, so that the Fund's yield will likely be lower than the yield on
longer-term fixed income funds.  The Fund does not invest for the purpose of
seeking capital appreciation or gains.  The Fund is not a complete investment
program.


Main Risks of Investing in the Fund

All investments have risks to some degree.  Funds that invest in debt
obligations for income may be subject to credit risks and interest rate
risks.  However, the Fund's investments must meet strict standards set by its
Board of Trustees following special rules for money market funds under
federal law. Those rules require the Fund to maintain --
o     high credit quality in its portfolio,
o     a short  average  portfolio  maturity  to reduce  the  effects  of
      changes in interest rates on the value of the Fund's securities and
o     diversification  of the Fund's investments among issuers to reduce
   the  effects  of a default  by any one  issuer  on the value of the  Fund's
   shares.

      Even so, there are risks that any of the Fund's holdings could have its
credit rating downgraded, or the issuer could default, or that interest rates
could rise sharply, causing the value of the Fund's investments (and its
share price) to fall.  If insurance products holding Fund shares redeem them
at a rate greater than anticipated by the Manager, the Fund might have to
sell portfolio securities prior to their maturity at a loss.  As a result,
there is a risk that the Fund's shares could fall below $1.00 per share.
Income on short-term securities tends to be lower than income on longer-term
debt securities so the Fund's yield will likely be lower than the yield on
longer-term fixed income funds.  Also, there is the risk that the value of
your investment could be eroded over time by the effects of inflation, and
that poor security selection by OppenheimerFunds, Inc. (the "Manager") could
cause the Fund to underperform other funds that have a similar objective.

      The Fund's investment manager tries to reduce risks by diversifying
investments and by carefully researching securities before they are
purchased. The rate of the Fund's income will vary from day to day, generally
reflecting changes in overall short-term interest rates. There is no
assurance that the Fund will achieve its investment objective.

An Investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.  Although the Fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.

The Fund's Past Performance


The bar chart and table below show how the Fund's returns may vary over time,
by showing changes in the Fund's performance from year to year for the last
10 calendar years and its average annual total returns for the 1, 5 and 10
year periods.  Variability of returns is one measure of the risks of
investing in a money market fund. The Fund's past investment performance is
not necessarily an indication of how the Fund will perform in the future.


                 Annual Total Returns (as of 12/31 each year)

   [See appendix to prospectus for annual total return data for bar chart.]

Charges imposed by the separate accounts that invest in the Fund are not
included in the calculations of return in this bar chart, and if those
charges were included, the returns would be less than those shown.


During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 1.59% (2nd Qtr `00) and the lowest return (not
annualized) for a calendar quarter was 0.34% (4th Qtr `02).


- ---------------------------------------------------------------------------------
Average Annual Total
Returns for the            1 Year              5 Years            10 Years
periods
ended December 31,

2002

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer Money

Fund/VA (inception          1.47%               4.35%               4.51%

4/3/85)
- ---------------------------------------------------------------------------------


The returns in the table measure the performance of a hypothetical account
without deducting charges imposed by the separate accounts that invest in the
Fund and assume that all distributions have been reinvested in additional
shares. The total returns are not the Fund's current yield. The Fund's
current yield more closely reflects the Fund's current earnings. To obtain
the Fund's current 7-day yield information, please call the Transfer Agent
toll-free at 1.800.225.5677.


The Fund's total returns should not be expected to be the same as the returns
of other Oppenheimer funds, even if both funds have the same portfolio
managers and/or similar names


Fees and Expenses of the Fund

The following tables are provided to help you understand the fees and
expenses you may pay if you buy and hold shares of the Fund. The Fund pays a
variety of expenses directly for management of its assets, administration and
other services. Those expenses are subtracted from the Fund's assets to
calculate the Fund's net asset values per share. All shareholders therefore
pay those expenses indirectly. The numbers below are based on the Fund's
expenses during its fiscal year ended December 31, 2002.

Shareholder Fees.  The Fund does not charge any initial sales charge to buy
shares or to reinvest dividends.  There are no exchange fees or redemption
fees and no contingent deferred sales charges. Please refer to the
accompanying prospectus of the participating insurance company for
information on initial or contingent deferred sales charges, exchange fees or
redemption fees for that variable life insurance policy, variable annuity or
other investment product.  Those charges and fees are not reflected in either
of the tables below.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)


- ---------------------------------------------------------------------------------

Management Fees                                           0.45%

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Distribution and Service (12b-1) Fees                     None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Other Expenses                                            0.02%

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Total Annual Operating Expenses                           0.47%

- ---------------------------------------------------------------------------------


Expenses may vary in future years. "Other expenses" in the table include
transfer agent fees, custodial fees, and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily agreed to limit transfer
and shareholder servicing agent fees to 0.35% per fiscal year. That
undertaking may be amended or withdrawn at any time. For the Fund's fiscal
year ended December 31, 2002, the transfer agent fees did not exceed the
expense limitation described above.

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in shares of the Fund for the
time periods indicated, reinvest your dividends and distributions and then
redeem all of your shares at the end of those periods.  The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same.  Your actual costs may be higher or
lower, because expenses will vary over time.  Based on these assumptions your
expenses would be as follows, whether or not you redeem your investment at
the end of each period:


- ----------------------------------------------------

    1 Year       3 Years     5 Years     10 Years

- ----------------------------------------------------
- ----------------------------------------------------

     $48          $151        $263         $591

- ----------------------------------------------------


About the Fund's Investments

The Fund's Principal Investment Policies. The Fund invests in short-term
money market instruments that must meet quality, maturity and diversification
standards established by its Board of Trustees as well as rules that apply to
money market funds under the Investment Company Act. The allocation of the
Fund's portfolio among the different types of permitted investments will vary
over time based on the Manager's evaluation of investment opportunities.  The
Fund's portfolio might not always include all of the different types of
investments described below. The Statement of Additional Information contains
more detailed information about the Fund's investment policies and risks.

      The Fund's Manager tries to reduce risks by diversifying investments
and by carefully researching investments before the Fund buys them. The rate
of the Fund's income will vary from day to day, generally reflecting changes
in overall short-term interest rates.


WHAT TYPES OF MONEY MARKET SECURITIES DOES THE FUND INVEST IN?  The following
is a brief description of the types of money market securities the Fund can
invest in.  Money market securities are high-quality, short-term debt
instruments that may be issued by the U.S. government, corporations, banks or
other entities.  They may have fixed, variable or floating interest rates.
All of the Fund's investments must meet the special quality requirements set
under the Investment Company Act.

o     U.S. Government Securities.  These are obligations issued or guaranteed
         by the U.S. government or any of its agencies or federally-chartered
         corporations referred to as instrumentalities.  Some are direct
         obligations of the U.S. Treasury, such as Treasury bills, notes and
         bonds, and are supported by the full faith and credit of the United
         States. Some U.S. government securities are supported by the right
         of the issuer to borrow from the U.S. Treasury. Others may be
         supported only by the credit of the instrumentality.  The Fund's
         investing in U.S. government securities does not mean that its share
         price or returns are guaranteed or backed by the U.S. government.


o     Bank Obligations.  The Fund can invest in time deposits, certificates
         of deposit and bankers' acceptances.  These investments must be:
               ?  obligations  of a domestic  bank having  total  assets of at
least $1 billion, or
               ?  U.S. dollar-denominated obligations of a foreign bank with
               total assets of at least U.S. $1 billion.

o     Commercial Paper.  Commercial paper is a short-term, unsecured
         promissory note of a domestic or foreign company.

o     Corporate Debt Obligations.  The Fund can invest in other short-term
         corporate debt obligations, besides commercial paper.

o     Other Money Market Obligations.  The Fund can invest in money market
         obligations other than those listed above if they are subject to
         repurchase agreements or guaranteed as to their principal and
         interest by a domestic bank or by a corporation whose commercial
         paper may be purchased by the Fund.

         The Fund can buy other money market instruments that the Manager
approves under Board approved policies.  They must be U.S. dollar-denominated
short-term investments that the Manager has determined to have minimal credit
risks.  They also must be of "high quality" as determined by a national
rating organization.  To a limited extent the Fund may buy an unrated
security that the Manager determines to have met those qualifications.

      The Fund can also purchase floating or variable rate demand notes and
asset-backed securities.  The Fund's investments in them may be subject to
restrictions adopted by the Board from time to time.

WHAT CREDIT QUALITY AND MATURITY STANDARDS APPLY TO THE FUND'S INVESTMENTS?
Money market instruments are subject to credit risk.  This is the risk that
the issuer might not make timely payments of interest on the security or
repay principal when it is due.  The Fund may buy only those securities that
meet standards set in the Investment Company Act for money market funds.  The
Fund's Board has adopted procedures to evaluate securities that are being
considered for the Fund's portfolio and the Manager has the responsibility to
implement those procedures when selecting investments for the Fund.

      In general, the Fund buys only high-quality investments that the
Manager believes present minimal credit risk at the time of purchase.
"High-quality" investments are:
      o   rated in one of the two highest short-term rating categories of two
          national rating organizations, or
      o   rated by one rating organization in one of its two highest rating
          categories (if only one rating organization has rated the
          investment), or
      o   unrated investments that the Manager determines are comparable in
          quality to the two highest rating categories.

      In general, these procedures require that securities be rated in one of
the two highest short-term rating categories of two national rating
organizations.  At least 95% of the Fund's assets must be invested in
securities of issuers with the highest credit rating.  In some cases, the
Fund can buy securities rated by one rating organization or unrated
securities that the Manager judges to be comparable in quality to the two
highest rating categories.


      The procedures also limit the percentage of the Fund's assets that can
be invested in the securities of any one issuer (other than the U.S.
government, its agencies and instrumentalities), to spread the Fund's
investment risks.  A security's maturity must not exceed 397 days.  Finally,
the Fund must maintain an average portfolio maturity of not more than 90
days, to reduce interest rate risks.


SPECIAL PORTFOLIO DIVERSIFICATION REQUIREMENTS.  To enable a variable annuity
or variable life insurance contract based on an insurance company separate
account to qualify for favorable tax treatment under the Internal Revenue
Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers.  The Fund's investment program is managed
to meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.

      Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income.  Those diversification requirements might also
limit, to some degree, the Fund's investment decisions in a way that could
reduce its performance.

CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE?  The Fund's Board of
Trustees can change non-fundamental policies without shareholder approval,
although significant changes will be described in amendments to this
Prospectus. Fundamental policies are those that cannot be changed without the
approval of a majority of the Fund's outstanding voting shares.  The Fund's
investment objective is a fundamental policy.  Investment restrictions that
are fundamental policies are listed in the Statement of Additional
Information.  An investment policy is not fundamental unless this Prospectus
or the Statement of Additional Information says that it is.

OTHER INVESTMENT STRATEGIES.  To seek its objective, the Fund can also use
the investment techniques and strategies described below.  The Manager might
not always use all of them. These techniques involve certain risks, although
some of them are designed to help reduce overall investment or market risks.
The Statement of Additional Information contains more information about some
of these practices.


Floating Rate/Variable Rate Notes.  The Fund can purchase notes that have
   floating or variable interest rates.  Variable rates are adjustable at
   stated periodic intervals.  Floating rates are adjusted automatically
   according to a specified market index for such investments, such as the
   prime rate of a bank.  If the maturity of a note is more than 397 days,
   the Fund can buy it only if it has a demand feature.  That feature must
   permit the Fund to recover the principal amount of the note on not more
   than thirty days' notice at any time, or at specified times not exceeding
   397 days from the date of purchase.


Obligations of Foreign Banks and Foreign Branches of U.S. Banks.  The Fund
      can invest in U.S. dollar-denominated securities of foreign banks
      having total assets at least equal to U.S. $1 billion.  It can also buy
      U.S. dollar-denominated securities of foreign branches of U.S. banks.
   These securities have additional investment risks compared to obligations
   of domestic branches of U.S. banks.  Risks that may affect the foreign
   bank's ability to pay its debt include:
      o  political and economic developments in the country in which the bank
         or branch is located,
      o  imposition of withholding taxes on interest income payable on the
         securities,
      o  government seizure or nationalization of foreign deposits,
      o  the establishment of exchange control regulations and
      o  the adoption of other governmental restrictions that might limit the
         repayment of principal and/or payment of interest on those
         securities.

      Additionally, not all of the U.S. and state banking laws and
regulations that apply to domestic banks and that are designed to protect
depositors and investors apply to foreign branches of domestic banks. None of
those U.S. and state regulations apply to foreign banks.

Bank Loan Participation Agreements.  The Fund may invest in bank loan
   participation agreements. They represent 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.

Asset-Backed Securities.  The Fund can invest in asset-backed securities.
   These are fractional interests in pools of consumer loans or other trade
   receivables, such as credit card or auto loan receivables, which are the
   obligations of a number of different parties.  The income from the
   underlying pool is passed through to holders, such as the Fund.

   These securities may be supported by a credit enhancement, such as a
   letter of credit, a guarantee (by a bank or broker) or a preference
   right.  However, the credit enhancement may apply only to a fraction of
   the security's value.  If the issuer of the security has no security
   interest in the assets that back the pool, there is a risk that the Fund
   could lose money if the issuer defaults.

Repurchase Agreements.  The Fund can enter into repurchase agreements.  In a
   repurchase transaction, the Fund buys a security and simultaneously sells
   it to the vendor for delivery at a future date.  The Fund's repurchase
   agreements must be fully collateralized.  However, if the vendor fails to
   pay the resale price on the delivery date, the Fund might incur costs in
   disposing of the collateral and might experience losses if there is any
   delay in its ability to do so.  There is no limit on the amount of the
   Fund's net assets that may be subject to repurchase agreements of 7 days
   or less.  It cannot invest more than 10% of its net assets in repurchase
   agreements maturing in more than 7 days.

Illiquid and Restricted Securities.  Investments may be illiquid because
      there is no active trading market for them, making it difficult to
      value them or dispose of them promptly at an acceptable price.
      Restricted securities may have a contractual limit on resale or may
      require registration under federal securities laws before they can be
      sold publicly.  The Fund will not invest more than 10% of its net
      assets in illiquid or restricted securities.  That limit may not apply
   to certain restricted securities that are eligible for resale to qualified
   institutional purchasers.  The Manager monitors holdings of illiquid
   securities on an ongoing basis to determine whether to sell any holdings
   to maintain adequate liquidity.  Difficulty in selling a security may
   result in a loss to the Fund or additional costs.

How the Fund Is Managed


The Manager.  The Fund's investment Manager, OppenheimerFunds, Inc., chooses
the Fund's investments and handles its day-to-day business.  The Manager
carries out its duties, subject to the policies established by the Board of
Trustees, under an Investment Advisory Agreement that states the Manager's
responsibilities.  The Agreement sets the fees paid by the Fund to the
Manager and describes the expenses that the Fund is responsible to pay to
conduct its business.

      The Manager has been an investment adviser since 1960.  The Manager and
its subsidiaries and affiliates managed $120 billion in assets as of March
31, 2003, including other Oppenheimer funds, with more than 7 million
shareholder accounts.  The Manager is located at 498 Seventh Avenue, New
York, New York 10018.


Portfolio Managers.  Carol E. Wolf and Barry D. Weiss are the portfolio
   managers and are Vice Presidents of the Fund. They are the persons
   principally responsible for the day-to-day management of the Fund's
   portfolio.  Ms. Wolf has had this responsibility since July 1988 and
   Mr. Weiss, since July 2001.  Ms. Wolf is a Senior Vice President of the
   Manager and Mr. Weiss is a Vice President, and each is an officer and
   portfolio manager of other Oppenheimer funds.  Prior to joining the
   Manager as Senior Credit Analyst in February, 2000, Mr. Weiss held the
   following positions: Associate Director, Fitch IBCA Inc. (April 1998 -
   February 2000); News Director, Fitch Investors Service (September 1996
   - April 1998); Senior Budget Analyst, City of New York, Office of
   Management & Budget (February 1990 - September 1996).


Advisory Fees.  Under the Investment Advisory Agreement, the Fund pays the
   Manager an advisory fee at an annual rate that declines on additional
   assets as the Fund grows: 0.450% of the first $500 million of average
   annual net assets, 0.425% of the next $500 million, 0.400% of the next
   $500 million, and 0.375% of average annual net assets in excess of $1.5
   billion.  The Fund's management fee for its fiscal year ended December 31,
   2002, was 0.45% of the Fund's average annual net assets for each class of
   shares.


Possible Conflicts of Interest. The Fund offers its shares to separate
   accounts of different insurance companies that are not affiliated with
   each other, as an investment for their variable annuity, variable life and
   other investment product contracts. While the Fund does not foresee any
   disadvantages to contract owners from these arrangements, it is possible
   that the interests of owners of different contracts participating in the
   Fund through different separate accounts might conflict. For example, a
   conflict could arise because of differences in tax treatment.

   The Fund's Board has procedures to monitor the portfolio for possible
   conflicts to determine what action should be taken. If a conflict occurs,
   the Board might require one or more participating insurance company
   separate accounts to withdraw their investments in the Fund. That could
   force the Fund to sell securities at disadvantageous prices, and orderly
   portfolio management could be disrupted. Also, the Board might refuse to
   sell shares of the Fund to a particular separate account, or could
   terminate the offering of the Fund's shares if required to do so by law or
   if it would be in the best interests of the shareholders of the Fund to do
   so.


INVESTING IN THE FUND

How to Buy, and Sell Shares

How Are Shares Purchased?  Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. The Fund reserves the right to refuse
any purchase order when the Manager believes it
would be in the Fund's best interests to do so.


      |X| Market Timers.  The Fund has instructed its participating insurance
companies that it may restrict or refuse investments by their separate
accounts from market timers.  "Market timers" include persons whose separate
account transactions have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier exchange request, (ii) exchanges out of the
Fund more than twice in any calendar quarter, (iii) an exchange of Fund
shares equal to at least $5 million, or more than 1% of the Fund's net
assets, or (iv) other transactions in Fund shares that demonstrated a timing
pattern.  Separate accounts under common ownership or control are combined
for these limits. There can be no assurance that all such participating
insurance companies will be successful in controlling investments in their
respective separate accounts by market timers.


Information about your investment in the Fund through your variable annuity
contract, variable
 life insurance policy or other plan can be obtained only from your
                                                     ----
participating insurance company or its servicing agent.  The Fund's Transfer
Agent does not hold or have access to those records.  Instructions for buying
or selling share of the Fund should be given to your insurance company or its
servicing agent, not directly to the Fund or its Transfer Agent.

At What Price Are Shares Sold?  Shares are sold at their offering price,
which is the net asset value per share. The net asset value will normally
remain at $1.00 per share. However, there are no guarantees that the Fund
will be able to maintain a net asset value of $1.00 per share. The Fund does
not impose any sales charge on purchases of its shares. If there are any
charges imposed under the variable annuity, variable life or other contract
through which Fund shares are purchased, they are described in the
accompanying prospectus of the participating insurance company.


Net Asset Value.  The Fund calculates the net asset value per shares as of
the close of The New York Stock Exchange ("the Exchange"), on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., Eastern time, but
may close earlier on some days. All references to time in this Prospectus
mean "Eastern time."


      The net asset value per share is determined 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. Under a policy adopted by the Fund's Board of
Trustees, the Fund uses the amortized cost method to value its securities to
determine the Fund's net asset value.

      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
owners to purchase Fund shares on a regular business day, provided that the
Fund receives the order from the insurance company by 9:30 A.M. on the next
regular business day at the offices of its Transfer Agent in Denver, Colorado.

     |X| Classes of Shares.  The Fund may offer two different classes of
shares.  The class of shares designated as Service shares are subject to a
Distribution and Service Plan. The impact of the expenses of the Plan on
Service shares is described below.  The class of shares that are not subject
to a Plan has no class "name" designation.  The different classes of shares
represent investments in the same portfolio of securities but are expected to
be subject to different expenses and will likely have different share prices.


Distribution and Service Plan for Service Shares.  The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution related services and personal service and maintenance of
accounts for the Fund's Service shares. The Plan allows for payments to be
made quarterly at an annual rate of up to 0.25% of the average annual net
assets of Service shares of the Fund.

     As of December 31, 2002, no Service shares of the Fund have been
offered. When and if that offering commences, the Fund's distributor would
use all the fees described in the preceding paragraph to compensate
sponsor(s) of the insurance product that offers Fund shares, for providing
personal service and maintenance of accounts of their variable contract
owners that hold Service shares.  The impact of the service plan would be to
increase operating expenses of the Service shares, which would result in
lower performance compared to the Fund's shares that are not subject to a
service fee.


How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.


      The share price that applies to a redemption order is the next net
asset value per share that is determined after the participating insurance
company (as the Fund's designated agent) receives a redemption request on a
regular business day from its contract or policy holder, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M..
the next regular business day at the office of its Transfer Agent in Denver,
Colorado. The Fund normally sends payment by Federal Funds wire to the
insurance company's account the day after the Fund receives the order (and no
later than 7 days after the Fund's receipt of the order). Under unusual
circumstances determined by the Securities and Exchange Commission, payment
may be delayed or suspended.

Dividends, Capital Gains and Taxes


Dividends.  The Fund intends to declare dividends from net investment income
each regular business day and to pay those dividends monthly.  To maintain a
net asset value of $1.00 per share, the Fund might withhold dividends or make
distributions from capital or capital gains.  Daily dividends will not be
declared or paid on newly purchased shares until Federal Funds are available
to the Fund from the purchase payment for such shares.  Dividends and
distributions will generally be lower for Service shares, which normally have
higher expenses.

      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the
participating insurance company's separate account (unless the participating
insurance company elects to have dividends or distributions paid in cash).

Capital Gains.  The Fund normally holds its securities to maturity and
therefore will not usually pay capital gains distributions. Although the Fund
does not seek capital gains, it could realize capital gains on the sale of
portfolio securities.  If it does, it may make distributions out of any net
short-term or long-term capital gains in March of each year.  The Fund may
make supplemental distributions of dividends and capital gains following the
end of its fiscal year.

Taxes.  For a discussion of the tax status of a variable annuity contract or
variable life insurance policy or other insurance investment product, please
refer to the accompanying prospectus of your participating insurance
company.  Because shares of the Fund may be purchased only through variable
annuity contracts, variable life insurance policies or other insurance
company separate accounts, dividends paid by the Fund from net investment
income and distributions (if any) of its net realized short-term or long-term
capital gains will be taxable, if at all, to the participating insurance
company.

      This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your
tax advisor or your participating insurance company about the effect of an
investment in the Fund under your contract or policy.

Financial Highlights


The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past five fiscal years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
the Fund's independent auditors, whose report, along with the Fund's
financial statements, is included in the Statement of Additional Information,
which is available on request.


FINANCIAL HIGHLIGHTS
OPPENHEIMER MONEY FUND/VA


Year Ended December 31                                   2002
2001          2000          1999          1998
- ------------------------------------------------------------------------------

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                    .01
..04           .06           .05           .05
 Dividends from net investment income                      (.01)
(.04)         (.06)         (.05)         (.05)
 Dividends from net realized gain                            -- 4
- --            --            --            --

- ----------------------------------------------------------------
 Net asset value, end of period                           $1.00
$1.00         $1.00         $1.00         $1.00

Total Return 1                                            1.47%
3.85%         6.26%         4.96%         5.25%

Ratios/Supplemental Data

Net assets, end of period (in thousands)              $379,969
$370,229      $215,771      $201,066      $151,799
- --------------------------------------------------------------------------------
Average net assets (in thousands)                     $386,457
$288,106      $204,586      $166,727      $137,633
- --------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                     1.46%
3.59%         5.98%         4.87%         5.12%
 Expenses                                                  0.47%
0.52%         0.51%         0.48%         0.50% 3

1.Assumes an  investment  on the business day before the first day fo 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 fo 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
product.  Inclusion of these charges  would reduce the total return  figures for
all periods shown.
2. Annualized for periods fo less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.
4.Less than $0.005 per shares.


INFORMATION AND SERVICES

For More Information on Oppenheimer Money Fund/VA
The following additional information about the Fund is available without
charge upon request:


STATEMENT OF ADDITIONAL INFORMATION. This document includes additional
information about the Fund's investment policies, risks, and operations. It
is incorporated by reference into this Prospectus (which means it is legally
part of this Prospectus).

ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.


How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund or instructions on how to contact the
sponsor of your insurance product:

- ------------------------------------------------------------------------------

By Telephone:                 Call OppenheimerFunds Services toll-free:

                              -----------------------------------------------
                              1.800.981.2871
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

By Mail:                      Write to:

                              OppenheimerFunds Services
                              P.O. Box 5270
                              Denver, Colorado 80217-5270
- ------------------------------------------------------------------------------


Information about the Fund including the Statement of Additional Information
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1.202.942.8090.  Reports and other information
about the Fund are available on the EDGAR database on the SEC's Internet
website at www.sec.gov. Copies may be obtained after payment of a duplicating
fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or
by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102.


No one has been authorized to provide any information about the Fund or to
make any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any
state or other jurisdiction where it is unlawful to make such an offer.


The Fund's shares are distributed by:                [logo]   OppenheimerFunds
Distributor, Inc.

The Fund's SEC File No. 811-4108

PR0660.001.0503
Printed on recycled paper




                         Appendix to Prospectus of
                         Oppenheimer Money Fund/VA
             (a series of Oppenheimer Variable Account Funds)

      Graphic material included in the Prospectus of Oppenheimer Money
Fund/VA (the "Fund") under the heading "Annual Total Return (as of 12/31
each year)":

      A bar chart will be included in the Prospectus of the Fund
depicting the annual total returns of a hypothetical investment in shares
of the Fund for each of the ten most recent calendar years, without
deducting separate account expenses.  Set forth below are the relevant
data that will appear on the bar chart:

Calendar
Year
Ended                               Annual Total Returns
- -----                               --------------------


12/31/93                                   3.16%
12/31/94                                   4.21%
12/31/95                                   5.62%
12/31/96                                   5.13%
12/31/97                                   5.32%
12/31/98                                   5.25%
12/31/99                                   4.96%
12/31/00                                   6.26%
12/31/01                                   3.85%
12/31/02                                   1.47%




Oppenheimer
Multiple Strategies Fund/VA
A series of Oppenheimer Variable
Account Funds                            Oppenheimer Multiple Strategies
                                         Fund/VA is a mutual fund that seeks a
Prospectus dated May 1, 2003             high total investment return, which
                                         includes current income and capital
                                         appreciation in the value of its
                                         shares.  The Fund allocates its
                                         investments among common stocks, debt
                                         securities, and "money market"
                                         instruments.
                                         Shares of the Fund are sold only as
                                               the underlying investment for
                                               variable life insurance
                                               policies, variable annuity
                                               contracts and other insurance
                                               company separate accounts. A
                                               prospectus for the insurance
                                               product you have selected
                                               accompanies this Prospectus and
                                               explains how to select shares of
                                               the Fund as an investment under
                                               that insurance product, and
                                               whether you are only eligible to
                                               purchase Service shares of the
As with all mutual funds, the                  Fund.
Securities                                     This Prospectus contains
and Exchange Commission has not          important information about the Fund's
approved or disapproved the Fund's       objective, its investment policies,
securities nor has it determined that    strategies and risks.  Please read
this Prospectus is accurate or           this Prospectus (and your insurance
complete.                                product prospectus) carefully before
It is a criminal offense to represent    you invest and keep them for future
otherwise.                               reference about your account.

                                                                          1234


Contents

            About the Fund
- ------------------------------------------------------------------------------

            The Fund's Objective and Investment Strategies

            Main Risks of Investing in the Fund

            The Fund's Past Performance


            Fees and Expenses of the Fund


            About the Fund's Investments

            How the Fund is Managed

            Investing in the Fund
- ------------------------------------------------------------------------------

            How to Buy and Sell Shares

            Dividends, Capital Gains and Taxes

            Financial Highlights


About the Fund

The Fund's Objective and Investment Strategies

- ------------------------------------------------------------------------------
What Is the Fund's Investment Objective? The Fund seeks a high total
investment return, which includes current income and capital appreciation in
the value of its shares.
- ------------------------------------------------------------------------------

What Does the Fund Mainly Invest In?  The Fund's investment Manager,
OppenheimerFunds, Inc., uses a variety of different types of securities and
investment strategies to seek the Fund's objective:
o     equity securities, such as common stocks, preferred stocks and
        securities convertible into common stock, of issuers in the U.S. and
        foreign countries,
o     debt securities, such as bonds and notes issued by domestic and foreign
        companies (which can include lower-grade, high-yield securities),
        securities issued or guaranteed by the U.S. government and its
        agencies and instrumentalities including mortgage-related securities
        (these are referred to as "U.S. government securities"), and debt
        obligations of foreign governments, and
o     money market instruments, which are debt obligations that have a
        maturity of 13 months or less, including short-term U.S. government
        securities, corporate and bank debt obligations and commercial paper.

      These investments are more fully explained in "About the Fund's
Investments," below.

How Do the Portfolio Managers Decide What Securities to Buy or Sell? In
selecting securities for the Fund, the Fund's portfolio managers use
different investment styles to carry out an asset allocation strategy that
seeks broad diversification across asset classes. They normally maintain a
balanced mix of equity securities and debt securities (including money market
instruments), although the Fund is not required to weight the portfolio
holdings in a fixed proportion.  Therefore, the portfolio's mix of equity
securities, debt securities and money market instruments will change over
time.

      The debt securities in the portfolio normally include a mix of U.S.
government securities, high-yield corporate bonds and foreign government
bonds to seek current income. The relative amounts of those types of debt
securities in the portfolio will change over time, because those sectors of
the bond markets generally react differently to changing economic
environments.

      The portfolio managers employ both "growth" and "value" styles in
selecting equity securities.  They use fundamental analysis of a company's
financial statements and management structure, analysis of the company's
operations and product development, as well as the industry of which the
issuer is part. Value investing seeks issuers that are temporarily out of
favor or undervalued in the market by various measures, such as the stock's
price/earnings ratio. Growth investing seeks issuers that the Manager
believes have possibilities for increases in their stock prices because of
strong earnings growth compared to the market, the development of new
products or services or other favorable economic factors.

Who Is the Fund Designed For?  The Fund's shares are available only as an
investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
high total return from their investment over the long term, from a fund
employing a variety of investments and investment styles in a diversified
portfolio. Those investors should be willing to assume the risks of
short-term share price fluctuations that are typical for a fund with
significant investments in stocks and foreign securities. Since the Fund's
income level will fluctuate, it is not designed for investors needing an
assured level of current income, and the Fund is not a complete investment
program.

Main Risks of Investing in the Fund

      All investments carry risks to some degree.  The Fund's investments are
subject to changes in their value from a number of factors, described below.
There is also the risk that the value of your investment could be eroded over
time by the effects of inflation and that poor security selection by the
Fund's investment manager, OppenheimerFunds, Inc., will cause the Fund to
underperform other funds having similar objectives.

      However, changes in the overall market prices of securities and the
income they pay can occur at any time. The share price of the Fund will
change daily based on changes in market prices of securities and market
conditions and in response to other economic events.

      |X| Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times can be great. The value of the Fund's
portfolio therefore will be affected by changes in the stock markets. Market
risk will affect the Fund's net asset value per share, which will fluctuate
as the values of the Fund's portfolio securities change.  A variety of
factors can affect the price of a particular stock, and the prices of
individual stocks do not all move in the same direction uniformly or at the
same time. Different stock markets may behave differently from each other.

      Additionally, stocks of issuers in a particular industry may be
affected by changes in economic conditions that affect that industry more
than others, or by changes in government regulations, availability of basic
resources or supplies, or other events. Other factors can affect a particular
stock's price, such as poor earnings reports by the issuer, loss of major
customers, major litigation against the issuer, or changes in government
regulations affecting the issuer. The Fund can invest in securities of large
companies and also small and medium-size companies, which may have more
volatile stock prices than large companies.

      |X| Risks of Foreign Investing.  The Fund can buy securities issued by
companies or governments in any country, including developed and
underdeveloped countries.  Although there are no limits on the amounts it can
invest in foreign securities, normally the Fund does not expect to invest
more than 35% of its total assets in foreign securities.


      While foreign securities offer special investment opportunities, there
are also special risks that can reduce the Fund's share prices and returns.
The change in value of a foreign currency against the U.S. dollar will result
in a change in the U.S. dollar value of securities denominated in that
foreign currency. Currency rate changes can also affect the distributions the
Fund makes from the income it receives from foreign securities as foreign
currency values change against the U.S. dollar. Foreign investing can result
in higher transaction and operating costs for the Fund. Foreign issuers are
not subject to the same accounting and disclosure requirements that U.S.
companies are subject to.  The value of foreign investments may be affected
by exchange control regulations, currency devaluation, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy in the U.S.
or abroad, or other political and economic factors.  These risks could cause
the prices of foreign securities to fall and therefore could depress the
Fund's share prices.


      |_| Special Risks of Emerging Markets. Securities of issuers in
emerging and developing markets may offer special investment opportunities,
but present risks not found in more mature markets. Those securities may be
more difficult to sell at an acceptable price and their prices may be more
volatile than securities of issuers in more developed markets. Settlements of
trades may be subject to greater delays so that the Fund might not receive
the proceeds of a sale of a security on a timely basis.


      Emerging markets might have less developed trading markets and
exchanges. Emerging market countries may have less developed legal and
accounting systems and investments may be subject to greater risks of
government restrictions on withdrawing the sales proceeds of securities from
the country. Economies of developing countries may be more dependent on
relatively few industries that may be highly vulnerable to local and global
changes. Governments may be more unstable and present greater risks of
nationalization or restrictions on foreign ownership of stocks of local
companies. These investments may be substantially more volatile than
securities of issuers in the U.S. and other developed countries and may be
very speculative.


      |X| Credit Risk. Debt securities are subject to credit risk.  Credit
risk relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. If the issuer fails to
pay interest, the Fund's income might be reduced and if the issuer fails to
repay principal, the value of that security and of the Fund's shares might be
reduced. While the Fund's investments in U.S. government securities are
subject to little credit risk, the Fund's other investments in debt
securities, particularly high-yield lower-grade debt securities, are subject
to risks of default.

      |_| Special Risks of Lower-Grade Securities.  Because the Fund can
invest in securities below investment-grade to seek high income, the Fund's
credit risks are greater than those of funds that buy only investment-grade
bonds. Lower-grade debt securities (commonly called "junk bonds") may be
subject to greater market fluctuations and greater risks of loss of income
and principal than investment-grade debt securities. Securities that are (or
that have fallen) below investment grade are exposed to a greater risk that
the issuers of those securities might not meet their debt obligations. These
risks can reduce the Fund's share price and the income it earns.

      |X| Interest Rate Risks.  The values of debt securities, including U.S.
government securities prior to maturity, are subject to change when
prevailing interest rates change.  When interest rates fall, the values of
already-issued debt securities generally rise. When interest rates rise, the
values of already-issued debt securities generally fall and they may sell at
a discount from their face amount.  The magnitude of these fluctuations will
often be greater for longer-term debt securities than shorter-term debt
securities.  The Fund's share price can go up or down when interest rates
change because of the effect of the changes on the value of the Fund's
investments in debt securities.

      |X| Prepayment Risk.  Prepayment risk occurs when the mortgages
underlying a mortgage-related security are prepaid at a rate faster than
anticipated (usually when interest rates fall) and the issuer of a security
can prepay the principal prior to the security's maturity. Mortgage-related
securities that are subject to prepayment risk, including the CMOs and other
mortgage-related securities that the Fund buys, generally offer less
potential for gains when prevailing interest rates decline, and have greater
potential for loss than other debt securities when interest rates rise.

      The impact of prepayments on the price of a security may be difficult
to predict and may increase the volatility of the price. The Fund might have
to reinvest the proceeds of prepaid securities in new securities offering
lower yields.  Additionally, the Fund can buy mortgage-related securities at
a premium. Accelerated prepayments on those securities could cause the Fund
to lose the portion of its principal investment represented by the premium
the Fund paid.

      If interest rates rise rapidly, prepayments might occur at slower rates
than expected, which could have the effect of lengthening the expected
maturity of a short or medium-term security. That could cause its value to
fluctuate more widely in response to changes in interest rates. In turn, this
could cause the value of the Fund's shares to fluctuate more.

      |X| There Are Special Risks in Using Derivative Investments. The Fund
can use derivatives to seek increased returns or to try to hedge investment
risks. In general terms, a derivative investment is an investment contract
whose value depends on (or is derived from) the value of an underlying asset,
interest rate or index. Options, futures, CMOs, and structured notes are
examples of derivatives the Fund can use.

      If the issuer of the derivative does not pay the amount due, the Fund
can lose money on the investment. Also, the underlying security or investment
on which the derivative is based, and the derivative itself, might not
perform the way the Manager expected it to perform. If that happens, the
Fund's share price could decline or the Fund could get less income than
expected. The Fund has limits on the amount of particular types of
derivatives it can hold. However, using derivatives can cause the Fund to
lose money on its investment and/or increase the volatility of its share
price.

How Risky is the Fund Overall?  The risks described above collectively form
the overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its price per share.  Particular
investments and investment strategies also have risks.  These risks mean that
you can lose money by investing in the Fund.  When you redeem your shares,
they may be worth more or less than what you paid for them.  There is no
assurance that the Fund will achieve its investment objective.

      In the short term, domestic and foreign stock markets can be volatile,
and the price of the Fund's shares will go up and down in response to those
changes. The Fund's income-oriented investments may help cushion the Fund's
total return from changes in stock prices, but debt securities are subject to
credit and interest rate risks. The Fund may be less volatile than funds that
focus only on stock investments, but has more risks than funds that focus
solely on investment grade bonds.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund's Past Performance


      The bar chart and table below show one measure of the risks of
investing in the Fund, by showing changes in the Fund's performance from year
to year for the last 10 calendar years for non-service shares and by showing
how the average annual total returns for 1, 5 and 10 years or life of class
of the Fund's two existing classes of shares compare to those of a
broad-based market index. Because Service shares are subject to a service
fee, the performance is expected to be lower for any given period.  The
Fund's past investment performance is not necessarily an indication of how
the Fund will perform in the future.


Annual Total Returns (as of 12/31 each year)

[See appendix to prospectus for data in bar chart showing annual total
returns]

Charges imposed by the separate accounts that invest in the Fund are not
included in the calculations of return in this bar chart, and if those
charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 11.22% (4th Q `98) and the lowest return (not
annualized) for a calendar quarter was -10.96% (3rd Q `01).

- ---------------------------------------------------------------------------------

Average       Annual
Total   Returns  for
the  periods   ended        1 Year             5 Years            10 Years
December 31, 2002

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Oppenheimer Multiple
Strategies Fund/VA
Non-Service Shares
(inception 2/9/87)         -10.40%              3.05%               8.06%

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

S&P 500 Index
                           -22.09%             -0.58%              9.34%1

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Lehman Bros.
Aggregate Bond Index       10.25%               7.55%              7.51%1

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Oppenheimer
Mulitple Strategies
Fund/VA Service
Shares                     -9.44%               N/A2                N/A2
(inception date:
5/1/02

- ---------------------------------------------------------------------------------

1.    From 12/31/92.
2.    Because  this is a new  class of  shares,  return  data  for the  period
   specified is not available.

The  Fund's  average  annual  total  returns   measure  the   performance  of  a
hypothetical  account without deducting charges imposed by the separate accounts
that  invest  in the Fund  and  assume  that all  dividends  and  capital  gains
distributions  have been reinvested in additional shares. The Fund's performance
is compared to the Standard &  Poor's 500 Index,  an unmanaged index of U.S.
equity  securities that is a measure of the general  domestic stock market.  The
Fund also compares its performance to the Lehman Brothers  Aggregate Bond Index,
an unmanaged index of U.S. corporate,  government and mortgage-backed securities
that is a measure of the domestic bond market.  The index  performance  includes
the reinvestment of income but does not reflect fees,  expenses,  or transaction
costs. Also, the Fund may have investments that vary from the indices.


The Fund's total returns should not be expected to be the same as the returns
of other Oppenheimer funds, even if both funds have the same portfolio
managers and/or similar names.


Fees and Expenses of the Fund

The  following  tables  are  provided  to help  you  understand  the  fees and
expenses  you may pay if you buy and hold shares of the Fund.  The Fund pays a
variety of expenses  directly for  management  of its assets,  administration,
distribution of its shares and other  services.  Those expenses are subtracted
from the Fund's  assets to  calculate  the Fund's net asset  values per share.
All shareholders  therefore pay those expenses  indirectly.  The numbers below
are based on the Fund's  expenses  during its fiscal year ended  December  31,
2002.

Shareholder Fees.  The Fund does not charge any initial sales charge to buy
shares or to reinvest dividends.  There are no exchange fees or redemption
fees and no contingent deferred sales charges. Please refer to the
accompanying prospectus of the participating insurance company for
information on initial or contingent deferred sales charges, exchange fees or
redemption fees for that variable life insurance policy, variable annuity or
other investment product.  Those charges and fees are not reflected in either
of the tables below.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)


- --------------------------------------------------------------------------------

                                    Non-Service Shares       Service Shares

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Management Fees                           0.72%                   0.72%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Distribution     and     Service           None                   0.25%
(12b-1) Fees

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Other Expenses                            0.02%                   0.02%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Total Annual Operating Expenses           0.74%                   0.99%

- --------------------------------------------------------------------------------

Service share inception date was May 1, 2002.
Expenses  may vary in future  years.  "Other  expenses"  in the table  include
transfer  agent fees,  custodial  fees,  and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily  agreed to limit transfer
and  shareholder  servicing  agent  fees to 0.35% per  fiscal  year,  for both
classes.  That  undertaking  may be amended or withdrawn at any time.  For the
Fund's fiscal year ended  December 31, 2002,  the transfer  agent fees did not
exceed the expense limitation described above.

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The  example  assumes  that you  invest  $10,000 in shares of the Fund for the
time periods  indicated and then redeem all of your shares at the end of those
periods.  The example also assumes that your  investment  has a 5% return each
year and that the  Fund's  operating  expenses  remain the same.  Your  actual
costs may be higher or lower,  because  expenses will vary over time. Based on
these  assumptions  your  expenses  would be as  follows,  whether  or not you
redeem your investment at the end of each period:


- ------------------------------------------------------------------------------

                              1 Year      3 Years     5 Years     10 Years

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Non-Service Shares             $76         $237        $411         $918

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Service Shares                 $101        $315        $547        $1,213

- ------------------------------------------------------------------------------


About the Fund's Investments

The Fund's Principal Investment Policies. The allocation of the Fund's
portfolio among  different types of investments will vary over time based
upon the Manager's evaluation of economic and market trends. At times the
Fund may focus more on investing for capital appreciation with less emphasis
on income. At other times, for example when stock markets are less stable,
the Fund may increase the relative emphasis of its portfolio in
income-seeking investments, such as bonds and money market instruments.

      The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial percentage of the stock of
any one company and by not investing too great a percentage of the Fund's
assets in any one issuer. Also, the Fund does not concentrate 25% or more of
its total assets in any one industry.

      In seeking broad diversification of the Fund's portfolio over asset
classes, issuers and economies, the portfolio managers consider overall and
relative economic conditions in U.S. and foreign markets. They seek broad
diversification by investing in different countries to help moderate the
special risks of investing in foreign securities and lower-grade, high-yield
debt securities. The Fund's portfolio might not always include all of the
different types of investments described below. The Statement of Additional
Information contains more detailed information about the Fund's investment
policies and risks.


      |X|  Stock and Other Equity Investments. The Fund can invest in equity
securities of issuers that may be of small, medium or large size, to seek
capital growth. Equity securities include common stocks, preferred stocks and
securities convertible into common stock. Although some convertible
securities are a type of debt security, the Manager considers some of those
convertible securities to be "equity equivalents" because of the conversion
feature.  In that case, their rating has less impact on the investment
decision than in the case of other debt securities. The Fund invests in
securities issued by domestic or foreign companies that the Manager believes
have appreciation potential or that are undervalued.


      The Fund's equity investments may be exchange-traded or
over-the-counter securities. Over-the-counter securities may have less
liquidity than exchange-traded securities, and stocks of companies with
smaller capitalization have greater risk of volatility than stocks of larger
companies. The Fund limits its investments in securities of small, unseasoned
issuers to not more than 5% of its net assets.


      |X|  Debt Securities. The Fund can also invest in debt securities, such
as U.S. government securities, foreign government securities, and foreign and
domestic corporate bonds, notes and debentures, for their income
possibilities.


      The debt securities the Fund buys may be rated by nationally recognized
rating organizations or they may be unrated securities assigned a rating by
the Manager. The Fund's investments may be investment grade or below
investment grade in credit quality. The Manager does not rely solely on
ratings by rating organizations in selecting debt securities, but evaluates
business and economic factors affecting an issuer as well.

      The Fund's foreign debt investments can be denominated in U.S. dollars
or in foreign currencies and can include "Brady Bonds."  Those are U.S.
dollar-denominated debt securities collateralized by zero-coupon U.S.
Treasury securities.  They are typically issued by governments of emerging
market countries and are considered speculative securities with higher risks
of default.  The Fund will buy foreign currency only in connection with the
purchase and sale of foreign securities and not for speculation.

      |X| U.S. Government Securities.  The Fund can invest in securities
issued or guaranteed by the U.S. Treasury or other U.S. government agencies
or federally-chartered corporate entities referred to as
"instrumentalities."  These are referred to as "U.S. government securities"
in this Prospectus.  They can include collateralized mortgage obligations
(CMOs) and other mortgage-related securities.  Mortgage-related securities
are subject to additional risks of unanticipated changes in the rate of
payment of the underlying mortgages, which can affect the income stream to
the Fund from those securities as well as their values.

      |_| U.S. Treasury Obligations. These include Treasury bills (having
maturities of one year or less when issued), Treasury notes (having
maturities of from one to 10 years), and Treasury bonds (having maturities of
more than 10 years when issued).  Treasury securities are backed by the full
faith and credit of the United States as to timely payments of interest and
repayment of principal.  The Fund can buy U. S. Treasury securities that have
been "stripped" of their interest coupons by a Federal Reserve Bank,
zero-coupon U.S. Treasury securities described below, and Treasury
Inflation-Protection Securities ("TIPS").  Although not rated, Treasury
obligations have little credit risk but prior to their maturity are subject
to interest rate risk.

      |_| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities.  These include direct obligations and mortgage-related
securities that have different levels of credit support from the U.S.
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association pass-through
mortgage certificates (called "Ginnie Maes").  Some are supported by the
right of the issuer to borrow from the U.S. Treasury under certain
circumstances, such as Federal National Mortgage Association bonds ("Fannie
Maes").  Others are supported only by the credit of the entity that issued
them, such as Federal Home Loan Mortgage Corporation obligations ("Freddie
Macs").  These have relatively little credit risk.

      |_| Mortgage-Related U.S. Government Securities. The Fund can buy
interests in pools of residential or commercial mortgages, in the form of
collateralized mortgage obligations ("CMOs") and other "pass-through"
mortgage securities. CMOs that are U.S. government securities have collateral
to secure payment of interest and principal. They may be issued in different
series each having different interest rates and maturities. The collateral is
either in the form of mortgage pass-through certificates issued or guaranteed
by a U.S. agency or instrumentality or mortgage loans insured by a U.S.
government agency.

      The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when interest rates rise.

      If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be
reduced. Additionally, the Fund may have to reinvest the prepayment proceeds
in other securities paying interest at lower rates, which could reduce the
Fund's yield.

      When interest rates rise rapidly and if prepayments occur more slowly
than expected, a short- or medium-term CMO can in effect become a long-term
security, subject to greater fluctuations in value. These prepayment risks
can make the prices of CMOs very volatile when interest rates change. The
prices of longer-term debt securities tend to fluctuate more than those of
shorter-term debt securities. That volatility will affect the Fund's share
price.

      |X| Private-Issuer Mortgage-Backed Securities. The Fund can invest in
mortgage-backed securities issued by private issuers, which do not offer the
credit backing of U.S. government securities. Primarily these would include
multi-class debt or pass-through certificates secured by mortgage loans. They
may be issued by banks, savings and loans, mortgage bankers and other
non-governmental issuers. Private issuer mortgage-backed securities are
subject to the credit risks of the issuers (as well as the interest rate
risks and prepayment risks of CMOs, discussed above), although in some cases
they may be supported by insurance or guarantees.


      |X| High-Yield, Lower-Grade Debt Securities. The Fund can invest
without limit in lower-grade, high-yield debt securities, including bonds,
debentures, notes, preferred stocks, loan participation interests, structured
notes and, asset-backed securities, among others, to seek current income.
These securities are sometimes called "junk bonds." The Fund has no
requirements as to the maturity of the debt securities it can buy, or as to
the market capitalization range of the issuers of those securities.


      Lower-grade debt securities are those rated below "Baa" by Moody's
Investors Service, Inc. or lower than "BBB" by Standard & Poor's Rating
Service or that have similar ratings by other nationally-recognized rating
organizations. The Fund can invest in securities rated as low as "C" or "D"
or which are in default at the time the Fund buys them. While securities
rated "Baa" by Moody's or "BBB" by S&P are considered "investment grade,"
they have some speculative characteristics.

      While investment-grade securities are subject to risks of non-payment
of interest and principal, in general high-yield lower-grade bonds, whether
rated or unrated, have greater risks than investment-grade securities.  There
may be less of a market for them and therefore they may
be harder to sell at an acceptable price.  The special risks these securities
are subject to mean that the Fund may not achieve the expected income from
them and that the Fund's net asset value per share may be affected by
declines in value of these securities.



      |X| Money Market Instruments.  The Fund can invest in money market
instruments, which are debt obligations having a remaining maturity of 13
months or less.  They include short-term certificates of deposit, bankers'
acceptances, commercial paper (including variable amount master demand
notes), U.S. government obligations, and other debt instruments (including
bonds) issued by corporations.  These securities may have variable or
floating interest rates.  The Fund's investments in commercial paper in
general will be limited to paper in the top two rating categories of Standard
& Poor's, Moody's or other national rating organizations.

      |X| Credit Derivatives. The Fund may enter into credit default swaps,
both (i) directly and (ii) indirectly in the form of a swap embedded within a
structured note, to protect against the risk that a security will default.
The Fund pays a fee to enter into the trade and receives a fixed payment
during the life of the swap. If there is a credit event (for example, the
security fails to timely pay interest or principal), the Fund either delivers
the defaulted bond (if the Fund has taken the short position in the credit
default swap, also known as "buying credit protection") or pays the par
amount of the defaulted bond (if the Fund has taken the long position in the
credit default swap note, also known as "selling credit protection"). Risks
of credit default swaps include the cost of paying for credit protection if
there are no credit events, and adverse pricing when purchasing bonds to
satisfy its delivery obligation where the Fund took a short position in the
swap and there has been a credit event.

      |X| Foreign Investing.  The Fund typically invests a portion of its
assets in foreign debt securities. The Fund can buy debt securities issued by
foreign governments or companies.  The Fund can buy securities of governments
and companies in under-developed and developed markets.  However, the Fund
may not invest more than 10% of its net assets in the securities of
governments and companies in emerging markets.  Debt securities issued or
guaranteed by a foreign government or its agencies might not be backed by the
"full faith and credit" of the government.

      The Fund's foreign debt investments can be denominated in U.S. dollars
or in foreign currencies.  However, the Fund may not invest more than 20% of
its net assets in foreign debt securities.  The Fund will buy and sell
foreign currency only in connection with the purchase and sale of foreign
securities and not for speculation.


Special Portfolio Diversification Requirements. To enable a variable annuity
or variable life insurance contract based on an insurance company separate
account to qualify for favorable tax treatment under the Internal Revenue
Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Fund's investment program is managed to
meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.

      Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income. Those diversification requirements might also
limit, to some degree, the Fund's investment decisions in a way that could
reduce its performance.


Can the Fund's Investment Objective and Policies Change?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Fundamental policies cannot be changed without the approval
of a majority of the Fund's outstanding voting shares. The Fund's objective
is a fundamental policy. Investment restrictions that are fundamental
policies are listed in the Statement of Additional Information. An investment
policy is not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.


      |_| Portfolio Turnover. The Fund can engage in short-term trading to
try to achieve its objective. It might have a turnover rate in excess of 100%
annually. Portfolio turnover affects brokerage costs the Fund pays. The
Financial Highlights table at the end of this Prospectus shows the Fund's
portfolio turnover rates during prior fiscal years.


Other Investment Strategies.  To seek its objective, the Fund can also use
the investment techniques and strategies described below. The Fund might not
always use all of them. These techniques have risks, although some of them
are designed to help reduce overall investment or market risks.


      |X|  Forward Rolls.  The Fund can enter into "forward roll"
transactions with respect to mortgage-related securities.  In this type of
transaction, the Fund sells a mortgage-related security to a buyer and
simultaneously agrees to repurchase a similar security at a later date at a
set price.

During the period between the sale and the repurchase, the Fund 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
Fund sells may decline below the price at which the Fund is obligated to
repurchase securities, or that the counterparty might default in its
obligation.


      |X| Bank Loan Participation Agreements.  The Fund can invest in bank
loan participation agreements. They provide the Fund 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 Manager looks to the creditworthiness of the borrower that
is obligated to make principal and interest payments on the loan.  Not more
than 5% of the Fund's net assets can be invested in participation interests
of any one borrower.

      |X| Repurchase Agreements.  The Fund can enter into repurchase
agreements.  In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized.  However, if the vendor
fails to pay the resale price on the delivery date, the Fund could incur
costs in disposing of the collateral and might experience losses if there is
any delay in its ability to do so.  There is no limit on the amount of the
Fund's net assets that may be subject to repurchase agreements of seven days
or less.

      |X| Zero-Coupon and "Stripped" Securities.  Some of the U.S. government
and private company debt securities the Fund buys are zero-coupon bonds that
pay no interest.  They are issued at a substantial discount from their face
value.  "Stripped" securities are the separate income or principal components
of a debt security.  Some CMOs or other mortgage-related securities may be
stripped, with each component having a different proportion of principal or
interest payments. One class might receive all the interest and the other all
the principal payments.

      Zero-coupon and stripped securities are subject to greater fluctuations
in price from interest rate changes than conventional interest-bearing
securities.  The Fund may have to pay out the imputed income on zero-coupon
securities without receiving the actual cash currently. Interest-only
securities are particularly sensitive to changes in interest rates.

      The values of interest-only mortgage related securities are also very
sensitive to prepayments of underlying mortgages. Principal-only securities
are also sensitive to changes in interest rates. When prepayments tend to
fall, the timing of the cash flows to these securities increases, making them
more sensitive to changes in interest rates. The market for some of these
securities may be limited, making it difficult for the Fund to dispose of its
holdings at an acceptable price.


      |X| Asset-Backed Securities. The Fund can buy asset-backed securities,
which are fractional interests in pools of loans collateralized by loans or
other assets or receivables. They are typically issued by trusts and special
purpose corporations that pass the income from the underlying pool to the
buyer of the interest. These securities are subject to prepayment risks and
the risk of default by the issuer as well as by the borrowers of the
underlying loans in the pool.


      |X| Illiquid and Restricted Securities.  Investments may be illiquid
because they do not have an active trading market, making it difficult to
value them or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual restriction on its resale or which
cannot be sold publicly until it is registered under the Securities Act of
1933. The Fund will not invest more than 15% of its net assets in illiquid or
restricted securities. Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that
limit. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate
liquidity.


      |X| "Structured" Notes. The Fund can buy "structured" notes, which are
specially-designed derivative debt investments whose payments of principal or
interest payments are linked to the value of an index (such as a currency or
securities index) or commodity, including financial commodities. The terms of
the instrument may be "structured" by the purchaser (the Fund) and the
borrower issuing the note.

      The principal and/or interest payments depend on the performance of one
or more other securities or indices, and the values of these notes will
therefore fall or rise in response to the changes in the values of the
underlying security or index. They are subject to both credit and interest
rate risks and therefore the Fund could receive more or less than it
originally invested when the notes mature, or it might receive less interest
than the stated coupon payment if the underlying investment or index does not
perform as anticipated. Their values may be very volatile and they may have a
limited trading market, making it difficult for the Fund to sell its
investment at an acceptable price.

      |X| Derivative Investments. The Fund can invest in a number of
different kinds of "derivative" investments.  In the broadest sense,
exchange-traded options, futures contracts, mortgage-related securities and
other hedging instruments the Fund can use may be considered "derivative
investments."  In addition to using hedging instruments, the Fund may use
other derivative investments because they offer the potential for increased
income and principal value.


      Markets underlying securities and indices may move in a direction not
anticipated by the Manager.  Interest rate and stock market changes in the
U.S. and abroad may also influence the performance of derivatives.  As a
result of these risks the Fund could realize less principal or income from
the investment than expected.  Certain derivative investments held by the
Fund may be illiquid.

      |X| Hedging.  The Fund can buy and sell futures contracts, forward
contracts and put and call options, including options on futures and
broadly-based securities indices.  These are all referred to as "hedging
instruments."  The Fund is not required to use hedging instruments to seek
its objective. The Fund does not use hedging instruments for speculative
purposes, and has limits on its use of them.

      The Fund could buy and sell options, futures and forward contracts for
a number of purposes.  It might do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute for
purchasing individual securities.  It might do so to try to manage its
exposure to changing interest rates.  Forward contracts can be used to try to
manage foreign currency risks on the Fund's foreign investments.

      Options trading involves the payment of premiums and there are also
special risks in particular hedging strategies. For example, if a covered
call written by the Fund is exercised on an investment that has increased in
value, the Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has increased in
value above the call price.  In writing a put, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.

      If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Fund's return.
The Fund could also experience losses if the prices of its futures and
options positions were not correlated with its other investments or if it
could not close out a position because of an illiquid market.


      |X| Short-Term Debt Securities. The Fund can buy high-quality,
short-term money market instruments, including obligations of the U.S.
Government and its agencies, short-term corporate debt obligations, bank
certificates of deposit and bankers' acceptances, and commercial paper, which
are short-term, negotiable promissory notes of companies.

      |X| Temporary Defensive and Interim Investments.  In times of adverse
or unstable market, economic or political conditions, the Fund can invest up
to 100% of its total assets in temporary defensive investments that are
inconsistent with the Fund's principal investment strategies. Generally they
would be highly-rated commercial paper and money market instruments, U.S.
government securities and repurchase agreements.   The Fund might also hold
these types of securities pending the investment of proceeds from the sale of
Fund shares or portfolio securities or to meet anticipated redemptions of
Fund shares.  To the extent the Fund invests defensively in these securities,
it may not achieve its investment objective.


How the Fund Is Managed

The Manager.  The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an investment
advisory agreement that states the Manager's responsibilities.  The agreement
sets the fees the Fund pays to the Manager and describes the expenses that
the Fund is responsible to pay to conduct its business.


      The Manager has been an investment advisor since 1960. The Manager and
its subsidiaries and controlled affiliates managed more than $120 billion in
assets as of March 31, 2003, including other Oppenheimer funds with more than
7 million shareholder accounts.  The Manager is located at 498 Seventh
Avenue, New York, New York 10018.

      |X| Portfolio Managers.  Effective January 13, 2003, the equity portion
of the Fund's portfolio is managed by Emmanuel Ferreira, supported by other
members of the Manager's value portfolio team, and the fixed-income portion
of the portfolio is managed by Angelo Manioudakis, supported by other members
of the Manager's high-grade fixed-income team. Mr. Ferreira and Mr.
Manioudakis are primarily responsible for the day-to-day management of the
Fund's portfolio and are Vice Presidents of the Fund. Mr. Ferreira is a Vice
President of the Manager and Mr. Manioudakis is a Senior Vice President of
the Manager. Prior to joining the Manager in January 2003, Mr. Ferriera was a
portfolio manager at Lashire Investments (1999-2003), and a senior analyst at
Mark Asset Management (1997-1999). Prior to joining the Manager, Mr.
Manioudakis was a portfolio manager at Morgan Stanley Investment Management
(from August 1993 to April 2002)."

      |X|  Advisory Fees.  Under the investment advisory agreement, the Fund
pays the Manager an advisory fee at an annual rate that declines on
additional assets as the Fund grows: 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 its last fiscal year
ended December 31, 2002, was 0.72% of the Fund's average annual net assets.


      |X| Possible Conflicts of Interest. The Fund offers its shares to
separate accounts of different insurance companies that are not affiliated
with each other as an investment for their variable annuity, variable life
and other investment product contracts. While the Fund does not foresee any
disadvantages to contract owners from these arrangements, it is possible that
the interests of owners of different contracts participating in the Fund
through different separate accounts might conflict. For example, a conflict
could arise because of differences in tax treatment.

      The Fund's Board of Trustees has procedures to monitor the portfolio
for possible conflicts to determine what action should be taken. If a
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Fund. That
could force the Fund to sell securities at disadvantageous prices, and
orderly portfolio management could be disrupted. Also, the Board might refuse
to sell shares of the Fund to a particular separate account, or could
terminate the offering of the Fund's shares if required to do so by law or if
it would be in the best interests of the shareholders of the Fund to do so.

Investing in the Fund

How to Buy and Sell Shares

How Are Shares Purchased? Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That Prospectus will indicate whether
you are only eligible to purchase Service shares of the Fund. The Fund
reserves the right to refuse any purchase order when the Manager believes it
would be in the Fund's best interests to do so.

      |X| Market Timers.  The Fund has instructed its participating insurance
companies that it may restrict or refuse investments by their separate
accounts from market timers.  "Market timers" include persons whose separate
account transactions have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier exchange request, (ii) exchanges out of the
Fund more than twice in any calendar quarter, (iii) an exchange of Fund
shares equal to at least $5 million, or more than 1% of the Fund's net
assets, or (iv) other transactions in Fund shares that demonstrated a timing
pattern.  Separate accounts under common ownership or control are combined
for these limits. There can be no assurance that all such participating
insurance companies will be successful in controlling investments in their
respective separate accounts by market timers.

- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------


 At What Price Are Shares Sold? Shares are sold to participating insurance
companies at their offering price, which is the net asset value per share.
The Fund does not impose any sales charge on purchases of its shares. If
there are any charges imposed under the variable annuity, variable life or
other contract through which Fund shares are purchased, they are described in
the accompanying prospectus of the participating insurance company.

Net Asset Value.  The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange ("the Exchange"), on
each day the Exchange is open for trading (referred to in this Prospectus as
a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.


      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security. A security's valuation may differ depending on the method used
for determining value.


      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
or policy owners to purchase Fund shares on a regular business day, provided
that the Fund receives the order from the insurance company, generally by
9:30 A.M. on the next regular business day at the offices of its Transfer
Agent in Colorado.

      |X| Classes of Shares.  The Fund may offer two different classes of
shares. The class of shares designated as Service shares are subject to a
Distribution and Service Plan. The impact of the expenses of the Plan on
Service shares is described below.  The class of shares that are not subject
to a Plan has no class "name" designation. The different classes of shares
represent investments in the same portfolio of securities but are expected to
be subject to different expenses and will likely have different share prices.


Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution related services and personal services and account maintenance
for the Fund's Service shares. Under the Plan, payments are made quarterly at
an annual rate of up to 0.25% of the average annual net assets of Service
shares of the Fund. The distributor currently uses all of those fees to
compensate sponsor(s) of the insurance product that offers Fund shares, for
providing personal service and maintenance of accounts of their variable
contract owners that hold Service shares.  The impact of the service plan is
to increase operating expenses of the Service shares, which result in lower
performance compared to the Fund's shares that are not subject to a service
fee.


How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.

     The share price that applies to a redemption order is the next net asset
value per share that is determined after the participating insurance company
(as the Fund's designated agent) receives a redemption request on a regular
business day from its contract or policy holder, provided that the Fund
receives the order from the insurance company generally by 9:30 A.M. the next
regular business day at the office of its Transfer Agent in Colorado. The
Fund normally sends payment by Federal Funds wire to the insurance company's
account the day after the Fund receives the order (and no later than seven
days after the Fund's receipt of the order). Under unusual circumstances
determined by the Securities and Exchange Commission, payment may be delayed
or suspended.

Dividends, Capital Gains and Taxes

Dividends.  The Fund intends to declare dividends separately for each class
of shares from net investment income on an annual basis, and to pay those
dividends in March. Dividends and distributions will generally be lower for
Service shares, which normally have higher expenses. The Fund has no fixed
dividend rate and cannot guarantee that it will pay any dividends.

      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).

Capital Gains.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year.  The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

Taxes.  For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company.  Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Fund from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable,
if at all, to the participating insurance company.

      This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your
tax advisor or your participating insurance company representative about the
effect of an investment in the Fund under your contract or policy.

Financial Highlights


The Financial Highlights Table is presented to help you understand the Fund's
financial performance for its non-service shares for the past ten fiscal
years.  Certain information reflects financial results for a single Fund
share.  The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions).  This information has been
audited by Deloitte & Touche LLP, the Fund's independent auditors, whose
report, along with the Fund's financial statements, is included in the
Statement of Additional Information, which is available on request.



FINANCIAL HIGHLIGHTS
MULTIPLE STRATEGIES FUND/VA


Non-Service shares   Year Ended December 31,                      2002
2001        2000          1999         1998
- --------------------------------------------------------------------------------


Per Share Operating Data
Net asset value, beginning of period                            $15.40
$16.55      $17.46        $17.05       $17.01
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                              .50
..53         .72           .82          .71
Net realized and unrealized gain (loss)                          (2.02)
(.19)        .38          1.04          .42

- -------------------------------------------------------------
Total from investment operations                                 (1.52)
..34        1.10          1.86         1.13
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                              (.51)
(.64)       (.82)         (.59)        (.16)
Distributions from net realized gain                              (.21)
(.85)      (1.19)         (.86)        (.93)

- -------------------------------------------------------------
Total dividends and/or distributions to shareholders              (.72)
(1.49)      (2.01)        (1.45)       (1.09)
- --------------------------------------------------------------------------------
Net asset value, end of period                                  $13.16
$15.40      $16.55        $17.46       $17.05

=============================================================

- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                              (10.40)%
2.22%       6.44%        11.80%        6.66%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                      $458,848
$593,033    $589,298      $578,783     $622,333
- --------------------------------------------------------------------------------
Average net assets (in thousands)                             $517,516
$599,324    $566,724      $593,151     $640,131
- --------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                             3.31%
3.42%       4.36%         4.46%        4.05%
Expenses                                                          0.74%
0.76%       0.76%         0.73%        0.76% 3
- --------------------------------------------------------------------------------
Portfolio turnover rate
42%        30%         42%           17%          43%


1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.


Service shares    Year Ended December 31,                                2002
1
- -------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period                                   $14.51
- -------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                                     .13
Net realized and unrealized loss                                        (1.50)

- ---------
Total from investment operations                                        (1.37)
- -------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                                       --
Distributions from net realized gain                                       --

- ---------
Total dividends and/or distributions to shareholders                       --
- -------------------------------------------------------------------------------
Net asset value, end of period                                         $13.14

=========

- -------------------------------------------------------------------------------
Total Return, at Net Asset Value 2
(9.44)%

- -------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                               $2,306
- -------------------------------------------------------------------------------
Average net assets (in thousands)                                      $1,037
- -------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                                    3.30%
Expenses                                                                 0.99%
- -------------------------------------------------------------------------------
Portfolio turnover rate                                                    42%


1. For the period from May 1, 2002 (inception of offering) to December 31,
2002.
2. Assumes an investment on the business day before the first day of the
fiscal
period (or inception of offering), 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 of less than one full year.

INFORMATION AND SERVICES
For More Information on Oppenheimer Multiple Strategies Fund/VA

The following additional information about the Fund is available without
charge upon request:

Statement of Additional Information.

This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).

Annual and Semi-Annual Reports.

Additional information about the Fund's investments and performance is
available in the Fund's Annual and Semi-Annual Reports to shareholders. The
Annual Report includes a discussion of market conditions and investment
strategies that significantly affected the Fund's performance during its last
fiscal year.

How to Get More Information

You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund, or instructions on how to contact the
sponsor of your insurance product:
- ---------------------------------------------------------------------------
By Telephone
- ---------------------------------------------------------------------------
Call OppenheimerFunds Services toll-free:
1.800.981.2871

By Mail
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270

Information about the Fund including the Statement of Additional Information can
be reviewed and copied at the SEC's Public  Reference Room in  Washington,  D.C.
Information  on the  operation of the Public  Reference  Room may be obtained by
calling the SEC at 1.202.942.8090.  Reports and other information about the Fund
are  available  on  the  EDGAR  database  on  the  SEC's  Internet   website  at
www.sec.gov.  Copies  may be  obtained  after  payment of a  duplicating  fee by
electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing
to the SEC's Public Reference Section, Washington, D.C. 20549-0102.

No one has been authorized to provide any information about the Fund or
to make any representations about the Fund other than what is contained
in this Prospectus. This Prospectus is not an offer to sell shares of the
Fund, nor a solicitation of an offer to buy shares of the Fund, to any
person in any state or other jurisdiction where it is unlawful to make
such an offer.
The Fund's SEC File No.: 811-4108

PR0670.001.0503
Printed on recycled paper.

                                                     1234

                         Appendix to Prospectus of
                  Oppenheimer Multiple Strategies Fund/VA
             (a series of Oppenheimer Variable Account Funds)

      Graphic material included in the Prospectus of Oppenheimer Multiple
Strategies Fund/VA (the "Fund") under the heading "Annual Total Return
(as of 12/31 each year)":


     A bar chart will be included in the Prospectus of the Fund depicting
the annual total returns of a hypothetical $10,000 investment in
non-service shares of the Fund for each of the ten most recent calendar
years, without deducting separate account expenses.  Set forth below are
the relevant data that will appear on the bar chart:


Calendar
Year
Ended                               Annual Total Returns
- -----                               --------------------


12/31/93                                  15.95%
12/31/94                                  -1.95%
12/31/95                                  21.36%
12/31/96                                  15.50%
12/31/97                                  17.22%
12/31/98                                   6.66%
12/31/99                                  11.80%
12/31/00                                   6.44%
12/31/01                                   2.22%
12/31/02                                  -10.40%


NIA\OVAF\670PSP_2003(b).doc



Oppenheimer
Strategic Bond Fund/VA                         Oppenheimer Strategic Bond
A series of Oppenheimer Variable         Fund/VA is a mutual fund that seeks a
Account Funds                            high level of current income
                                         principally derived from interest on

Prospectus dated May 1, 2003             debt securities. The Fund invest
                                         mainly in three market sectors: debt
                                         securities of foreign government and
                                         companies, U.S. government securities,
                                         and lower-rated high yield securities
                                         of U.S. and foreign companies.

                                               Shares of the Fund are sold only
                                         as the underlying investment for
                                         variable life insurance policies,
                                         variable annuity contracts and other
                                         insurance company separate accounts. A
                                         prospectus for the insurance product
                                         you have selected accompanies this
                                         Prospectus and explains how to select
                                         shares of the Fund as an investment
                                         under that insurance product, and
                                         whether you are only eligible to
                                         purchase Service shares of the Fund.
                                               This Prospectus contains
                                         important information about the Fund's
                                         objective, its investment policies,
                                         strategies and risks. Please read this
                                         Prospectus (and your insurance product
                                         prospectus) carefully before you
                                         invest and keep them for future
                                         reference about your account.

As with all mutual funds, the
Securities and Exchange Commission has
not approved or disapproved the Fund's
securities nor has it determined that
this Prospectus is accurate or
complete. It is a criminal offense to
represent otherwise.

                                                                          1234

CONTENTS


                  ABOUT THE FUND

                  The Fund's Objective and Investment Strategies

                  Main Risks of Investing in the Fund

                  The Fund's Past Performance


                  Fees and Expenses of the Fund


                  About the Fund's Investments

                  How the Fund is Managed


                  INVESTING IN THE FUND

                  How to Buy and Sell Shares

                  Dividends, Capital Gains and Taxes

                  Financial Highlights


About the Fund

The Fund's Objective and Investment Strategies

What is the  Fund's  Investment  Objective?  The  Fund  seeks a high  level of
current income principally derived from interest on debt securities.


What Does the Fund Mainly Invest In?  Under normal market conditions, the
Fund invests at least 80% of its net assets (including any borrowings for
investment purposes) in debt securities.  The Fund invests mainly in debt
securities of issuers in three market sectors: foreign governments and
companies, U.S. government securities and lower-grade high-yield securities
of U.S. and foreign companies. Those debt securities typically include:
o     short,  medium and  long-term  foreign  government  and U.S.  government

         bonds and notes,
o     collateralized mortgage obligations (CMOs),
o     other mortgage-related securities and asset-backed securities,
o     participation interests in loans,
o     "structured" notes,
o     lower-grade,    high-yield   domestic   and   foreign   corporate   debt
         obligations, and
o     "zero-coupon" or "stripped" securities.

      Under normal market conditions, the Fund invests in each of those three
market sectors. However, the Fund is not obligated to do so, and the amount
of its assets in each of the three sectors will vary over time. The Fund can
invest up to 100% of its assets in any one sector at any time, if the Fund's
investment Manager, OppenheimerFunds, Inc. (the "Manager") believes that in
doing so the Fund can achieve its objective without undue risk. The Fund can
invest in securities having short, medium, or long-term maturities and may
invest without limit in lower-grade, high-yield debt obligations, also called
"junk bonds."

What Is A "Debt" Security? A debt security is essentially a loan by the buyer to
the issuer of the debt security.  The issuer  promises to pay back the principal
amount of the loan and normally pays  interest,  at a fixed or variable rate, on
the debt while it is outstanding.

      The Fund's foreign investments can include debt securities of issuers
in developed markets as well as emerging markets, which have special risks.
The Fund can also use hedging instruments and certain derivative investments,
primarily CMOs and "structured" notes, to try to enhance income or to try to
manage investment risks. These investments are more fully explained in "About
the Fund's Investments," below.

How Does the Manager Decide What Securities to Buy or Sell?  In selecting
securities for the Fund, the Fund's portfolio managers analyze the overall
investment opportunities and risks in individual national economies. The
portfolio managers' overall strategy is to build a broadly-diversified
portfolio of debt securities to help moderate the special risks of investing
in high-yield debt instruments and foreign securities. The managers may try
to take advantage of the lack of correlation of price movements that may
occur among the three sectors from time to time. The portfolio managers
currently focus on the factors below (some of which may vary in particular
cases and may change over time), looking for:
      o  Securities offering high current income,
      o  Overall diversification for the portfolio by seeking securities
         whose markets and prices tend to move in different directions, and
      o  Relative values among the three major market sectors in which the
         Fund invests.

Who is the Fund  Designed  For?  The  Fund's  shares  are  available  only as an
investment  option under  certain  variable  annuity  contracts,  variable  life
insurance  policies and  investment  plans  offered  through  insurance  company
separate accounts of participating  insurance  companies,  for investors seeking
high  current  income  from  a  fund  that  ordinarily  will  have   substantial
investments in both domestic and foreign debt securities. Those investors should
be willing to assume the risks of short-term share price  fluctuations  that are
typical for a fund that invests in debt securities,  particularly high-yield and
foreign securities, which have special risks. Since the Fund's income level will
fluctuate,  it is not designed for investors needing an assured level of current
income. Also, the Fund does not seek capital appreciation.  The Fund is designed
as a long-term  investment for investors  seeking an investment  with an overall
sector diversification strategy.  However, the Fund is not a complete investment
program.

Main Risks of Investing in the Fund

      All investments have some degree of risk.  The Fund's investments, in
particular, are subject to changes in their value from a number of factors
described below. There is also the risk that poor security selection by the
Manager will cause the Fund to underperform other funds having a similar
objective.

      The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial percentage of the
securities of any one issuer and by not investing too great a percentage of
the Fund's assets in any one issuer. The Fund's diversification strategies,
both with respect to securities in different sectors and securities issued by
different companies and governments are intended to help reduce the
volatility of the Fund's share prices while seeking current income. Also, the
Fund does not concentrate 25% or more of its investments in the securities of
any one foreign government or in the debt and equity securities of companies
in any one industry.

      However, changes in the overall market prices of securities and the
income they pay can occur at any time. The share price and yield of the Fund
will change daily based on changes in market prices of securities and market
conditions, and in response to other economic events.


Credit Risk.  Debt securities are subject to credit risk.  Credit risk
   relates to the ability of the issuer of a security to make interest and
   principal payments on the security as they become due. If the issuer fails
   to pay interest, the Fund's income might be reduced, and if the issuer
   fails to repay principal, the value of that security and of the Fund's
   shares might be reduced. While the Fund's investments in U.S. government
   securities are subject to little credit risk, the Fund's other investments
   in debt securities, particularly high-yield, lower-grade debt securities,
   are subject to risks of default.

Credit Derivatives.  The Fund may enter into credit default swaps, both (i)
   directly and (ii) indirectly in the form of a swap embedded within a
   structured note, to protect against the risk that a security will default.
   The Fund pays a fee to enter into the trade and receives a fixed payment
   during the life of the swap. If there is a credit event, the Fund either
   delivers the defaulted bond (if the Fund has taken the short position in
   the credit default swap) or pays the par amount of the defaulted bond (if
   the Fund has taken the long position in the credit default swap note).
   Risks of credit default swaps include the cost of paying for credit
   protection if there are no credit events.

|_|  Special Risks of Lower-Grade Securities.  Because the Fund can invest
   without limit in securities below investment grade to seek high current
   income, the Fund's credit risks are greater than those of funds that buy
   only investment-grade bonds. Lower-grade debt securities may be subject to
   greater market fluctuations and greater risks of loss of income and
   principal than investment-grade debt securities. Securities that are (or
   that have fallen) below investment grade are exposed to a greater risk
   that the issuers of those securities might not meet their debt
   obligations. The market for these securities may be less liquid, making it
   difficult for the Fund to sell them quickly at an acceptable price. These
   risks can reduce the Fund's share prices and the income it earns.


Risks of Foreign Investing.  The Fund can invest its assets without limit in
   foreign government and corporate debt securities and can buy securities of
   governments and companies in both developed markets and emerging markets.
   The Fund normally invests significant amounts of its assets in foreign
   securities. While foreign securities offer special investment
   opportunities, there are also special risks that can reduce the Fund's
   share prices and returns.

   The change in value of a foreign currency against the U.S. dollar will
   result in a change in the U.S. dollar value of securities denominated in
   that foreign currency.  Currency rate changes can also affect the
   distributions the Fund makes from the income it receives from foreign
   securities as foreign currency values change against the U.S. dollar.
   Foreign investing can result in higher transaction and operating costs for
   the Fund. Foreign issuers are not subject to the same accounting and
   disclosure requirements that U.S. companies are subject to.


   The value of foreign investments may be affected by exchange control
   regulations, expropriation or nationalization of a company's assets,
   foreign taxes, delays in settlement of transactions, changes in
   governmental economic or monetary policy in the U.S. or abroad, or other
   political and economic factors.

|_|  Special Risks of Emerging and Developing Markets.  Securities of issuers
   in emerging and developing markets may offer special investment
   opportunities but present risks not found in more mature markets. Those
   securities may be more difficult to sell at an acceptable price and their
   prices may be more volatile than securities of issuers in more developed
   markets. Settlements of trades may be subject to greater delays so that
   the Fund may not receive the proceeds of a sale of a security on a timely
   basis.

   These countries might have less developed trading markets and exchanges.
   Emerging market countries may have less developed legal and accounting
   systems and investments may be subject to greater risks of government
   restrictions on withdrawing the sales proceeds of securities from the
   country. Economies of developing countries may be more dependent on
   relatively few industries that may be highly vulnerable to local and
   global changes. Governments may be more unstable and present greater risks
   of nationalization or restrictions on foreign ownership of securities of
   local companies. These investments may be substantially more volatile than
   debt securities of issuers in the U.S. and other developed countries and
   may be very speculative.

Interest Rate Risks. The prices of debt securities, including U.S. government
   securities, are subject to change when prevailing interest rates change.
   When interest rates fall, the values of already-issued debt securities
   generally rise.  When interest rates rise, the values of already-issued
   debt securities generally fall, and they may sell at a discount from their
   face amount. The magnitude of these fluctuations will often be greater for
   longer-term debt securities than shorter-term debt securities.  The Fund's
   share prices can go up or down when interest rates change because of the
   effect of the changes on the value of the Fund's investments in debt
   securities. Also, if interest rates fall, the Fund's investments in newly
   issued securities with lower yields will reduce the Fund's income.

Prepayment Risk. Prepayment risk is the risk that the issuer of a security
   can prepay the principal prior to the security's expected maturity. The
   prices and yields of mortgage-related securities are determined, in part,
   by assumptions about the cash flows from the rate of payments of the
   underlying mortgages. Changes in interest rates may cause the rate of
   expected prepayments of those mortgages to change. In general, prepayments
   increase when general interest rates fall and decrease when general
   interest rates rise. Securities subject to prepayment risk, including the
   mortgage-related securities that the Fund buys, have greater potential for
   losses when interest rates rise than other types of debt securities.


   The impact of prepayments on the price of a security may be difficult to
   predict and may increase the volatility of the price. Interest-only and
   principal-only "stripped" securities can be particularly volatile when
   interest rates change. If the Fund buys mortgage-related securities at a
   premium, accelerated prepayments on those securities could cause the Fund
   to lose a portion of its principal investment represented by the premium
   the Fund paid.

   If prepayments of mortgages underlying a CMO occur faster than expected
   when interest rates fall, the market value and yield of the CMO could be
   reduced.  If interest rates rise rapidly, prepayments may occur at slower
   rates than expected, which could have the effect of lengthening the
   expected maturity of a short or medium-term security. That could cause the
   value of the security to fluctuate more widely in response to changes in
   interest rates and this could cause the value of the Fund's shares to fall.


Sector Allocation Risks. The Manager's expectations about the relative
   performance of the three principal sectors in which the Fund invests may
   be inaccurate, and the Fund's returns might be less than other funds using
   similar strategies.

Risk of Derivative Investments. The Fund can use derivatives to seek
   increased income or to try to hedge investment risks. In general terms, a
   derivative investment is an investment contract whose value depends on (or
   is derived from) the value of an underlying asset, interest rate or index.
   Options, futures, forwards, interest rate swaps, structured notes and CMOs
   are examples of derivatives the Fund can use.


   If the issuer of the derivative does not pay the amount due, the Fund can
   lose money on the investment. Also, the underlying security or investment
   on which the derivative is based, and the derivative itself, might not
   perform the way the Manager expected it to perform. If that happens, the
   Fund's share price could decline or the Fund could get less income than
   expected. The Fund has limits on the amount of particular types of
   derivatives it can hold. However, using derivatives can cause the Fund to
   lose money on its investment and/or increase the volatility of its share
   prices.

HOW RISKY IS THE FUND OVERALL? The risks described above collectively form
the overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance and its price per share. Particular
investments and investment strategies also have risks.  These risks mean that
you can lose money by investing in the Fund. When you redeem your shares,
they may be worth more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment objective.


In the short term, the values of debt securities can fluctuate substantially
because of interest rate changes. Foreign debt securities, particularly those
of issuers in emerging markets, and high yield securities can be volatile,
and the price of the Fund's shares can go up and down substantially because
of events affecting foreign markets or issuers or events affecting the high
yield market. The Fund's sector and security diversification strategy may
help cushion the Fund's shares prices from that volatility, but debt
securities are subject to other credit and interest rate risks that can
affect their values and the share prices of the Fund. The Fund generally has
more risks than bond funds that focus on U.S. government securities and
investment-grade bonds but may be less volatile than bond funds that focus
solely on investments in a single foreign sector, such as emerging markets.


An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

The Fund's Past Performance


      The bar chart and table below show one measure of the risks of
investing in the Fund, by showing changes in the Fund's performance (for its
non-service shares) from year to year for the last 10 calendar years and by
showing how the average annual total returns of the Fund's shares compare to
those of broad-based market indices. The Fund's past investment performance
is not necessarily an indication of how the Fund will perform in the future.


                 Annual Total Returns (as of 12/31 each year)

    [See appendix to prospectus for data in bar chart showing annual total
                                   returns]

Charges imposed by the separate accounts that invest in the Fund are not
included in the calculations of return in this bar chart, and if those
charges were included, the returns would be less than those shown.


During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 5.90% (2nd Qtr `95) and the lowest return (not
annualized) for a calendar quarter was -3.70% (1st Qtr `94).


- ---------------------------------------------------------------------------------
Average Annual Total

Returns for the periods      1 Year            5 Years            10 Years
ended December 31, 2001                   (or life of class   (or life of class
                                              if less)            if less)

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer Strategic

Bond             Fund/VA      7.44%             4.11%               5.80%
Non-Service Shares

(inception 5/3/93)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lehman Brothers

Aggregate Bond Index         10.25%             7.55%              7.26%1

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Salomon Brothers World

Government Bond Index        19.49%             5.82%              6.07%1

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Oppenheimer Strategic

Bond Fund/VA Service          7.03%             5.01%                N/A
Shares (inception

3/19/01)
- ---------------------------------------------------------------------------------

1. From 4/30/93.


The Fund's returns in the table measure the performance of a hypothetical
account without deducting charges imposed by the separate accounts that
invest in the Fund and assume that all dividends and capital gains
distributions have been reinvested in additional shares. Because the Fund
invests in a variety of domestic and foreign corporate and government debt
securities, the Fund's performance is compared to the Lehman Brothers
Aggregate Bond Index, an unmanaged index of U.S. corporate and government
bonds, and to the Salomon Brothers World Government Bond Index, an unmanaged
index of debt securities of major foreign governments. However, it must be
remembered that the index performance reflects the reinvestment of income but
does not consider the effects of fees, expenses or transaction costs. Also,
the Fund may have investments that vary from the index.


The Fund's total returns should not be expected to be the same as the returns
of other Oppenheimer funds, even if both funds have the same portfolio
managers and/or similar names.


Fees and Expenses of the Fund

The following tables are provided to help you understand the fees and
expenses you may pay if you buy and hold shares of the Fund. The Fund pays a
variety of expenses directly for management of its assets, administration,
distribution of its shares and other services. Those expenses are subtracted
from the Fund's assets to calculate the Fund's net asset values per share.
All shareholders therefore pay those expenses indirectly. The numbers below
are based on the Fund's expenses during its fiscal year ended December 31,
2002.

Shareholder Fees.  The Fund does not charge any initial sales charge to buy
shares or to reinvest dividends.  There are no exchange fees or redemption
fees and no contingent deferred sales charges. Please refer to the
accompanying prospectus of the participating insurance company for
information on initial or contingent deferred sales charges, exchange fees or
redemption fees for that variable life insurance policy, variable annuity or
other investment product.  Those charges and fees are not reflected in either
of the tables below.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)


- --------------------------------------------------------------------------------

                                    Non-Service Shares       Service Shares

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Management Fees                           0.74%                   0.74%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Distribution and Service                   None                   0.25%
(12b-1) Fees

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Other Expenses                            0.05%                   0.07%

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Total Annual Operating Expenses           0.79%                   1.06%

- --------------------------------------------------------------------------------


Expenses may vary in future years. "Other expenses" in the table include
transfer agent fees, custodial fees, and accounting and legal expenses the
Fund pays. The Fund's transfer agent has voluntarily agreed to limit transfer
and shareholder servicing agent fees to 0.35% per fiscal year, for both
classes. That undertaking may be amended or withdrawn at any time.  After the
management fee limitation described under "the Manager" in the Statement of
Additional Information, which is no longer in effect, and the transfer agent
waiver, the actual "Management Fees" were 0.73% as percentage of daily net
assets for each class of shares, and "Total Operating Expenses" were 0.78%
for non-service shares and 1.03% for service shares.

EXAMPLE.  The  following  example is  intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in shares of the Fund for the
time periods indicated, reinvest you dividends and distributions and then
redeem all of your shares at the end of those periods.  The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same.  Your actual costs may be higher or
lower, because expenses will vary over time.  Based on these assumptions your
expenses would be as follows, whether or not you redeem your investment at
the end of each period:


- ------------------------------------------------------------------------------

                              1 Year      3 Years     5 Years     10 Years

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Non-Service Shares             $81         $252        $439         $978

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Service Shares                 $108        $337        $585        $1,294

- ------------------------------------------------------------------------------

About the Fund's Investments

THE FUND'S PRINCIPAL INVESTMENT POLICIES.  The allocation of the Fund's
portfolio among the different types of permitted investments will vary over
time based upon the Manager's evaluation of economic and market trends. At
times the Fund might emphasize investments in one or two sectors because of
the Manager's evaluation of the opportunities for high current income from
debt securities in those sectors relative to other sectors. The Fund's
portfolio might not always include all of the different types of investments
described below. The Statement of Additional Information contains more
detailed information about the Fund's investment policies and risks.

      The Fund can invest in different types of debt securities described
below.  A debt security is essentially a loan by the buyer to the issuer of
the debt security. The issuer promises to pay back the principal amount of
the loan and normally pays interest, at a fixed or variable rate, on the debt
while it is outstanding. The debt securities the Fund buys may be rated by
nationally recognized rating organizations or they may be unrated securities
assigned an equivalent rating by the Manager. The Fund's investments may be
investment grade or below investment grade in credit quality and the Fund can
invest without limit in below investment-grade debt securities, commonly
called "junk bonds."  These typically offer higher yields than investment
grade bonds, because investors assume greater risks of default of these
securities.  The ratings definitions of the principal national rating
organizations are included in Appendix A to the Statement of Additional
Information.

      The Fund can invest some of its assets in other types of securities,
including common stocks and other equity securities of foreign and U.S.
companies. However, the Fund does not anticipate having significant
investments in those types of securities as part of its normal portfolio
strategies. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.


|X|  U.S. Government Securities.  The Fund can invest in securities issued or
guaranteed by the U.S. Treasury or other government agencies or
federally-chartered corporate entities referred to as "instrumentalities."
These are referred to as "U.S. government securities" in this Prospectus.


o     U.S. Treasury Obligations.  These include Treasury bills (which have
      maturities of one year or less when issued), Treasury notes (which have
      maturities of from one to ten years when issued), and Treasury bonds
      (which have maturities of more than ten years when issued). Treasury
      securities are backed by the full faith and credit of the United States
      as to timely payments of interest and repayments of principal. The Fund
      can also buy U.S. Treasury securities that have been "stripped" of
      their coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury
      securities described below, and Treasury Inflation-Protection
      Securities ("TIPS").


o     Obligations Issued or Guaranteed by U.S. Government Agencies or
      Instrumentalities. These include direct obligations and
      mortgage-related securities that have different levels of credit
      support from the U.S. government. Some are supported by the full faith
      and credit of the U.S. government, such as Government National Mortgage
      Association pass-through mortgage certificates (called "Ginnie Maes").
      Some are supported by the right of the issuer to borrow from the U.S.
      Treasury under certain circumstances, such as Federal National Mortgage
      Association bonds ("Fannie Maes"). Others are supported only by the
      credit of the entity that issued them, such as Federal Home Loan
      Mortgage Corporation obligations ("Freddie Macs").

o     Mortgage-Related U.S. Government Securities.  The Fund can buy
      interests in pools of residential or commercial mortgages, in the form
      of collateralized mortgage obligations ("CMOs") and other
      "pass-through" mortgage securities. CMOs that are U.S. government
      securities have collateral to secure payment of interest and principal.
      They may be issued in different series each having different interest
      rates and maturities. The collateral is either in the form of mortgage
      pass-through certificates issued or guaranteed by a U.S. agency or
      instrumentality or mortgage loans insured by a U.S. government agency.
      The Fund can have substantial amounts of its assets invested in
      mortgage-related U.S. government securities.


      The prices and yields of CMOs are determined, in part, by assumptions
      about the cash flows from the rate of payments of the underlying
      mortgages. Changes in interest rates may cause the rate of expected
      prepayments of those mortgages to change. In general, prepayments
      increase when general interest rates fall and decrease when interest
      rates rise.

      If prepayments of mortgages underlying a CMO occur faster than expected
      when interest rates fall, the market value and yield of the CMO could
      be reduced.  When interest rates rise rapidly, if prepayments occur
      more slowly than expected, a short or medium-term CMO can in effect
      become a long-term security, subject to greater fluctuations in value.
      These prepayment risks can make the prices of CMOs very volatile when
      interest rates change. The prices of longer-term debt securities tend
      to fluctuate more than those of shorter-term debt securities. That
      volatility will affect the Fund's share prices.


Forward  Rolls.  The Fund may enter into "forward  roll" (also  referred to as
      "mortgage dollar rolls")  transactions with respect to  mortgage-related
      securities.   In  this   type  of   transaction,   the   Fund   sells  a
      mortgage-related  security  to a  buyer  and  simultaneously  agrees  to
      repurchase a similar security at a later date at a set price.

            During  the period  between  the sale and the  purchase,  the Fund
      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 Fund sells may decline  below the price at which
      the  Fund  is  obligated   to   repurchase   securities,   or  that  the
      counterparty might default in its obligation.

High-Yield, Lower-Grade Debt Securities. The Fund can purchase a variety of
   lower-grade, high-yield debt securities of U.S. and foreign issuers,
   including bonds, debentures, notes, preferred stocks, loan participation
   interests, structured notes, asset-backed securities, among others, to
   seek high current income. These securities are sometimes called "junk
   bonds."


Lower-grade  debt  securities  are those rated below "Baa" by Moody's  Investors
Service,  Inc. or lower than "BBB" by Standard  &  Poor's Rating  Service or
that have similar ratings by other  nationally-recognized  rating organizations.
The Fund can invest in  securities  rated as low as "C" or "D", in unrated bonds
or bonds which are in default at the time the Fund buys them.  While  securities
rated "Baa" by Moody's or "BBB" by S&P are  considered  "investment  grade,"
they have some speculative characteristics.

The Manager does not rely solely on ratings issued by rating  organizations when
selecting  investments  for the Fund. The Fund can buy unrated  securities  that
offer high current income.  The Manager assigns a rating to an unrated  security
that is equivalent to the rating of a rated  security that the Manager  believes
offers comparable yields and risks.


Private-Issuer Mortgage-Backed Securities. The Fund can invest a substantial
   portion of its assets in mortgage-backed securities issued by private
   issuers, which do not offer the credit backing of U.S. government
   securities. Primarily these include multi-class debt or pass-through
   certificates secured by mortgage loans. They may be issued by banks,
   savings and loans, mortgage bankers and other non-governmental issuers.
   Private issuer mortgage-backed securities are subject to the credit risks
   of the issuers (as well as the interest rate risks and prepayment risks of
   CMOs, discussed above), although in some cases they may be supported by
   insurance or guarantees.


Asset-Backed Securities. The Fund can buy asset-backed securities, which are
   fractional interests in pools of loans collateralized by the loans or
   other assets or receivables. They are issued by trusts and special purpose
   corporations that pass the income from the underlying pool to the buyer of
   the interest. These securities are subject to the risk of default by the
   issuer as well as by the borrowers of the underlying loans in the pool, as
   well as interest rate and prepayment risks.

Foreign Securities.  The Fund can buy a variety of debt securities issued by
   foreign governments and companies, as well as "supra-national" entities,
   such as the World Bank. They can include bonds, debentures, and notes,
   including derivative investments called "structured" notes, described
   below. The Fund's foreign debt investments can be denominated in U.S.
   dollars or in foreign currencies. The Fund will buy foreign currency only
   in connection with the purchase and sale of foreign securities and not for
   speculation.

o     Investments in Emerging and Developing Markets. The Fund can buy "Brady
         Bonds," which are U.S.-dollar denominated debt securities
         collateralized by zero-coupon U.S. Treasury securities. They are
         typically issued by emerging markets countries and are considered
         speculative securities with higher risks of default.

SPECIAL PORTFOLIO DIVERSIFICATION REQUIREMENTS.  To enable a variable annuity
or variable life insurance contract based on an insurance company separate
account to qualify for favorable tax treatment under the Internal Revenue
Code, the underlying investments must follow special diversification
requirements that limit the percentage of assets that can be invested in
securities of particular issuers. The Fund's investment program is managed to
meet those requirements, in addition to other diversification requirements
under the Internal Revenue Code and the Investment Company Act that apply to
publicly-sold mutual funds.

      Failure by the Fund to meet those special requirements could cause
earnings on a contract owner's interest in an insurance company separate
account to be taxable income. Those diversification requirements might also
limit, to some degree, the Fund's investment decisions in a way that could
reduce its performance.


CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Shareholders will receive 60 days advance notice of any
changes in the 80% requirement (a non-fundamental policy) described above
under "What Does The Fund Mainly Invest In?"  Fundamental policies are those
that cannot be changed without the approval of a majority of the Fund's
outstanding voting shares. The Fund's investment objective is a fundamental
policy. Other investment restrictions that are fundamental policies are
listed in the Statement of Additional Information. An investment policy is
not fundamental unless this Prospectus or the Statement of Additional
Information says that it is.


Portfolio Turnover.  The Fund may engage in short-term trading to try to
   achieve its objective. Portfolio turnover affects brokerage and
   transaction costs the Fund pays. The Financial Highlights table below
   shows the Fund's portfolio turnover rates during prior fiscal years.

OTHER INVESTMENT STRATEGIES.  To seek its objective, the Fund can also use
the investment techniques and strategies described below. The Manager might
not always use all of the different types of techniques and investments
described below. These techniques involve certain risks, although some are
designed to help reduce investment or market risks.

Zero-Coupon and "Stripped" Securities.  Some of the government and corporate
   debt securities the Fund buys are zero-coupon bonds that pay no interest.
   They are issued at a substantial discount from their face value.
   "Stripped" securities are the separate income or principal components of a
   debt security. Some CMOs or other mortgage-related securities may be
   stripped, with each component having a different proportion of principal
   or interest payments. One class might receive all the interest and the
   other all the principal payments.

   Zero-coupon and stripped securities are subject to greater fluctuations in
   price from interest rate changes than conventional interest-bearing
   securities. The Fund may have to pay out the imputed income on zero-coupon
   securities without receiving the actual cash currently. The Fund can
   invest up to 50% of its total assets in zero-coupon securities issued by
   either the U.S. Treasury or companies.

   The values of interest-only and principal only mortgage-related securities
   are also very sensitive to prepayments of underlying mortgages.
   Principal-only securities are also sensitive to prepayment of underlying
   mortgages and changes in interest rates. When prepayments tend to fall,
   the timing of the cash flows to these securities increases, making them
   more sensitive to changes in interest rates. The market for some of these
   securities may be limited, making it difficult for the Fund to dispose of
   its holdings at an acceptable price.

Participation Interests in Loans. These securities represent an undivided
      fractional interest in a loan obligation by a borrower. They are
      typically purchased from banks or dealers that have made the loan or
      are members of the loan syndicate. The loans may be to foreign or U.S.
      companies. The Fund does not invest more than 5% of its net assets in
      participation interests of any one borrower. They are subject to the
   risk of default by the borrower. If the borrower fails to pay interest or
   repay principal, the Fund can lose money on its investment.

Illiquid and Restricted Securities.  Investments may be illiquid because
   there is no active trading market for them, making it difficult to value
   them or dispose of them promptly at an acceptable price. A restricted
   security is one that has a contractual restriction on its resale or which
   cannot be sold publicly until it is registered under the Securities Act of
   1933. The Fund will not invest more than 15% of its net assets in illiquid
   or restricted securities.  Certain restricted securities that are eligible
   for resale to qualified institutional purchasers may not be subject to
   that limit. The Manager monitors holdings of illiquid securities on an
   ongoing basis to determine whether to sell any holdings to maintain
   adequate liquidity.

Derivative Investments. The Fund can invest in a number of different kinds of
   "derivative" investments. In general terms, a derivative investment is an
   investment contract whose value depends on (or is derived from) the value
   of an underlying asset, interest rate or index. In the broadest sense,
   options, futures contracts, and other hedging instruments the Fund might
   use may be considered "derivative" investments. In addition to using
   derivatives for hedging, the Fund might use other derivative investments
   because they offer the potential for increased income. The Fund currently
   does not use derivatives to a significant degree and is not required to
   use them in seeking its objective.

   Derivatives have risks. If the issuer of the derivative investment does
   not pay the amount due, the Fund can lose money on the investment. The
   underlying security or investment on which a derivative is based, and the
   derivative itself, may not perform the way the Manager expected it to. As
   a result of these risks the Fund could realize less principal or income
   from the investment than expected or its hedge might be unsuccessful. As a
   result, the Fund's share prices could fall. Certain derivative investments
   held by the Fund might be illiquid.

"Structured" Notes. The Fund can buy "structured" notes, which are
   specially-designed derivative debt investments.  Their principal payments
   or interest payments are linked to the value of an index (such as a
   currency or securities index) or commodity. The terms of the instrument
   may be "structured" by the purchaser (the Fund) and the borrower issuing
   the note.

   The value of these notes will fall or rise in response to the changes in
   the values of the underlying security or index. They are subject to both
   credit and interest rate risks and therefore the Fund could receive more
   or less than it originally invested when the notes mature, or it might
   receive less interest than the stated coupon payment if the underlying
   investment or index does not perform as anticipated. The prices of these
   notes may be very volatile and they may have a limited trading market,
   making it difficult for the Fund to sell its investment at an acceptable
   price.

Hedging. The Fund can buy and sell futures contracts, put and call options,
   and forward contracts.  These are all referred to as "hedging
   instruments." The Fund is not required to use other hedging instruments to
   seek its objective. The Fund does not use hedging instruments for
   speculative purposes and has limits on its use of them.

   The Fund could buy and sell options, futures and forward contracts for a
   number of purposes. It might do so to try to hedge against falling prices
   of its portfolio securities or to establish a position in the securities
   market as a temporary substitute for purchasing individual securities.  It
   might do so to try to manage its exposure to changing interest rates.
   Forward contracts and currency options can be used to try to manage
   foreign currency risks on the Fund's foreign investments. The Fund could
   write covered call options to seek cash for liquidity purposes or to
   distribute to shareholders.

   Options trading involves the payment of premiums and has special tax
   effects on the Fund. If a covered call written by the Fund is exercised on
   an investment that has increased in value, the Fund will be required to
   sell the investment at the call price and will not be able to realize any
   profit if the investment has increased in value above the call price.
   There are also special risks in particular hedging strategies. If the
   Manager used a hedging instrument at the wrong time or judged market
   conditions incorrectly, the strategy could reduce the Fund's return.  The
   Fund could also experience losses if the prices of its futures and options
   positions were not correlated with its other investments or if it could
   not close out a position because of an illiquid market.


  Temporary Defensive and Interim Investments.  In times of unstable adverse
market or economic conditions, the Fund can invest up to 100% of its assets
in temporary investments that are inconsistent with the Funds' principal
investment strategies.  Generally they would be cash or cash equivalents,
such as U.S. Treasury Bills and other short-term U.S. government obligations
or high-grade commercial paper.  The Fund can also hold these types of
securities pending the investment of proceeds from the sale of Fund shares or
portfolio securities or to meet anticipated redemptions of Fund shares.  To
the extent the Fund invests defensively in these securities, it might not
achieve its investment objectives.


How the Fund Is Managed


The Manager.  The Fund's investment Manager, OppenheimerFunds, Inc., chooses
the Fund's investments and handles its day-to-day business.  The Manager
carries out its duties, subject to the policies established by the Board of
Trustees, under an Investment Advisory Agreement that states the Manager's
responsibilities.  The Agreement sets forth the fees paid by the Fund to the
Manager and describes the expenses that the Fund is responsible to pay to
conduct its business.

      The Manager has been an investment adviser since 1960.  The Manager and
its subsidiaries and affiliates managed $120 billion in assets as of March
31, 2003 including other Oppenheimer funds, with more than 7 million
shareholder accounts.  The Manager is located at 498 Seventh Avenue, New
York, New York 10018.

Portfolio Managers.  The portfolio manager of the Fund is Arthur P.
   Steinmetz. He has been the person principally responsible for the
   day-to-day management of the Fund's portfolio since its inception in May
   1993.  He is Vice President of the Fund and Senior Vice President of the
   Manager.  He also serve as officer and portfolio manager for other
   Oppenheimer funds.  Mr. Steinmetz has been employed by the Manager since
   1986.

Advisory Fees.  Under the Investment Advisory Agreement, the Fund pays the
   Manager an advisory fee at an annual rate that declines on additional
   assets as the Fund grows: 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% on the next $200 million
   and 0.50% of average annual net assets over $1 billion. The Fund's
   management fee for its fiscal year ended December 31, 2002, was 0.74% of
   the Fund's average annual net assets for each class of shares. That fee
   was 0.73% after a non-recurring management fee limitation, described under
   "The Manager" in the Statement of Additional Information.


Possible Conflicts of Interest. The Fund offers its shares to separate
   accounts of different insurance companies that are not affiliated with
   each other, as an investment for their variable annuity, variable life and
   other investment product contracts. While the Fund does not foresee any
   disadvantages to contract owners from these arrangements, it is possible
   that the interests of owners of different contracts participating in the
   Fund through different separate accounts might conflict. For example, a
   conflict could arise because of differences in tax treatment.

   The Fund's Board has procedures to monitor the portfolio for possible
   conflicts to determine what action should be taken. If a conflict occurs,
   the Board might require one or more participating insurance company
   separate accounts to withdraw their investments in the Fund. That could
   force the Fund to sell securities at disadvantageous prices, and orderly
   portfolio management could be disrupted. Also, the Board might refuse to
   sell shares of the Fund to a particular separate account, or could
   terminate the offering of the Fund's shares if required to do so by law or
   if it would be in the best interests of the shareholders of the Fund to do
   so.

INVESTING IN THE FUND

How to Buy and Sell Shares

HOW ARE SHARES PURCHASED?  Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That Prospectus will indicate whether
you are only eligible to purchase Service shares of the Fund. The Fund
reserves the right to refuse any purchase order when the Manager believes it
would be in the Fund's best interests to do so.

      |X| Market Timers.  The Fund has instructed its participating insurance
companies that it may restrict or refuse investments by their separate
accounts from market timers.  "Market timers" include persons whose separate
account transactions have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier exchange request, (ii) exchanges out of the
Fund more than twice in any calendar quarter, (iii) an exchange of Fund
shares equal to at least $5 million, or more than 1% of the Fund's net
assets, or (iv) other transactions in Fund shares that demonstrated a timing
pattern.  Separate accounts under common ownership or control are combined
for these limits. There can be no assurance that all such participating
insurance companies will be successful in controlling investments in their
respective separate accounts by market timers.

- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------

AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price, which
is the net asset value per share. The Fund does not impose any sales charge
on purchases of its shares. If there are any charges imposed under the
variable annuity, variable life or other contract through which Fund shares
are purchased, they are described in the accompanying prospectus of the
participating insurance company.


Net Asset Value.  The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange ("the Exchange"), on
each day the Exchange is open for trading (referred to in this Prospectus as
a "regular business day"). The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.


      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security. A security's valuation may differ depending on the method used
for determining value.


      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
owners to purchase Fund shares on a regular business day, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M. on
the next regular business day at the offices of its Transfer Agent in Denver,
Colorado.


      |X| Classes of Shares.  The Fund offers two different classes of
shares. The class designated as Service shares are subject to a Distribution
and Service Plan. The impact of the expenses of the Plan on Service shares is
described below.  The class of shares that are not subject to a Plan has no
class "name" designation. The different classes of shares represent
investments in the same portfolio of securities but are expected to have
different expenses and share prices.


Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution related services for the Fund's Service shares. Under the Plan,
payments are made quarterly at an annual rate of up to 0.25% of the average
annual net assets of Service shares of the Fund. The distributor currently
uses all of those fees to compensate sponsor(s) of the insurance product that
offers Fund shares, for providing personal service and maintenance of
accounts of their variable contract owners that hold Service shares.  The
impact of the service plan is to increase operating expenses of the Service
shares, which results in lower performance compared to the Fund's shares that
are not subject to a service fee.

HOW ARE SHARES REDEEMED?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares. Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.

      The share price that applies to a redemption order is the next net
asset value per share that is determined after the participating insurance
company (as the Fund's designated agent) receives a redemption request on a
regular business day from its contract or policy holder, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M.
the next regular business day at the office of its Transfer Agent in Denver,
Colorado. The Fund normally sends payment by Federal Funds wire to the
insurance company's account the day after the Fund receives the order (and no
later than 7 days after the Fund's receipt of the order). Under unusual
circumstances determined by the Securities and Exchange Commission, payment
may be delayed or suspended.

Dividends, Capital Gains and Taxes

DIVIDENDS.  The Fund intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis and to pay
those dividends in March. Dividends and distributions will generally be lower
for Service shares, which normally have higher expenses. The Fund has no
fixed dividend rate and cannot guarantee that it will pay any dividends.


      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).


CAPITAL GAINS.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year.  The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.

TAXES.  For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Fund may be purchased
only through insurance company separate accounts for variable
annuity contracts, variable life insurance policies or other investment
products, dividends paid by the Fund from net investment income and
distributions (if any) of net realized short-term and long-term capital gains
will be taxable, if at all, to the participating insurance company.

      This information is only a summary of certain federal income tax
information about an investment in Fund shares. You should consult with your
tax advisor or your participating insurance company representative about the
effect of an investment in the Fund under your contract or policy.

Financial Highlights


The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past five fiscal years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte &; Touche LLP,
the Fund's independent auditors, whose report, along with the Fund's
financial statements, is included in the Statement of Additional Information,
which is available on request.


FINANCIAL HIGHLIGHTS
STRATEGIC BOND FUND/VA

Non-Service shares    Year Ended December 31,                  2002
2001          2000          1999          1998
- --------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of period                          $4.62
$4.69         $4.97        $ 5.12        $ 5.12
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                           .29
..41           .41           .45           .39
Net realized and unrealized gain (loss)                         .03
(.19)         (.28)         (.31)         (.24)

- --------------------------------------------------------------
Total from investment operations                                .32
..22           .13           .14           .15
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                           (.37)
(.29)         (.41)         (.29)         (.09)
Distributions from net realized gain
- --            --            --            --          (.06)

- --------------------------------------------------------------
Total dividends and/or distributions to shareholders           (.37)
(.29)         (.41)         (.29)         (.15)
- --------------------------------------------------------------------------------
Net asset value, end of period                                $4.57
$4.62         $4.69         $4.97         $5.12

==============================================================

- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                             7.44%
4.85%         2.63%         2.83%         2.90%
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands)                   $406,126
$351,686      $304,562      $282,086      $279,200
- --------------------------------------------------------------------------------
Average net assets (in thousands)                          $374,519
$330,711      $289,923      $278,668      $250,227
- --------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                          6.89%
8.78%         9.23%         9.08%         8.17%
Expenses                                                       0.79%
0.79%         0.79%         0.78%         0.80% 3
Expenses, net of reduction to custodian expenses
and/or voluntary reimbursement of expenses                     0.78%
0.79%         0.79%         0.78%         0.80%
- --------------------------------------------------------------------------------
Portfolio turnover rate                                          65%
104%          104%           81%          134%

1. Assumes an  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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

Service shares    Year Ended December  31,                 2002        2001 1

- --------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of
period                                            $ 4.73        $ 4.64
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment
income
..03           .15
Net realized and unrealized gain (loss)
                                  .28          (.06)
- ---------------------
Total from investment
operations                                                   .31           .09
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income                                              (.37)           --
Distributions from net realized
gain                                                --            --

- ---------------------
Total dividends and/or distributions to shareholders
                        (.37)           --
- --------------------------------------------------------------------------------
Net asset value, end of
period                                                   $4.67         $4.73

=====================
- --------------------------------------------------------------------------------
Total Return, at Net Asset Value 2
                     7.03%         1.94%

- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)
     $8,138            $4
- --------------------------------------------------------------------------------
Average net assets (in
thousands)                                               $2,307            $2
- --------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment
income
5.40%         8.17%
Expenses
                                   1.06%         0.92%
Expenses, net of reduction to custodian expenses and/or voluntary
reimbursement of expenses and/or waiver of transfer agent
fees                    1.03%         0.92%
- --------------------------------------------------------------------------------
Portfolio turnover
rate                                                             65%
104%

1. For the period from March 19, 2001  (inception  of  offering) to December 31,
2001.
2. Assumes an  investment on the business day before the first day of the fiscal
period  (or  inception  of  offering),  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 des 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 of less than one full year.

INFORMATION AND SERVICES


For More Information on Oppenheimer Strategic Bond Fund/VA
The following additional information about the Fund is available without
charge upon request:

STATEMENT OF ADDITIONAL INFORMATION. This document includes additional
information about the Fund's investment policies, risks, and operations. It
is incorporated by reference into this Prospectus (which means it is legally
part of this Prospectus).

ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.


How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund or instructions on how to contact the
sponsor of your insurance product:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

By Telephone:                 Call OppenheimerFunds Services toll-free:
                              1.800.981.2871

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

By Mail:                      Write to:
                              OppenheimerFunds Services
                              P.O. Box 5270
                              Denver, Colorado 80217-5270

- ------------------------------------------------------------------------------


Information about the Fund including the Statement of Additional Information
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1.202.942.8090.  Reports and other information
about the Fund are available on the EDGAR database on the SEC's Internet
website at www.sec.gov. Copies may be obtained after payment of a duplicating
fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or
by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102.


No one has been authorized to provide any information about the Fund or to
make any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any
state or other jurisdiction where it is unlawful to make such an offer.


The Fund's shares are distributed by:                [logo]   OppenheimerFunds
Distributor, Inc.

The Fund's SEC File No. 811-4108

PR0265.001.0503
Printed on recycled paper



                         Appendix to Prospectus of
                    Oppenheimer Strategic Bond Fund/VA
             (a series of Oppenheimer Variable Account Funds)

      Graphic material included in the Prospectus of Oppenheimer
Strategic Bond Fund/VA (the "Fund") under the heading "Annual Total
Return (as of 12/31 each year)":


      A bar chart will be included in the Prospectus of the Fund depicting
the annual total returns of a hypothetical $10,000 investment in
Non-Service shares of the Fund for each of the most recent calendar years,
without deducting separate account expenses.  Set forth below are the
relevant data that will appear on the bar chart:


Calendar
Year
Ended                               Annual Total Returns
- -----                               --------------------


12/31/94                                  -3.78%
12/31/95                                  15.33%
12/31/96                                  12.07%
12/31/97                                   8.71%
12/31/98                                   2.90%
12/31/99                                   2.83%
12/31/00                                   2.63%
12/31/01                                   4.85%
12/31/02                                   7.44%




Oppenheimer
Value Fund/VA
A series of Oppenheimer Variable
Account Funds
                                         Oppenheimer Value Fund/VA is a mutual
Prospectus dated May 1, 2003             fund. It seeks long-term growth of
                                         capital by investing primarily in
                                         common stocks with low price-earnings
                                         ratios and better-than-anticipated
                                         earnings.  Realization of current
                                         income is a secondary consideration.
                                               Shares of the Fund are sold only
                                         as the underlying investment for
                                         variable life insurance policies,
                                         variable annuity contracts and other
                                         insurance company separate accounts. A
                                         prospectus for the insurance product
                                         you have selected accompanies this
                                         Prospectus and explains how to select
                                         shares of the Fund as an investment
                                         under that insurance product, and
                                         whether you are only eligible to
                                         purchase Service share of the Fund.
                                               This Prospectus contains
                                         important information about the Fund's
                                         objective, its investment policies,
                                         strategies and risks. Please read this
                                         Prospectus (and your insurance product
                                         prospectus) carefully before you
                                         invest and keep them for future
                                         reference about your account.

As with all mutual funds, the
Securities
And Exchange Commission has not
approved or disapproved the Fund's
securities nor has it determined that
this Prospectus is accurate or
complete.
It is a criminal offense to represent
otherwise.

                                                                          1234




Contents

            About the Fund

- ------------------------------------------------------------------------------


            The Fund's Objective and Investment Strategies


            Main Risks of Investing in the Fund


            The Fund's Past Performance

            Fees and Expenses of the Fund


            About the Fund's Investments

            How the Fund is Managed


            Investing in the Fund

- ------------------------------------------------------------------------------

            How to Buy and Sell Shares

            Dividends, Capital Gains and Taxes


            Financial Highlights



ABOUT THE FUND

The Fund's Investment Objective and Strategies

What Is the Fund's Investment Objective? The Fund seeks long-term growth of
capital by investing primarily in common stocks with low price-earnings
ratios and better-than-anticipated earnings. Realization of current income is
a secondary consideration.


What Does the Fund Mainly Invest In? The Fund invests  mainly in common stocks
of  different   capitalization   ranges,   and  currently   emphasizes   large
capitalization stocks. The Fund also can buy other investments, including:
o     Preferred stocks, rights and warrants and convertible securities, and
o     Securities of U.S. and foreign companies, although there are limits on

               the Fund's investments in foreign securities.

How Does the  Portfolio  Manager  Decide What  Securities  to Buy or Sell?  In
selecting  securities for purchase or sale by the Fund,  the Fund's  portfolio
manager  selects  securities  one at a  time.  This is  called  a  "bottom  up
approach."  The  portfolio   manager  uses  fundamental   analysis  to  select
securities for the Fund that he believes are  undervalued.  While this process
and the  inter-relationship  of the factors  used may change over time and its
implementation  may vary in particular  cases, the portfolio manager currently
considers the following factors when assessing a company's business prospects:
o     Future supply/demand conditions for its key products,
o     Product cycles,
o     Quality of management,
o     Competitive position in the market place,
o     Reinvestment plans for cash generated, and
o     Better-than-expected earnings reports.

      Not all factors are relevant for every individual security.

The  portfolio  manager  may  consider  selling a stock for one or more of the
following reasons:
o     The stock price reached its target,
o     The company's fundamentals appear to be deteriorating, or
o     Better stock selections are believed to have been identified.

Who Is the Fund Designed For? The Fund's shares are available only as an
investment option under certain variable annuity contracts, variable life
insurance policies and investment plans offered through insurance company
separate accounts of participating insurance companies, for investors seeking
capital growth in their investment over the long term. Because the Fund
currently focuses its investments in stocks, those investors should be
willing to assume the risks of short-term share price fluctuations that are
typical for a fund that can have substantial stock investments. Since the
Fund's income level will fluctuate and will likely be small, it is not
designed for investors needing an assured level of current income.  The Fund
is not a complete investment program.

Main Risks of Investing in the Fund


      All investments have some degree of risk.  The Fund's investments are
subject to changes in their value from a number of factors described below.
There is also the risk that poor security selection by the Fund's investment
Manager, OppenheimerFunds, Inc., will cause the Fund to underperform other
funds having similar objectives.


|X|   Risks of Investing in Stocks.  Stocks fluctuate in price, and their
short-term volatility at times may be great. Because the Fund currently
focuses its investments in stocks, the value of the Fund's portfolio will be
affected by changes in the stock markets.  Market risk will affect the Fund's
net asset values per share, which will fluctuate as the values of the Fund's
portfolio securities change.

      A variety of factors can affect the price of a particular stock and the
prices of individual stocks do not all move in the same direction uniformly
or at the same time.  Different stock markets may behave differently from
each other. In particular, because the Fund currently emphasizes investments
in stocks of U.S. issuers, it will be affected primarily by changes in U.S.
stock markets.


      Additionally,  stocks  of  issuers  in  a  particular  industry  may  be
affected by changes in economic  conditions  that  affect that  industry  more
than others,  or by changes in government  regulations,  availability of basic
resources or supplies,  or other events affecting that industry. At times, the
Fund may  increase the relative  emphasis of its  investments  in a particular
industry.  To the  extent  that  the  Fund  is  emphasizing  investments  in a
particular  industry,  its share  values may  fluctuate  in response to events
affecting that industry.


      Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the issuer
or its industry. The Fund emphasizes securities of large companies but it can
also buy stocks of small- and medium-size companies, which may have more
volatile stock prices than stocks of large companies.

|X|   Risks of Value Investing. Value investing seeks stocks having prices
         that are low in relation to what their real worth or prospects are
         believed to be. The Fund hopes that it will realize appreciation in
         the value of its holdings when other investors realize the intrinsic
         value of those stocks. In using a value investing style, there is
         the risk that the market will not recognize that the securities are
         undervalued and they might not appreciate in value as the Manager
         anticipates.

|X|   Risks of Foreign Investing. While foreign securities offer special
   investment opportunities, there are also special risks. The change in
   value of a foreign currency against the U.S. dollar will result in a
   change in the U.S. dollar value of securities denominated in that foreign
   currency. Foreign issuers are not subject to the same accounting and
   disclosure requirements that U.S. companies are subject to.

      The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transaction, changes in governmental economic
or monetary policy in the U.S. or aboard, or other political and economic
factors.


How Risky is the Fund Overall?  The risks described above collectively form
the overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance and the prices of its shares.
Particular investments and investment strategies also have risks.  These
risks mean that you can lose money by investing in the Fund. When you redeem
your shares, they may be worth more or less than what you paid for them. The
share prices of the Fund will change daily based on changes in market prices
of securities and market conditions, and in response to other economic
events. There is no assurance that the Fund will achieve its investment
objective.


      The Fund focuses its investments on stocks for long-term growth. Stock
markets can be volatile, and the prices of the Fund's shares will go up and
down. The Fund generally does not use income-oriented investments to help
cushion the Fund's total return from changes in stock prices. In the
OppenheimerFunds spectrum, the Fund is generally more conservative than
aggressive growth stock funds, but more aggressive than funds that invest in
stocks and bonds.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.

The Fund's Performance


      Because the Fund recently commenced operations, prior performance
information for a full calendar year is not yet available.  Once available,
this information will provide some indication of the risks of an investment
in the Fund by showing how the Fund's performance compares to those of a
broad-based index, such as the S&P 500 Index.  After the Fund has commenced
investment operations, to obtain the Fund's performance information, you can
contact the Transfer Agent at the toll-free telephone number on the back
cover of this Prospectus. Please remember that the Fund is intended to be a
long-term investment, performance results are historical, and that past
performance (particularly over a short-term period) is not predictive of
future results.


Fees and Expenses of the Fund


The following tables are meant to help you understand the fees and expenses
you may pay if you buy and hold shares of the Fund. The Fund pays a variety
of expenses directly for management of its assets, administration,
distribution of its shares and other services. Those expenses are subtracted
from the Fund's assets to calculate the Fund's net asset values per share.
All shareholders therefore pay those expenses indirectly. Shareholders pay
other expenses directly, such as sales charges and account transaction
charges. The numbers below are based on the Fund's expected expenses during
its first fiscal year.


Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- -----------------------------------------------

                                   Non-ServiService
- ----------------------------------  Shares  Shares


                                 -----------------------------------------------
- --------------------------------------------------------------------------------
Management Fees                           0.75%                   0.75%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Distribution  and Service  (12b-1)   N/A     0.25%
Fees

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other Expenses                      0.30%    0.30%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Annual Operating Expenses           1.05%                   1.30%
- --------------------------------------------------------------------------------
Expenses may vary in future years. "Other Expenses" include transfer agent
fees, custodial expenses, and accounting and legal expenses the Fund pays.

EXAMPLE. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.


The example assumes that you invest $10,000 in shares of the Fund for the
time periods  indicated and then redeem all of your shares at the end of those
periods.  The example also assumes that your  investment  has a 5% return each
year and that the  Fund's  operating  expenses  remain the same.  Your  actual
costs may be higher or lower,  because  expenses will vary over time. Based on
these  assumptions  your  expenses  would be as  follows,  whether  or not you
redeem your investment at the end of each period:

- -----------------------------------------------------------------------------

                        1 Years      3 Years      5 Years           10 Years

 -----------------------------------------------------------------------------
 -----------------------------------------------------------------------------

 Non-Service Shares     $107         $334           $579             $1,283

 -----------------------------------------------------------------------------
 -----------------------------------------------------------------------------

 Service Shares         $132         $412           $713             $1,568

 -----------------------------------------------------------------------------

About the Fund's Investments

The Fund's Principal Investment Policies.  The allocation of the Fund's
portfolio among the different types of investments will vary over time based
upon the evaluation of economic and market trends by the Manager.  The Fund's
portfolio might not always include all of the different types of investments
described below. The Statement of Additional Information contains more
detailed information about the Fund's investment policies and risks.

      The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques.
The Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of securities of
any one issuer and by not investing too great a percentage of the Fund's
assets in any one company.  Also, the Fund does not concentrate 25% or more
of its total assets in any one industry.

      However, changes in the overall market prices of securities and any
income they may pay can occur at any time. The price and yield of the Fund's
shares will change daily based on changes in market prices of securities and
market conditions and in response to other economic events.

|X|   Stock   Investments.   The  Fund  invests  primarily  in  a  diversified
        portfolio of common stocks of issuers that may be of small,  medium or
        large  capitalization,  to seek capital growth. The Fund can invest in
        other  equity  securities,  including  preferred  stocks,  rights  and
        warrants,  and securities  convertible into common stock. The Fund can
        buy securities issued by domestic or foreign companies.  However,  the
        Fund currently emphasizes  investments in large capitalization  stocks
        of U.S. issuers.



      The   Fund's   equity    investments   may   be    exchange-traded    or
over-the-counter   securities.   Over-the-counter  securities  may  have  less
liquidity than exchange-traded securities.


      While many convertible securities are debt securities, the Manager
considers some of them to be "equity equivalents" because of their conversion
feature. In these cases, their credit rating has less impact on the
investment decision than in the case of other debt securities. Convertible
securities are subject to credit risk and interest rate risk, discussed below.

     The  Fund can buy  convertible  securities  rated as low as "B" by  Moody's
Investor  Services,  Inc.  or Standard  &  Poor's  Rating  Service or having
comparable ratings by other nationally  recognized rating  organizations (or, if
they are unrated,  having a comparable  rating  assigned by the Manager).  Those
ratings are below  "investment  grade" and the securities are subject to greater
risk  of  default  by  the  issuer  than  investment-grade   securities.   These
investments  are subject to the Fund's policy of not investing  more than 10% of
its net assets in debt securities.


Can the Fund's Investment Objective and Policies Change?  The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.  Fundamental policies cannot be changed without the approval
of a majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy.  Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the
Statement of Additional Information says that it is.


Other Investment Strategies.  To seek its objective, the Fund can use the
investment techniques and strategies described below.  The Fund might not
always use all of them.  These techniques have risks, although some of them
are designed to help reduce overall investment or market risks.

|X|   Cash and Cash Equivalents. Under normal market conditions the Fund can
      invest up to 15% of its net assets in cash and cash equivalents such as
      commercial paper, repurchase agreements, Treasury bills and other
      short-term U.S. government securities. This strategy would be used
      primarily for cash management or liquidity purposes. To the extent that
      the Fund uses this strategy, it might reduce its opportunities to seek
      its objective of long-term growth of capital.


|X|   Debt Securities.  Under normal market conditions, the Fund can invest in
   debt  securities,  such as  securities  issued  or  guaranteed  by the U.S.
   government  or  its  agencies  and  instrumentalities,  foreign  government
   securities,  and  foreign  and  domestic  corporate  bonds and  debentures.
   Normally these  investments  are limited to not more than 10% of the Fund's
   net assets, including convertible debt securities.


      The debt securities the Fund buys may be rated by nationally recognized
rating organizations or they may be unrated securities assigned an equivalent
rating by the Manager. The Fund's debt investments may be "investment grade"
(that is, rated in the four highest rating categories of a nationally
recognized rating organization) or may be lower-grade securities rated as low
as "B," as described above.

|X|   Credit Risk.  Debt securities are subject to credit risk.  Credit risk
         relates to the ability of the issuer of a security to make interest
         and principal payments on the security as they become due. If the
         issuer fails to pay interest, the Fund's income might be reduced,
         and if the issuer fails to repay principal, the value of that
         security and of the Fund's shares might be reduced. A downgrade in
         an issuer's credit rating or other adverse news about an issuer can
         reduce the value of that issuer's securities. While the Fund's
         investments in U.S. government securities are subject to little
         credit risk, the Fund's other investments in debt securities,
         particularly high-yield, lower-grade debt securities are subject to
         risks of default. Lower-grade debt securities may be subject to
         greater market fluctuations and greater risks of loss of income and
         principal than investment-grade debt securities.

|X|   Interest Rate Risk. The values of debt securities, including U.S.
         government securities, are subject to change when prevailing
         interest rates change.  When interest rates fall, the values of
         already-issued debt securities generally rise.  When interest rates
         rise, the values of already-issued debt securities generally fall,
         and they may sell at a discount from their face amount. The
         magnitude of these fluctuations will often be greater for
         longer-term debt securities than shorter-term debt securities.  The
         Fund's share prices can go up or down when interest rates change
         because of the effect of the changes on the value of the Fund's
         investments in debt securities.

|X|   Foreign Securities. The Fund can invest up to 25% of its total assets
in securities or governments in any country, developed or underdeveloped.
These include equity and debt securities of companies organized under the
laws of countries other than the United States and debt securities of foreign
governments and their agencies and instrumentalities.

|X|   Derivative Investments. In general terms, a derivative investment is an
   investment contract whose value depends on (or is derived from) the value
   of an underlying asset, interest rate or index. Options, futures,
   mortgage-related securities and "stripped" securities are examples of
   derivatives the Fund can use. Currently the Fund does not use derivative
   investments to a significant degree.

|X|   There Are Special Risks In Using Derivative Investments. If the issuer
         of the derivative does not pay the amount due, the Fund can lose
         money on the investment. Also, the underlying security or investment
         on which the derivative is based, and the derivative itself, might
         not perform the way the Manager expected it to perform. If that
         happens, the Fund's share prices could decline or the Fund could get
         less income than expected. Interest rate and stock market changes in
         the U.S. and abroad may also influence the performance of
         derivatives. Some derivative investments held by the Fund may be
         illiquid. The Fund has limits on the amount of particular types of
         derivatives it can hold. However, using derivatives can cause the
         Fund to lose money on its investment and/or increase the volatility
         of its share prices.

|X|   Hedging. The Fund can buy and sell futures contracts, put and call
         options, swaps, and forward contracts.  These are all referred to as
         "hedging instruments."  The Fund does not use hedging instruments
         for speculative purposes. The Fund has limits on its use of hedging
         instruments and is not required to use them in seeking its
         investment objective.
      The Fund can buy and sell options, swaps, futures and forward contracts
for a number of purposes. Some of these strategies would hedge the Fund's
portfolio against price fluctuations. Other hedging strategies, such as
buying futures and call options, would tend to increase the Fund's exposure
to the securities market. The Fund may also try to manage its exposure to
changing interest rates.

      There are special risks in particular hedging strategies. For example,
options trading involves the payment of premiums and can increase portfolio
turnover. If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment
at the call price and will not be able to realize any profit if the
investment has increased in value above the call price.

      If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the hedge fails and the strategy could reduce
the Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other investments
or if it could not close out a position because of an illiquid market.

|X|   Illiquid and Restricted Securities. Investments may be illiquid because
   they do not have an active trading market, making it difficult to value
   them or dispose of them promptly at an acceptable price. A restricted
   security is one that has a contractual restriction on its resale or which
   cannot be sold publicly until it is registered under the Securities Act of
   1933. The Fund will not invest more than 10% of its net assets in illiquid
   or restricted securities. Certain restricted securities that are eligible
   for resale to qualified institutional purchasers may not be subject to
   that limit. The Manager monitors holdings of illiquid securities on an
   ongoing basis to determine whether to sell any holdings to maintain
   adequate liquidity.

|X|   Temporary Defensive and Interim Investments.  In times of adverse or
   unstable market, economic or political conditions, the Fund can invest up
   to 100% of its assets in defensive securities.  Generally, they would be
   short-term U.S. government securities, high-grade commercial paper, bank
   obligations or repurchase agreements. The Fund can also hold these types
   of securities pending the investment of proceeds from the sale of Fund
   shares or portfolio securities or to meet anticipated redemptions of Fund
   shares. To the extent the Fund invests in these securities, it might not
   achieve its investment objective.

|X|   Portfolio Turnover. The Fund may engage in active or frequent trading
to try to achieve its objective. The Fund's portfolio turnover rate will
fluctuate from year to year, depending on market conditions. Portfolio
turnover increases the Fund's brokerage costs which reduces its performance.
If the Fund realizes capital gains when it sells its portfolio investments,
it must generally pay those gains out to shareholders, increasing their
taxable distributions.

How the Fund Is Managed


The Manager. The Manager chooses the Fund's investments and handles its
day-to-day business.  The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an investment
advisory agreement that states the Manager's responsibilities.  The agreement
sets the fees the Fund pays to the Manager and describes the expenses that
the Fund is responsible to pay to conduct its business.

      The Manager has been an investment advisor since January 1960.  The
Manager and its subsidiaries and controlled affiliates managed more than $120
billion in assets as of March 31, 2003, including other Oppenheimer funds
with more than 7 million shareholder accounts.  The Manager is located at 498
Seventh Avenue, New York, New York 10018.


|X|   Portfolio Manager. The Fund is managed by Christopher Leavy. Mr. Leavy
   is a Senior Vice President of the Manager, Vice President of the Fund and
   serves as an officer and portfolio manager of other Oppenheimer funds.
   Prior to joining the Manager in September 2000, he was a portfolio manager
   of Morgan Stanley Dean Witter Investment Management (from 1997) prior to
   which he was a portfolio manager and equity analyst of Crestar Asset
   Management (from 1995).

|X|   Advisory Fees.  Under the investment advisory agreement, the Fund pays
the Manager an advisory fee at an annual rate 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.

|X|   Possible Conflicts of Interest. The Fund offers its shares to separate
accounts of different insurance companies that are not affiliated with each
other, as an investment for their variable annuity, variable life and other
investment product contracts. While the Fund does not foresee any
disadvantages to contract owners from these arrangements, it is possible that
the interests of owners of different contracts participating in the Fund
through different separate accounts might conflict. For example, a conflict
could arise because of differences in tax treatment.

      The Fund's Board of Trustees has procedures to monitor the portfolio
for possible conflicts to determine what action should be taken. If a
conflict occurs, the Board might require one or more participating insurance
company separate accounts to withdraw their investments in the Fund. That
could force the Fund to sell securities at disadvantageous prices, and
orderly portfolio management could be disrupted. Also, the Board might refuse
to sell shares of the Fund to a particular separate account, or could
terminate the offering of the Fund's shares if required to do so by law or if
it would be in the best interests of the shareholders of the Fund to do so.

INVESTING IN THE FUND

How to Buy and Sell Shares

Two classes of shares are described in this Prospectus.  Currently, the Fund
offers only non-service shares.

How Are Shares Purchased?  Shares of the Fund may be purchased only by
separate investment accounts of participating insurance companies as an
underlying investment for variable life insurance policies, variable annuity
contracts or other investment products. Individual investors cannot buy
shares of the Fund directly. Please refer to the accompanying prospectus of
the participating insurance company for information on how to select the Fund
as an investment option for that variable life insurance policy, variable
annuity or other investment product. That Prospectus will indicate whether
you are eligible to purchase Service shares of the Fund. The Fund reserves
the right to refuse any purchase order when the Manager believes it would be
in the Fund's best interests to do so.

|X|   Market Timers.  The Fund has instructed its participating insurance
companies that it may restrict or refuse investments by their separate
accounts from market timers.  "Market timers" include persons whose separate
account transactions have, or have attempted (i) an exchange out of the Fund
within two weeks of an earlier exchange request, (ii) exchanges out of the
Fund more than twice in any calendar quarter, (iii) an exchange of Fund
shares equal to at least $5 million, or more than 1% of the Fund's net
assets, or (iv) other transactions in Fund shares that demonstrated a timing
pattern.  Separate accounts under common ownership or control are combined
for these limits. There can be no assurance that all such participating
insurance companies will be successful in controlling investments in their
respective separate accounts by market timers.


      The interests of the Fund's long-term shareholders and its ability to
manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market fluctuations -
also known as "market timing."  When large dollar amounts are involved, the
Fund may have difficulty implementing long-term investment strategies,
because it cannot predict how much cash it will have to invest.  Market
timing also may force the Fund to sell portfolio securities at
disadvantageous times to raise the cash needed to buy a market timer's Fund
shares.  These factors may hurt the Fund's performance and its shareholders.


- ------------------------------------------------------------------------------
Information about your investment in the Fund through your variable annuity
contract, variable life insurance policy or other plan can be obtained only
                                                                       ----
from your participating insurance company or its servicing agent. The Fund's
Transfer Agent does not hold or have access to those records. Instructions
for buying or selling shares of the Fund should be given to your insurance
company or its servicing agent, not directly to the Fund or its Transfer
Agent.
- ------------------------------------------------------------------------------


|X|   At What Price Are Shares Sold?  Shares are sold to participating
insurance companies at their offering price, which is the net asset value per
share. The Fund does not impose any sales charge on purchases of its shares.
If there are any charges imposed under the variable annuity, variable life or
other contract through which Fund shares are purchased, they are described in
the accompanying prospectus of the participating insurance company.

Net Asset Value.  The Fund calculates the net asset value per share as of the
close of The New York Stock Exchange ("the Exchange"), on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., Eastern time, but
may close earlier on some days. All references to time in this Prospectus
mean "Eastern time."


      The net asset value per share is determined 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. To determine net asset value, the Fund's Board of
Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures for
valuing illiquid and restricted securities and obligations for which market
values cannot be readily obtained. Because some foreign securities trade in
markets and on exchanges that operate on weekends and U.S. holidays, the
values of some of the Fund's foreign investments may change on days when
investors cannot buy or redeem Fund shares.

      If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are priced that
day, an event occurs that the Manager deems likely to cause a material change
in the value of such security, the Fund's Board of Trustees has authorized
the Manager, subject to the Board's review, to ascertain a fair value for
such security.  A security's valuation may differ depending on the method
used for determining value.

      The offering price that applies to an order from a participating
insurance company is based on the next calculation of the net asset value per
share that is made after the insurance company (as the Fund's designated
agent to receive purchase orders) receives a purchase order from its contract
owners to purchase Fund shares on a regular business day, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M. on
the next regular business day at the offices of its Transfer Agent in
Colorado.

      The Fund's net asset value is used to determine the unit value for the
separate account that invests in the Fund. Please refer to the accompanying
prospectus for the participating insurance company for information on unit
values.

|X|   Classes of Shares.  The Fund may offer two different classes of shares.
The class of shares offered by this Prospectus has no class name
designation.  The other class of shares designated as Service shares are
subject to a Distribution and Service Plan. The impact of the expenses of the
Plan on Service shares is described below.  The class of shares that are not
subject to a Plan has no class "name" designation. The different classes of
shares represent investments in the same portfolio of securities but are
expected to be subject to different expenses and will likely have different
share prices.

Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay the distributor, for
distribution and personal service and maintenance of accounts for the Fund's
Service shares. Under the Plan, payments are made quarterly at an annual rate
of up to 0.25% of the average annual net assets of Service shares of the
Fund.  The distributor currently uses all of those fees to compensate
sponsor(s) of the insurance product that offers Fund shares, for providing
personal service and maintenance of accounts of their variable contract
owners that hold Service shares.  The impact of the service plan is to
increase operating expenses of the Service shares, which results in lower
performance compared to the Fund's shares that are not subject to a service
fee.

How Are Shares Redeemed?  As with purchases, only the participating insurance
companies that hold Fund shares in their separate accounts for the benefit of
variable annuity contracts, variable life insurance policies or other
investment products can place orders to redeem shares. Contract holders and
policy holders should not directly contact the Fund or its transfer agent to
request a redemption of Fund shares.  Contract owners should refer to the
withdrawal or surrender instructions in the accompanying prospectus of the
participating insurance company.


      The share price that applies to a redemption order is the next net
asset value per share that is determined after the participating insurance
company (as the Fund's designated agent) receives a redemption request on a
regular business day from its contract or policy holder, provided that the
Fund receives the order from the insurance company, generally by 9:30 A.M.
the next regular business day, at the office of its Transfer Agent in
Colorado.  The Fund normally sends payment by Federal Funds wire to the
insurance company's account the day after the Fund receives the order (and no
later than seven days after the Fund's receipt of the order).  Under unusual
circumstances determined by the Securities and Exchange Commission, payment
may be delayed or suspended.


Dividends, Capital Gains and Taxes

Dividends.  The Fund intends to declare dividends separately for each class
of shares from net investment income, if any, on an annual basis, and to pay
those dividends in March on a date selected by the Board of Trustees.
Dividends and distributions will generally be lower for Service shares, which
normally have higher expenses. The Fund has no fixed dividend rate and cannot
guarantee that it will pay any dividends or distributions.

      All dividends (and any capital gains distributions) will be reinvested
automatically in additional Fund shares at net asset value for the account of
the participating insurance company (unless the insurance company elects to
have dividends or distributions paid in cash).

Capital Gains.  The Fund may realize capital gains on the sale of portfolio
securities.  If it does, it may make distributions out of any net short-term
or long-term capital gains in March of each year.  The Fund may make
supplemental distributions of dividends and capital gains following the end
of its fiscal year.  There can be no assurance that the Fund will pay any
capital gains distributions in a particular year.


Taxes.  For a discussion of the tax status of a variable annuity contract, a
variable life insurance policy or other investment product of a participating
insurance company, please refer to the accompanying prospectus of your
participating insurance company. Because shares of the Fund may be purchased
only through insurance company separate accounts for variable annuity
contracts, variable life insurance policies or other investment products,
dividends paid by the Fund from net investment income and distributions (if
any) of net realized short-term and long-term capital gains will be taxable,
if at all, to the participating insurance company.


      This information is only a summary of certain federal income tax
information about an investment in Fund shares.  You should consult with your
tax advisor or your participating insurance company representative about the
effect of an investment in the Fund under your contract or policy.


Financial Highlights

A Financial Highlights Table normally is presented to help you understand the
Fund's financial performance for its non-service shares. Because this Fund
has only been offered since January 2, 2003, no financial information is
shown.


INFORMATION AND SERVICES

For More Information on Oppenheimer Value Fund/VA

The following additional information about the Fund is available without
charge upon request:

STATEMENT OF ADDITIONAL INFORMATION.  This document includes additional
information about the Fund's investment policies, risks, and operations.
It is incorporated by reference into this Prospectus (which means it is
legally part of this Prospectus).

ANNUAL AND SEMI-ANNUAL REPORTS.  Additional information about the Fund's
investments and performance will be available in the Fund's Annual and
Semi-Annual Reports to shareholders. The Annual Report will include a
discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal
year.

How to Get More Information

You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, (when available) the notice explaining the Fund's
privacy policy and other information about the Fund, or instructions on
how to contact the sponsor of your insurance product:
- --------------------------------------------------------------------------------
By Telephone:                         Call OppenheimerFunds Services
                                      toll-free:
                                      1.800.981.2871
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
By Mail:                              Write to:
                                      OppenheimerFunds Services
                                      P.O. Box 5270
                                      Denver, Colorado 80217-5270
- --------------------------------------------------------------------------------

Information about the Fund including the Statement of Additional
Information can be reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1.202.942.8090.  Reports and
other information about the Fund are available on the EDGAR database on
the SEC's Internet website at www.sec.gov. Copies may be obtained after
                              -----------
payment of a duplicating fee by electronic request at the SEC's e-mail
address: publicinfo@sec.gov or by writing to the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

No one has been authorized to provide any information about the Fund or
to make any representations about the Fund other than what is contained
in this Prospectus. This Prospectus is not an offer to sell shares of the
Fund, nor a solicitation of an offer to buy shares of the Fund, to any
person in any state or other jurisdiction where it is unlawful to make
such an offer.
The Fund's SEC File No.: 811-4108

PR0642.001.0503
Printed on recycled paper.

NIA\OVAF\642PSP_2003(b).doc

EX-99

- ------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
- ------------------------------------------------------------------------------


6803 S. Tucson Way, Centennial, Colorado 80112
1.800.225.5677

            Statement of Additional Information dated May 1, 2003

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OPPENHEIMER  VARIABLE  ACCOUNT FUNDS (the  "Trust") is an  investment  company
consisting of 11 separate Funds (the "Funds"):

Oppenheimer Aggressive Growth Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer Global Securities Fund/VA
Oppenheimer High Income Fund/VA
Oppenheimer Main Street Fund(R)/VA
(named  "Oppenheimer  Main Street(R)Growth & Income Fund" prior to May 1,
2003)
Oppenheimer Main StreetSmall Cap Fund(R)/VA
Oppenheimer Money Fund/VA
Oppenheimer Multiple Strategies Fund/VA
Oppenheimer Strategic Bond Fund/VA
Oppenheimer Value Fund/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, 2003. It
should be read together with the Prospectuses. You can obtain a Prospectus by
writing to the Funds' Transfer Agent, OppenheimerFunds Services, at P.O. Box
5270, Denver, Colorado 80217, or by calling the Transfer Agent at the
toll-free number shown above.



Contents
                                                                        Page
            About the Funds
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Additional Information About the Funds' Investment Policies and Risks.. 3
    The Funds' Investment Policies..................................... 3
    Other Investment Techniques and Strategies......................... 16
    Other Investment Restrictions...................................... 38
How the Funds are Managed ............................................. 41
    Organization and History........................................... 41
    Board of Trustees and Oversight Committees......................... 43
    Trustees and Officers of the Funds................................. 44
    The Manager........................................................ 56
Brokerage Policies of the Funds........................................ 59
Distribution and Service Plans (Service Shares Only)................... 61
Performance of the Funds............................................... 62


About Your Account

How To Buy and Sell Shares............................................. 68
Dividends, Capital Gains and Taxes..................................... 72
Additional Information About the Funds................................. 73


Financial Information About the Funds *
Financial Statements and Independent Auditors' Reports................. F-1
Appendix A: Ratings Definitions........................................ A-1
Appendix B: Industry Classifications (Oppenheimer Money Fund/VA)....... B-1
Appendix C: Industry Classifications (all other Funds)................. C-1
Appendix D: Major Shareholders......................................... D-1


*This Statement of Additional  Information  consists of two separate  documents.
This text  comprises  the first  document.  The  second  document  contains  the
Independent  Auditors' Reports and Financial Statements for each Fund, except as
follows:  since Oppenheimer Value Fund/ VA recently commenced operations,  there
are no reports or Financial  Statements  currently  available for that Fund. The
two documents  should be read together with the  Prospectuses  for the Funds and
for the insurance products you have selected. These documents can also be viewed
or downloaded online with Adobe Acrobat Reader.  Call 1.888.470.0861 if you want
the domain name of an insurance  sponsor's  website that displays both documents
comprising  this  Statement  of  Additional  Information  online,  if  you  have
technical difficulties,  or to request a paper copy of both documents comprising
this Statement of Additional Information at no charge.

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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 Funds' Prospectuses. 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. (the "Manager"), 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' portfolios 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:
o     evaluation of the issuer's historical operations,
o     prospects for the industry of which the issuer is part,
o     the issuer's financial condition,
o     its pending product developments and business (and those of
         competitors),
o     the effect of general market and economic conditions on the issuer's
         business, and
o     legislative proposals that might affect the issuer.

      The Funds are categorized by the types of investment they make.
Aggressive Growth Fund/VA, Capital Appreciation Fund/VA, Global Securities
Fund/VA, Main Street(R)Small Cap Fund/VA, and Value 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 Fund(R)/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 Fund(R)/VA's portfolio
to equity securities is generally substantially larger than its allocation to
fixed-income securities. Money Fund/VA's 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. At times, a Fund
may have substantial amounts of its assets invested in securities of issuers
in one or more capitalization ranges, based upon the Manager's use of its
investment strategies and its judgment of where the best market opportunities
are to seek a Fund's objective.

      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
prices 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.

o     Growth Investing. In selecting equity investments, the portfolio
managers for the Equity Funds may from time to time use a growth investing
style, a value investing style, or a combination of both. In using a growth
approach, the portfolio managers seek 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.

      Growth companies 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.

      o     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:
o     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.
o     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.
o     Dividend Yield is measured by dividing the annual dividend by the stock
         price per share.
o     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.

o     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.

o     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. That limit does not apply to warrants and rights that the
Funds have acquired as part of units of securities or that are attached to
other securities. No more than 2% of Value Fund/VA's total assets may be
invested in warrants that are not listed on either The New York Stock
Exchange or The American Stock Exchange.

      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|   Preferred Stocks. Preferred stocks are equity securities but have
certain attributes of debt securities. Preferred stock, unlike common stock,
has a stated dividend rate payable from the corporation's earnings. Preferred
stock dividends may be cumulative or non-cumulative, participating, or
auction rate. "Cumulative" dividend provisions require all or a portion of
prior unpaid dividends to be paid before the issuer can pay dividends on
common shares.

      If interest rates rise, the fixed dividend on preferred stocks may be
less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as provisions for
their call or redemption prior to maturity which can have a negative effect
on their prices when interest prior to maturity rates decline. Preferred
stock may be "participating" stock, which means that it may be entitled to a
dividend exceeding the stated dividend in certain cases.

      Preferred stocks are equity securities because they do not constitute a
liability of the issuer and therefore do not offer the same degree of
protection of capital as debt securities and may not offer the same degree of
assurance of continued income as debt securities. The rights of preferred
stock on distribution of a corporation's assets in the event of its
liquidation are generally subordinate to the rights associated with a
corporation's debt securities. Preferred stock generally has a preference
over common stock on the distribution of a corporation's assets in the event
of its liquidation.

      |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 their investment objectives.

      A Fund's debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc., ("Moody's") or at least "BBB" by Standard & Poor's Rating
Services ("S&P") or Fitch, Inc. ("Fitch") or that have comparable ratings by
another nationally recognized rating organization. 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. If the securities that a Fund buys are unrated, to be
considered part of a Fund's holdings of investment-grade securities, they
must be judged by the Manager to be of comparable quality to bonds rated as
investment grade by a rating organization.

      o     U.S. Government Securities. These are securities issued or
guaranteed by the U.S. Treasury or other government agencies or
federally-chartered corporate entities referred to as "instrumentalities."
The obligations of U.S. government agencies or instrumentalities in which the
Funds may invest may or may not be guaranteed or supported by the "full faith
and credit" of the United States. "Full faith and credit," means generally
that the taxing power of the U.S. government is pledged to the payment of
interest and repayment of principal on a security. 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. The owner might not be able to assert a claim against the United
States if the issuing agency or instrumentality does not meet its commitment.
The Funds will invest in securities of U.S. government agencies and
instrumentalities only if the Manager is satisfied that the credit risk with
respect to the agency or instrumentality is minimal.

      o     U.S. Treasury Obligations. These include Treasury bills
(maturities of one year or less when issued), Treasury notes (maturities of
one to 10 years), and Treasury bonds (maturities of more than 10 years).
Treasury securities are backed by the full faith and credit of the United
States as to timely payments of interest and repayments of principal. They
also can include U.S. Treasury securities that have been "stripped" by a
Federal Reserve Bank, zero-coupon U.S. Treasury securities described below,
and Treasury Inflation-Protection Securities ("TIPS").

      o     Treasury Inflation-Protection Securities. The Funds can buy these
TIPS, which are designed to provide an investment vehicle that is not
vulnerable to inflation. The interest rate paid by TIPS is fixed. The
principal value rises or falls semi-annually based on changes in the
published Consumer Price Index. If inflation occurs, the principal and
interest payments on TIPS are adjusted to protect investors from inflationary
loss. If deflation occurs, the principal and interest payments will be
adjusted downward, although the principal will not fall below its face amount
at maturity.

o     Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such
as Government National Mortgage Association ("GNMA") pass-through mortgage
certificates (called "Ginnie Maes"). Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Others are
supported only by the credit of the entity that issued them, such as Federal
Home Loan Mortgage Corporation obligations ("Freddie Macs").

|X|   U.S. Government Mortgage-Related Securities. The Funds can invest in a
variety of mortgage-related securities that are issued by U.S. government
agencies or instrumentalities, some of which are described below.

o     GNMA Certificates. The Government National Mortgage Association is a
wholly-owned corporate instrumentality of the United States within the U.S.
Department of Housing and Urban Development. GNMA's principal programs
involve its guarantees of privately-issued securities backed by pools of
mortgages. Ginnie Maes are debt securities representing an interest in one
mortgage or a pool of mortgages that are insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by the
Veterans Administration.

      The Ginnie Maes in which the Funds invest are of the "fully modified
pass-through" type. They provide that the registered holders of the Ginnie
Maes will receive timely monthly payments of the pro-rata share of the
scheduled principal payments on the underlying mortgages, whether or not
those amounts are collected by the issuers. Amounts paid include, on a pro
rata basis, any prepayment of principal of such mortgages and interest (net
of servicing and other charges) on the aggregate unpaid principal balance of
the Ginnie Maes, whether or not the interest on the underlying mortgages has
been collected by the issuers.

      The Ginnie Maes purchased by the Funds are guaranteed as to timely
payment of principal and interest by GNMA. In giving that guaranty, GNMA
expects that payments received by the issuers of Ginnie Maes on account of
the mortgages backing the Ginnie Maes will be sufficient to make the required
payments of principal of and interest on those Ginnie Ames. However, if those
payments are insufficient, the guaranty agreements between the issuers of the
Ginnie Maes and GNMA require the issuers to make advances sufficient for the
payments. If the issuers fail to make those payments, GNMA will do so.

      Under federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under
any guaranty issued by GNMA as to such mortgage pools. An opinion of an
Assistant Attorney General of the United States, dated December 9, 1969,
states that such guaranties "constitute general obligations of the United
States backed by its full faith and credit."  GNMA is empowered to borrow
from the United States Treasury to the extent necessary to make any payments
of principal and interest required under those guaranties.

      Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to
the extent of payments received by the issuers on account of such mortgages,
Ginnie Maes do not constitute a liability of those issuers, nor do they
evidence any recourse against those issuers. Recourse is solely against GNMA.
Holders of Ginnie Maes (such as the Funds) have no security interest in or
lien on the underlying mortgages.

      Monthly payments of principal will be made, and additional prepayments
of principal may be made, to the Fund with respect to the mortgages
underlying the Ginnie Maes owned by the Fund. All of the mortgages in the
pools relating to the Ginnie Maes in the Funds are subject to prepayment
without any significant premium or penalty, at the option of the mortgagors.
While the mortgages on one-to-four family dwellings underlying certain Ginnie
Maes have a stated maturity of up to 30 years, it has been the experience of
the mortgage industry that the average life of comparable mortgages, as a
result of prepayments, refinancing and payments from foreclosures, is
considerably less.

o     Federal Home Loan Mortgage Corporation ("FHLMC") Certificates. FHLMC, a
corporate instrumentality of the United States, issues FHLMC Certificates
representing interests in mortgage loans. FHLMC guarantees to each registered
holder of a FHLMC Certificate timely payment of the amounts representing a
holder's proportionate share in:
(i)   interest payments less servicing and guarantee fees,
(ii)  principal prepayments, and
(iii) the ultimate collection of amounts representing the holder's
            proportionate interest in principal payments on the mortgage
            loans in the pool represented by the FHLMC Certificate, in each
            case whether or not such amounts are actually received.

      The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States.

o     Federal National Mortgage Association (Fannie Mae) Certificates. Fannie
Mae, a federally-chartered and privately-owned corporation, issues Fannie Mae
Certificates which are backed by a pool of mortgage loans. Fannie Mae
guarantees to each registered holder of a Fannie Mae Certificate that the
holder will receive amounts representing the holder's proportionate interest
in scheduled principal and interest payments, and any principal prepayments,
on the mortgage loans in the pool represented by such Certificate, less
servicing and guarantee fees, and the holder's proportionate interest in the
full principal amount of any foreclosed or other liquidated mortgage loan. In
each case the guarantee applies whether or not those amounts are actually
received. The obligations of Fannie Mae under its guarantees are obligations
solely of Fannie Mae and are not backed by the full faith and credit of the
United States or any of its agencies or instrumentalities other than Fannie
Mae.

o     Commercial (Privately-Issued) Mortgage Related Securities. The Funds
can invest in commercial mortgage-related securities issued by private
entities. Generally these are multi-class debt or pass-through certificates
secured by mortgage loans on commercial properties. They are subject to the
credit risk of the issuer. These securities typically are structured to
provide protection to investors in senior classes from possible losses on the
underlying loans. They do so by having holders of subordinated classes take
the first loss if there are defaults on the underlying loans. They may also
be protected to some extent by guarantees, reserve funds or additional
collateralization mechanisms.

      |X|   Participation Interests. The Funds can invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan made
by the issuing financial institution in the proportion that the buyer's
participation interest bears to the total principal amount of the loan. Not
more than 5% of the Fund's net assets can be invested in participation
interests of the same borrower. The issuing financial institution may have no
obligation to the Fund other than to pay the Fund the proportionate amount of
the principal and interest payments it receives.

      Participation interests are primarily dependent upon the
creditworthiness of the borrowing corporation, which is obligated to make
payments of principal and interest on the loan. There is a risk that a
borrower may have difficulty making payments. If a borrower fails to pay
scheduled interest or principal payments, the Fund could experience a
reduction in its income. The value of that participation interest might also
decline, which could affect the net asset value of the Fund's shares. If the
issuing financial institution fails to perform its obligations under the
participation agreement, the Fund might incur costs and delays in realizing
payment and suffer a loss of principal and/or interest.

|X|   Zero-Coupon U.S. Government Securities. The Funds may buy zero-coupon
U.S. government securities. These will typically be U.S. Treasury Notes and
Bonds that have been stripped of their unmatured interest coupons, the
coupons themselves, or certificates representing interests in those stripped
debt obligations and coupons.

      Zero-coupon securities do not make periodic interest payments and are
sold at a deep discount from their face value at maturity. The buyer
recognizes a rate of return determined by the gradual appreciation of the
security, which is redeemed at face value on a specified maturity date. This
discount depends on the time remaining until maturity, as well as prevailing
interest rates, the liquidity of the security and the credit quality of the
issuer. The discount typically decreases as the maturity date approaches.

      Because zero-coupon securities pay no interest and compound
semi-annually at the rate fixed at the time of their issuance, their value is
generally more volatile than the value of other debt securities that pay
interest. Their value may fall more dramatically than the value of
interest-bearing securities when interest rates rise. When prevailing
interest rates fall, zero-coupon securities tend to rise more rapidly in
value because they have a fixed rate of return.

      A Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives
any cash payments on the zero-coupon investment. To generate cash to satisfy
those distribution requirements, a Fund may have to sell portfolio securities
that it otherwise might have continued to hold or to use cash flows from
other sources such as the sale of Fund shares.

      o  Special Risks of Lower-Grade Securities. Because lower-grade
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 Fitch 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 and Fitch are included in Appendix A to this
Statement of Additional Information.

      o  Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of fixed-income securities resulting from the inverse relationship
between price and yield. For example, an increase in general interest rates
will tend to reduce the market value of already-issued fixed-income
investments, and a decline in general interest rates will tend to increase
their value. In addition, debt securities with longer maturities, which tend
to have higher yields, are subject to potentially greater fluctuations in
value from changes in interest rates than obligations with shorter
maturities.

      Fluctuations in the market value of fixed-income securities after the
Funds buy them will not affect the interest income payable on those
securities (unless the security pays interest at a variable rate pegged to
interest rate changes). However, those price fluctuations will be reflected
in the valuations of the securities, and therefore the Funds' net asset
values will be affected by those fluctuations.

      |X|   Floating Rate and Variable Rate Obligations. Some securities the
Funds can purchase have variable or floating interest rates. Variable rates
are adjusted at stated periodic intervals. Variable rate obligations can have
a demand feature that allows the Funds to tender the obligation to the issuer
or a third party prior to its maturity. The tender may be at par value plus
accrued interest, according to the terms of the obligations.

      The interest rate on a floating rate demand note is adjusted
automatically according to a stated prevailing market rate, such as a bank's
prime rate, the 91-day U.S. Treasury Bill rate, or some other standard. The
instrument's rate is adjusted automatically each time the base rate is
adjusted. The interest rate on a variable rate note is also based on a stated
prevailing market rate but is adjusted automatically at specified intervals
of not less than one year. 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. The Manager may determine that an unrated floating rate or variable
rate demand obligation meets the Funds' quality standards by reason of being
backed by a letter of credit or guarantee issued by a bank that meets those
quality standards.

      Floating rate and variable rate demand notes that have a stated
maturity in excess of one year may have features that permit the holder to
recover the principal amount of the underlying security at specified
intervals not exceeding one year and upon no more than 30 days' notice. The
issuer of that type of note normally has a corresponding right in its
discretion, after a given period, to prepay the outstanding principal amount
of the note plus accrued interest. Generally, the issuer must provide a
specified number of days' notice to the holder.

      |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, a
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 (also
referred to as mortgage-backed 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). Privately issued
mortgage-related securities have some credit risk, as the underlying mortgage
may not fully collateralize the obligation and full payment of them is not
guaranteed. Both types of mortgage-related securities are subject to interest
rate risks and prepayment risks, as described in the Prospectuses.

      As with other debt securities, the prices of mortgage-related
securities tend to move inversely to changes in interest rates. The Fixed
Income Funds and Value Fund/VA 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, that 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.

o     Forward Rolls. The Funds can enter into "forward roll" transactions
with respect to mortgage-related securities (also referred to as "mortgage
dollar rolls"). In this type of transaction, a Fund sells 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 a Fund in excess of the yield
on the securities that have been sold.

      The Funds will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Funds will identify on its books liquid
assets in an amount equal to the payment obligation under the roll.

      These transactions have risks. During the period between the sale and
the repurchase, the Fund 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 Fund sells may decline below the price
at which the Fund is obligated to repurchase securities.

o     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 trenches 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/VA 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. Value
Fund/VA can purchase up to 25% of its total assets in certain equity and debt
securities issued or guaranteed by foreign companies or of foreign
governments or their agencies and as stated in the Prospectus, the Fund does
not concentrate 25% or more of its total assets in the securities of any one
foreign government.

      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.

      o     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.

o     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, currency devaluation, 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.

o     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 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, a 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 their 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 or no trading market, which may
adversely affect the Funds' ability to value them or 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. 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 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 its
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 its portfolio on a forward
commitment basis to attempt to limit its exposure to anticipated falling
prices. In periods of falling interest rates and rising prices, a Fund might
sell portfolio securities and purchase the same or similar securities on a
when-issued or 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 domestic and foreign
corporations. The Fixed Income Funds and Value Fund/VA 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
and Value Fund/VA 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 resell 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 Value Fund/VA and 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 for defensive purposes.

      Repurchase agreements, considered "loans" under the Investment Company
Act of 1940 (the "Investment Company Act"), are collateralized by the
underlying security. The Funds' repurchase agreements require that at all
times while the repurchase agreements 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.

      Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Funds, along with other affiliated entities managed by the
Manager, may transfer uninvested cash balances into one or more joint
repurchase accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities that are
collateral for repurchase agreements are financial assets subject to the
Fund's entitlement orders through its securities account at its custodian
bank until the agreements mature. Each joint repurchase arrangement requires
that the market value of the collateral be sufficient to cover payments of
interest and principal; however, in the event of default by the other party
to the agreement, retention or sale of the collateral may be subject to legal
proceedings.

      |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| 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.  The Funds may also lend up to 5% of that Fund's net assets
to an affiliated fund, for not more than seven days.

     There are some risks in connection with securities lending. The Funds might
experience a delay in receiving  additional  collateral  to secure a loan,  or a
delay in recovery of the loaned securities if the borrower  defaults.  The Funds
must  receive  collateral  for  a  loan.  Under  current  applicable  regulatory
requirements  (which  are  subject to  change),  on each  business  day the loan
collateral must be at least equal to the value of the loaned securities. It must
consist of cash, bank letters of credit, or securities of the U.S. government or
its agencies or instrumentalities,  or other cash equivalents in which that Fund
is permitted to invest.  To be acceptable as collateral,  letters of credit must
obligate a bank to pay  amounts  demanded  by the Funds if the demand  meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Funds.

      When they lend securities, that Fund receives amounts equal to the
dividends or interest on loaned securities. It also receives one or more of
(a) negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on any short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. That
Fund may also pay reasonable finder's, custodian and administrative fees in
connection with these loans. The terms of a Fund's loans must meet applicable
tests under the Internal Revenue Code and must permit the Fund to reacquire
loaned securities on five days' notice or in time to vote on any important
matter.

      |X|   Borrowing for Leverage. Each Fund has the ability to borrow from
banks on an unsecured basis. Each Fund has undertaken to limit borrowing to
25% of the value of that Fund's net assets, which is further limited to 10%
if borrowing is for a purpose other than to facilitate redemptions. Investing
borrowed funds in portfolio securities is a speculative technique known as
"leverage."  The Funds cannot borrow money in excess of 33-1/3% of the value
of that Fund's total assets. The Funds may borrow only from banks and/or
affiliated investment companies. With respect to this fundamental policy, the
Funds can borrow only if they maintain a 300% ratio of assets to borrowings
at all times in the manner set forth in the Investment Company Act. 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 values 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|   Interfund Borrowing and Lending Arrangements. Consistent with its
fundamental policies and pursuant to an exemptive order issued by the
Securities and Exchange Commission ("SEC"), the Fund may engage in borrowing
and lending activities with other funds in the OppenheimerFunds complex.
Borrowing money from affiliated funds may afford the Fund the flexibility to
use the most cost-effective alternative to satisfy its borrowing
requirements. Lending money to an affiliated fund may allow the Fund to
obtain a higher rate of return than it could from interest rates on
alternative short-term investments. Implementation of interfund lending is
being accomplished consistent with applicable regulatory requirements,
including the provisions of the SEC order.

      o     Interfund Borrowing. The Fund will not borrow from affiliated
funds unless the terms of the borrowing arrangement are at least as favorable
as the terms the Fund could otherwise negotiate with a third party. To assure
that the Fund will not be disadvantaged by borrowing from an affiliated fund,
certain safeguards are being implemented. Examples of these safeguards
include the following:
o     the Fund will not borrow money from affiliated funds unless the
            interest rate is more favorable than available bank loan rates;
o     the Fund's borrowing from affiliated funds must be consistent with its
            investment objective and investment policies;
o     the loan rates will be the average of the overnight repurchase
            agreement rate available through the OppenheimerFunds joint
            repurchase agreement account and a pre-established formula based
            on quotations from independent banks to approximate the lowest
            interest rate at which bank loans would be available to the Fund;
o     if the Fund has outstanding borrowings from all sources greater than
            10% of its total assets, then the Fund must secure each
            additional outstanding interfund loan by segregating liquid
            assets of the Fund as collateral;
o     the Fund cannot borrow from an affiliated fund in excess of 125% of its
            total redemptions for the preceding seven days;
o     each interfund loan may be repaid on any day by the Fund; and
o     the Trustees will be provided with a report of all interfund loans and
            the Trustees will monitor all such borrowings to ensure that the
            Fund's participation is appropriate.

      There is a risk that a borrowing fund could have a loan called on one
days' notice. In that circumstance, the Fund might have to borrow from a bank
at a higher interest cost if money to lend were not available from another
Oppenheimer fund.

      o     Interfund Lending. To assure that the Fund will not be
disadvantaged by making loans to affiliated funds, certain safeguards are
being implemented. Examples of these safeguards include the following:
o     the Fund will not lend money to affiliated funds unless the interest
            rate on such loan is determined to be reasonable under the
            circumstances;
o     the Fund may not make interfund loans in excess of 15% of its net
            assets;
o     an interfund loan to any one affiliated fund shall not exceed 5% of the
            Fund's net assets;
o     an interfund loan may not be outstanding for more than seven days;
o     each interfund loan may be called on one business day's notice; and
o     the Manager will provide the Trustees reports on all interfund loans
            demonstrating that the Fund's participation is appropriate and
            that the loan is consistent with its investment objectives and
            policies.

      When a Fund  lends  assets  to  another  affiliated  fund,  the  Fund is
subject to the risk that the borrowing fund might fail to repay the loan.

      o  Bank Obligations. The Funds can buy time deposits, certificates of
deposit and bankers' acceptances. They must be:
o     obligations issued or guaranteed by a domestic bank (including a
            foreign branch of a domestic bank) having total assets of at
            least U.S. $1 billion, or
o     obligations of a foreign bank with total assets of at least U.S. $1
            billion.

      "Banks" include commercial banks, savings banks and savings and loan
associations, which may or may not be members of the Federal Deposit
Insurance Corporation.

      o  Commercial Paper. The Funds can invest in commercial paper if it is
rated within the top three rating categories of S&P and Moody's or other
rating organizations.

      If the paper is not rated, it may be purchased if the Manager
determines that it is comparable to rated commercial paper in the top three
rating categories of national rating organizations.

      The Funds can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper
may otherwise be purchased by the Funds.

      o  Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts by
the Funds at varying rates of interest under direct arrangements between the
Funds, as lender, and the borrower. They permit daily changes in the amounts
borrowed. The Funds have 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 prepay up to the full amount of the note without
penalty. These notes may or may not be backed by bank letters of credit.

      Because these notes are direct lending arrangements between the lender
and borrower, it is not expected that there will be a trading market for
them. There is no secondary market for these notes, although they are
redeemable (and thus are immediately repayable by the borrower) at principal
amount, plus accrued interest, at any time. Accordingly, the Fund's right to
redeem such notes is dependent upon the ability of the borrower to pay
principal and interest on demand.

      The Funds have no limitations on the type of issuer from whom these
notes will be purchased. However, in connection with such purchases and on an
ongoing basis, the Manager will consider the earning power, cash flow and
other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
made demand simultaneously. Investments in master demand notes are subject to
the limitation on investments by the Fund in illiquid securities, described
in the Prospectus. Currently, the Fund does not intend that its investments
in variable amount master demand notes will exceed 5% of its total assets.

      |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:
o     sell futures contracts,
o     buy puts on such futures or on securities, or
o     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:
o     buy futures, or
o     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 Funds.

      o     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) an individual stock ("single stock futures"), (3) bond indices
(these are referred to as "bond index futures"), (4) debt securities (these
are referred to as "interest rate futures"), (5) foreign currencies (these
are referred to as "forward contracts") and (6) commodity contracts (these
are referred to as commodity futures)." The Fixed Income Funds are not
expected to buy or sell stock index futures or single stock futures on a
regular basis.

      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. Similarly, a single stock future
obligates the seller to deliver (and the purchaser to take) cash or a
specified equity security to settle the futures transaction. Either party
could also enter into an offsetting contract to close out the position.
Single stock futures trade on a very limited number of exchanges, with
contracts typically not fungible among the exchanges.

      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.

      o     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.

      o     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 identifying an
equivalent dollar amount of liquid assets on its books. The Fund will
identify additional liquid assets if the value of the identified assets drops
below 100% of the current value of the future. Because of this 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.

o     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 identified on its books to
cover such put options.

      If a Fund writes a put, the put must be covered by identifying liquid
assets on its books. 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 on its books 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 assets identified on its books 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.

      o   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.

      Buying a put on an investment a Fund does not own (such as an index of
future) permits a Fund to resell the put or to buy the underlying investment
and sell it at the exercise price. The resale price will vary inversely to
the price of the underlying investment. If the market price of the underlying
investment is above the exercise price and, as a result, the put is not
exercised, the put will become worthless on its expiration date.

      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.

      o     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 the Fund
owns the underlying foreign currency covered by the call or has an absolute
and immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration identified
on its books) 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 on its books liquid assets in an amount equal to the exercise
price of the option.

o  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.

o     Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery
at a fixed price. 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."

      The Fund will cover its short positions in these cases by identifying
on its books liquid 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.

|X|   Interest Rate Swaps Transactions. Value Fund/VA and Strategic Bond
Fund/VA can enter into interest rate swap agreements. In an interest rate
swap, the Fund and another party exchange their right to receive or their
obligation to pay interest on securities. For example, they might swap the
right to receive floating rate payments for fixed rate payments. Each of
these Funds can enter into interest rate swaps on securities it owns or as
hedge against a basket of securities held by that Fund that the Fund's
Manager deems to be closely correlated with the swap transactions. Also, that
Fund will identify on its books liquid assets (such as cash or U.S.
government securities) to cover any amounts it could owe under swaps that
exceed the amounts it is entitled to receive, and it will adjust that amount
daily, as needed.

      Swap agreements entail both interest rate risk and credit risk. There
is a risk that, based on movements of interest rates in the future, the
payments made by the Fund under a swap agreement will be greater than the
payments it received. Credit risk arises from the possibility that the
counterparty will default. If the counterparty defaults, the Fund's loss will
consist of the net amount of contractual interest payments that the Fund has
not yet received. The Manager will monitor the creditworthiness of
counterparties to the Fund's interest rate swap transactions on an ongoing
basis.

      The Fund can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides
that all swaps done between the Fund and that counterparty shall be regarded
as parts of an integral agreement. If amounts are payable on a particular
date in the same currency in respect of one or more swap transactions, the
amount payable on that date in that currency shall be the net amount. In
addition, the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty can terminate all of the swaps
with that party. Under these agreements, if a default results in a loss to
one party, the measure of that party's damages is calculated by reference to
the average cost of a replacement swap for each swap. It is measured by the
mark-to-market value at the time of the termination of each swap. The gains
and losses on all swaps are then netted, and the result is the counterparty's
gain or loss on termination. The termination of all swaps and the netting of
gains and losses on termination is generally referred to as "aggregation."

      |X|   Credit Derivatives. The Fixed-Income Funds and Multiple
Strategies/VA may enter into credit default swaps, both directly ("unfunded
swaps") and indirectly in the form of a swap embedded within a structured
note ("funded swaps"), to protect against the risk that a security will
default. Unfunded and funded credit default swaps may be on a single
security, or on a basket of securities. These Funds pay a fee to enter into
the swap and receives a fixed payment during the life of the swap. These
Funds may take a short position in the credit default swap (also known as
"buying credit protection"), or may take a long position in the credit
default swap note (also known as "selling credit protection").

      These Funds would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. If the short credit default swap is against a
corporate issue, these Funds must own that corporate issue. However, if the
short credit default swap is against sovereign debt, these Funds may own
either: (i) the reference obligation, (ii) any sovereign debt of that foreign
country, or (iii) sovereign debt of any country that the Manager determines
is closely correlated as an inexact bona fide hedge.

      If these Funds take a short position in the credit default swap, if
there is a credit event (including bankruptcy, failure to timely pay interest
or principal, or a restructuring), these Funds will deliver the defaulted
bonds and the swap counterparty will pay the par amount of the bonds. An
associated risk is adverse pricing when purchasing bonds to satisfy the
delivery obligation. If the swap is on a basket of securities, the notional
amount of the swap is reduced by the par amount of the defaulted bond, and
the fixed payments are then made on the reduced notional amount.

      Taking a long position in the credit default swap note (i.e.,
purchasing the "funded swap") would increase a Fund's exposure to specific
high yield corporate issuers. The goal would be to increase liquidity in that
market sector via the swap note and its associated increase in the number of
trading instruments, the number and type of market participants, and market
capitalization.

      If a Fund takes a long position in the credit default swap note, if
there is a credit event the Fund will pay the par amount of the bonds and the
swap counterparty will deliver the bonds. If the swap is on a basket of
securities, the notional amount of the swap is reduced by the par amount of
the defaulted bond, and the fixed payments are then made on the reduced
notional amount.

      These Funds will invest no more than 25 % of their total assets in
"unfunded" credit default swaps. These Funds will limit their investments in
"funded" credit default swap notes to no more than 10% of its total assets.

      Other risks of credit default swaps include the cost of paying for
credit protection if there are no credit events, pricing transparency when
assessing the cost of a credit default swap, counterparty risk, and the need
to fund the delivery obligation (either cash or the defaulted bonds,
depending on whether the Fund is long or short the swap, respectively).

o        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 advisor 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.

o 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 and Interim Investments. When market conditions are
unstable, or the Manager believes it is otherwise appropriate to reduce holdings
in stocks or bonds,  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: o  obligations  issued or guaranteed by the U.S.
government or its instrumentalities or agencies, o 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,  o
short-term debt obligations of corporate issuers,  rated investment grade (rated
at least Baa by Moody's or at least BBB by Standard & Poor's 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,  o
certificates  of deposit and bankers'  acceptances of domestic and foreign banks
having total assets in excess of $1 billion, and o 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.

|X| Investment in Other Investment  Companies.  The Funds (except Money Fund/VA)
can also  invest in the  securities  of other  investment  companies,  which can
include open-end funds,  closed-end funds and unit investment trusts, subject to
the limits set forth in the Investment  Company Act that apply to those types of
investments.  For example, a Fund can invest in Exchange-Traded Funds, which are
typically open-end funds or unit investment trusts,  listed on a stock exchange.
A Fund might do so as a way of gaining exposure to the segments of the equity or
fixed-income  markets  represented by the Exchange-Traded  Funds' portfolio,  at
times when a Fund may not be able to buy those  portfolio  securities  directly.
Investing in another  investment  company may involve the payment of substantial
premiums above the value of such investment  company's portfolio  securities and
is subject to  limitations  under the  Investment  Company Act. The Funds do not
intend to invest in other investment  companies unless the Manager believes that
the potential  benefits of the investment justify the payment of any premiums or
sales  charges.  As a  shareholder  of an  investment  company,  a Fund would be
subject to its ratable share of that investment  company's  expenses,  including
its advisory and administration  expenses. The Funds do not anticipate investing
a substantial amount of its net assets in shares of other investment companies.

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.  The
Fund can also buy "Second Tier Securities,"  which are Eligible  Securities that
are not First Tier 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 five 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 if disposal of the security would be in Money Fund/VA's
best interests.

     The Rating  Organizations  currently  designated  as  nationally-recognized
statistical rating  organizations by the Securities and Exchange  Commission are
Standard  &  Poor's  (a  division  of the  McGraw-Hill  Companies),  Moody's
Investors  Service,  Inc., Fitch, Inc. and Dominion Bond Rating Service Limited.
See Appendix A to this Statement of Additional  Information for a description of
the rating categories of the Rating Organizations.

o    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.

o    Bank Loan Participation  Agreements.  Money Fund/VA may invest in bank loan
     participation  agreements,  although  such  investments  have  not  been  a
     principal  investment  strategy.  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.

o    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  seven  days,  are  subject  to the  10%
     limitation applicable to illiquid securities purchased by Money Fund/VA.

o    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.

o    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.  In addition to having a number of investment policies
and  restrictions  identified in the  Prospectuses  or elsewhere as "fundamental
policies," the Funds have other  investment  restrictions  that are  fundamental
policies, described below.

     |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: o 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 o more than 50% of
the outstanding shares.

     The Funds' (except Value Fund /VA)  investment  objectives are  fundamental
policies.  Other  policies  described in the  Prospectuses  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  Prospectuses 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.

o    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, or securities of other investment companies.

o    The Funds cannot make loans except (a) through  lending of securities,  (b)
     through  the  purchase  of  debt   instruments  or  similar   evidences  of
     indebtedness,   (c)  through  an  interfund   lending  program  with  other
     affiliated funds, and (d) through repurchase agreements.

o    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.

o    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.

o    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.

o    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.

o    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.

o    The Funds  cannot  borrow  money in excess of  33-1/3% of the value of that
     Fund's total assets. The Funds may borrow only from banks and/or affiliated
     investment  companies.  With respect to this fundamental  policy, the Funds
     can borrow only if they  maintain a 300% ratio of assets to  borrowings  at
     all times in the manner set forth in the Investment Company Act.

     The following investment restrictions are fundamental policies of the Value
Fund/VA.

o    Value Fund/VA cannot issue senior securities. However, it can make payments
     or deposits of margin in connection  with options or futures  transactions,
     lend its portfolio  securities,  enter into repurchase  agreements,  borrow
     money and pledge its assets as permitted by its other fundamental policies.
     For purposes of this restriction, the issuance of shares of common stock in
     multiple  classes or  series,  the  purchase  or sale of  options,  futures
     contracts  and  options  on futures  contracts,  forward  commitments,  and
     repurchase agreements entered into in accordance with the Fund's investment
     policies,  and the pledge,  mortgage or  hypothecation of the Fund's assets
     are not deemed to be senior securities.

o    Value  Fund/VA  cannot  buy  securities  or  other  instruments  issued  or
     guaranteed  by any one issuer if more than 5% of its total  assets would be
     invested in securities or other  instruments  of that issuer or if it would
     then own more than 10% of that issuer's voting securities.  This limitation
     applies  to 75% of the  Fund's  total  assets.  The limit does not apply to
     securities  issued  or  guaranteed  by the  U.S.  government  or any of its
     agencies or instrumentalities or securities of other investment companies.

o    Value  Fund/VA  cannot  invest  25% or more of its total  assets in any one
     industry.  That limit does not apply to securities  issued or guaranteed by
     the U.S.  government  or its agencies and  instrumentalities  or securities
     issued by investment companies.

o    Value  Fund/VA  cannot  invest  in  physical   commodities  or  commodities
     contracts. However, the Fund can invest in hedging instruments permitted by
     any of its other investment policies, and can buy or sell options, futures,
     securities or other  instruments  backed by, or the investment  return from
     which is linked to, changes in the price of physical commodities, commodity
     contracts or currencies.

o    Value Fund/VA  cannot invest in real estate or in interests in real estate.
     However, the Fund can purchase securities of issuers holding real estate or
     interests in real estate  (including  securities of real estate  investment
     trusts) if permitted by its other investment policies.

o    Value Fund/VA cannot  underwrite  securities of other issuers.  A permitted
     exception is in case it is deemed to be an underwriter under the Securities
     Act of 1933 in reselling its portfolio securities.

o    Value Fund/VA cannot make loans,  except to the extent  permitted under the
     Investment  Company  Act,  the  rules  or  regulations  thereunder  or  any
     exemption therefrom that is applicable to the Fund, as such statute,  rules
     or regulations may be amended or interpreted from time to time.

o    Value Fund/VA may not borrow money,  except to the extent  permitted  under
     the  Investment  CompanyAct,  the rules or  regulations  thereunder  or any
     exemption therefrom that is applicable to the Fund, as such statute,  rules
     or regulations may be amended or interpreted from time to time.

     Value Fund/VA has also adopted the following  non-fundamental  policy:  The
Fund cannot invest in securities of other  investment  companies,  except to the
extent  permitted  under the  Investment  Company Act, the rules or  regulations
thereunder or any exemption therefrom, as such statute, rules or regulations may
be amended or interpreted from time to time.

     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 Funds makes an  investment.  The Funds 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,  Money  Fund/VA and all other Funds have  adopted the industry
classifications  set forth in Appendix B and Appendix C,  respectively,  to this
Statement of Additional Information. This is not a fundamental policy.

How the Funds Are Managed

Organization and History. Each Fund is an investment  portfolio,  or "series" of
Oppenheimer  Variable  Account  Funds (the  "Trust"),  a  multi-series  open-end
diversified  management investment company organized as a Massachusetts business
trust that presently includes 11 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(R)Fund/VA  was organized in 1995, Main Street(R)
Small Cap Fund/VA was  organized  in 1998 and Value  Fund/ VA was  organized  in
2002.  Prior to May 1,  2003,  Oppenheimer  Main  Street  Fund(R)/VA  was  named
"Oppenheimer Main  Street(R)Growth  & Income Fund/VA." Prior to May 1, 2001,
Oppenheimer Main Street(R)Small Cap Fund was named "Oppenheimer Small Cap Growth
Fund." 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(R)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.

|X|  Classes  of  Shares.  The  Trustees  are  authorized,  without  shareholder
approval,  to create  new  series  and  classes  of  shares.  The  Trustees  may
reclassify  unissued  shares of a Fund 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 Fund.  Shares do not have  cumulative  voting
rights or preemptive  or  subscription  rights.  Shares may be voted by proxy at
shareholder meetings.

     The Funds (except for Global Securities Fund/VA) currently have two classes
of shares authorized. All Funds offer a class of shares with no name designation
referred to in this  Statement of Additional  Information  and the Prospectus as
"non-service  shares." As of December 31, 2002,  all Funds except Money  Fund/VA
also offered a service share class,  subject to a Distribution and Service Plan.
As of May 1, 2003,  Global  Securities  Fund/VA also offers a third share class,
referred to in this  Statement of Additional  Information  and the Prospectus as
"Class 3." Value Fund/VA currently only offers the class of non-service  shares.
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  under the terms of the insurance  product,
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 a Fund represents an interest proportionately equal
to the interest of each other share of the same class of that Fund.

|X| Meetings of Shareholders.  The Trust is a Massachusetts  business trust, and
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 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 its 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 Funds'  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 Trust's Declaration of Trust contains
an express  disclaimer of shareholder  or Trustee  liability and states that all
persons extending credit to, doing business with,  contracting with or having or
asserting  any claim  against the Trust or the  Trustees  shall look only to the
assets of the appropriate  Series for payment,  and neither the shareholders nor
the Trustees, nor any of their agents, whether past, present or future, shall be
personally  liable for the  obligations of the Trust.  The  Declaration of Trust
also states that any  shareholder or former  shareholder  who is held personally
liable for the  obligations of the Trust solely by reason of his being or having
been a  shareholder  shall be  indemnified  by the Trust  against all losses and
expenses arising from such liability.  Upon request,  the Trust shall assume the
defense of any such claim and satisfy any  judgment on the 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  shareholder  will  incur  any  financial  loss from  being  held to be a
"partner"  of the Trust is limited to the  relatively  remote  circumstances  in
which the appropriate Fund would be unable to meet its obligations.

     The Trust's  contractual  arrangements state that any person doing business
with the Trust (and each  shareholder of the Funds) agrees under its Declaration
of Trust to look solely to the assets of the Funds for satisfaction of any claim
or demand that may arise out of any dealings with the Funds.  Additionally,  the
Trustees  shall have no personal  liability  to any such  person,  to the extent
permitted by law.

     |X| Board of Trustees and Oversight Committees. 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, it may hold shareholder meetings from time to time
on  important  matters,  and  shareholders  have the right to call a meeting  to
remove a Trustee or to take other action described in the Trust's Declaration of
Trust.

     The Board of Trustees has an Audit  Committee and a Review  Committee.  The
Audit Committee is comprised solely of Independent Trustees.  The members of the
Audit Committee are Edward L. Cameron (Chairman),  William L. Armstrong,  George
C. Bowen and Robert J. Malone.  The Audit  Committee held seven meetings  during
the fiscal year ended December 31, 2002. The Audit Committee furnishes the Board
with recommendations regarding the selection of the Fund's independent auditors.
Other main functions of the Audit Committee include, but are not limited to: (i)
reviewing  the scope and  results  of audits and the audit  fees  charged;  (ii)
reviewing  reports from the Fund's  independent  auditors  regarding  the Fund's
internal accounting  procedures and controls;  and (iii) establishing a separate
line  of  communication   between  the  Fund's  independent   auditors  and  its
independent Trustees.

     The Audit  Committee's  functions  include  selecting and nominating to the
full Board, Independent nominees for election as Independent Trustees. The Audit
Committee  may,  but need not  consider  the  advice and  recommendation  of the
Manager and its  affiliates  in  selecting  nominees.  The full Board elects new
trustees  except for those  instances  when a shareholder  vote is required.  To
date,  the  Committee  has been able to identify from its own resources an ample
number of qualified  candidates.  Nonetheless,  shareholders may submit names of
individuals,  accompanied by complete and properly  supported  resumes,  for the
Audit Committee's  consideration by mailing such information to the Committee in
care of the Funds.  The  Committee  may consider such persons at such time as it
meets to consider  possible  nominees.  The  Committee,  however,  reserves sole
discretion  to  determine  the   candidates  to  present  to  the  Board  and/or
shareholders when it meets for the purpose considering potential nominees.

     The members of the Review Committee are Jon S. Fossel (Chairman), Robert G.
Avis, Sam Freedman,  Beverly  Hamilton and F. William  Marshall,  Jr. The Review
Committee  held eight  meetings  during the fiscal year ended December 31, 2002.
Among  other  functions,   the  Review  Committee   reviews  reports  and  makes
recommendations  to the Board  concerning  the fees paid to the Fund's  transfer
agent and the services  provided to the Fund by the transfer  agent.  The Review
Committee  also  reviews the Fund's  investment  performance  and  policies  and
procedures  adopted by the Fund to comply with Investment  Company Act and other
applicable law.

     |X|  Trustees  and Officers of the Funds.  Except Mr.  Murphy,  each of the
Trustees is an "Independent  Trustee," as defined in the Investment Company Act.
Mr. Murphy is an "Interested Trustee," because he is affiliated with the Manager
by virtue of his  positions as an officer and director of the Manager,  and as a
shareholder  of its parent  company.  Mr. Murphy was elected as a Trustee of the
Funds  with the  understanding  that in the  event  he  ceases  to be the  chief
executive  officer of the Manager,  he will resign as a trustee of the Funds and
the other Board II Funds (defined below) for which he is a trustee or director.

     The Funds'  Trustees and officers and their  positions  held with the Funds
and length of service in such  position(s) and their  principal  occupations and
business  affiliations during the past five years are listed in the chart below.
The information for the Trustees also includes the dollar range of shares of the
Funds as well as the aggregate dollar range of shares  beneficially owned in any
of the Oppenheimer funds overseen by the Trustees.  All of the Trustees are also
trustees  or  directors  of the  following  Oppenheimer  funds  (except  for Ms.
Hamilton and Mr.  Malone,  who are not Trustees of Oppenheimer  Senior  Floating
Rate Fund and Mr Murphy is not a Trustee or Managing  General  Partner of any of
the Centennial Funds) (referred to a. "Board II Funds"):

Oppenheimer Cash Reserves                 Oppenheimer  Select Managers
Oppenheimer Champion Income Fund          Oppenheimer Senior Floating Rate Fund
Oppenheimer Capital Income Fund           Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund               Oppenheimer Total Return Fund, Inc.
Oppenheimer International Bond Fund       Oppenheimer Variable Account Funds
Oppenheimer Integrity Funds               Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government Fund  Centennial America Fund, L.P.
                                          Centennial   California   Tax  Exempt
Oppenheimer Main Street Funds,Inc.(R)     Trust
Oppenheimer Main StreetOpportunity Fund(R)Centennial Government Trust
Oppenheimer Main StreetSmall Cap Fund(R)  Centennial Money Market Trust
Oppenheimer Municipal Fund                Centennial New York Tax Exempt Trust
Oppenheimer Real Asset Fund(R)            Centennial Tax Exempt Trust

      Messrs. Murphy, Molleur, Albers, Bartlett, Evans, Kourkoulakos, Leavy,
Levine, Manioudakis, Monoyios, Steinmetz, Turner, Wilby, Zavanelli, Zack,
Masterson, Vottiero, and Weiss, and Mess. Bechtolt, Feld, Putnam, Switzer,
Wolf and Ives who are officers of the Funds, respectively hold the same
offices with one or more of the other Board II Funds as with the Funds. As of
March 31, 2003, the Trustees and officers of the Funds, as a group, owned of
record or beneficially less than 1% of any class of shares of any of the
Funds. In addition, each Independent Trustee, and his family members, do not
own securities of either the Manager or Distributor of the Board II Funds or
any person directly or indirectly controlling, controlled by or under common
control with the Manager or Distributor.

|X|   Affiliated Transactions and Material Business Relationships. In 2001,
Mr. Swain surrendered for cancellation 60,000 options of Oppenheimer
Acquisition Corp. ("OAC") (the Manager's parent holding company) to
MassMutual for a cash payment of $2,700,600.

      Mr. Swain has reported that he sold a residential property to Mr.
Freedman on October 23, 2001 for $1.2 million. An independent appraisal of
the property supported the sale price.

      The  address of each  Trustee in the chart  below is 6803 S. Tucson Way,
Centennial,  CO 80112-3924.  Each Trustee serves for an indefinite term, until
his or her resignation, retirement, death or removal.


- --------------------------------------------------------------------------------

                             Independent Trustees

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Name, Address,     Principal Occupation(s) During Past   Dollar      Aggregate
                                                                      Dollar
                                                                     Range of
                                                                    y Shares
                                                                    Beneficially
                                                                     Owned in
                   5 Years / Other                       Range of   any of the
Age, Position(s)   Trusteeships/Directorships Held by    Shares     Oppenheimer
Held with Fund     Trustee / Number of Portfolios in     Beneficiall   Funds
and Length of      Fund Complex Currently Overseen by    Owned in    Overseen
Service            Trustee                               each Funds by Trustee

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                                           As of December 31,
                                                                  2002

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

James C. Swain,    Formerly,   Chief  Executive  Officer    None       Over
 Chairman and      (until  August 27, 2002) of the Board             $100,000
Trustee since 1984 II  Funds,   Vice   Chairman   (until
Age: 69.           January 2, 2002) of the  Manager  and
                   President   and  a  director   (until
                   1997) of Centennial  Asset Management
                   Corporation      (a      wholly-owned
                   investment   advisory  subsidiary  of
                   the Manager).  Oversees 42 portfolios
                   in the OppenheimerFunds complex.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

William L.         Chairman  of  the  following  private    None     $50,001-
Armstrong,         mortgage  banking  companies:  Cherry             $100,000
Trustee since 1999 Creek Mortgage  Company (since 1991),
Age: 66.           Centennial   State  Mortgage  Company
                   (since  1994),  The El Paso  Mortgage
                   Company   (since   1993),   Transland
                   Financial   Services,   Inc.   (since
                   1997);   Chairman  of  the  following
                   private  companies:   Great  Frontier
                   Insurance  (insurance  agency) (since
                   1995),  Ambassador Media  Corporation
                   and Broadway  Ventures  (since 1984);
                   a director  of the  following  public
                   companies:  Helmerich  & Payne,  Inc.
                   (oil   and  gas   drilling/production
                   company)     (since     1992)     and
                   UNUMProvident   (insurance   company)
                   (since 1991).  Mr.  Armstrong is also
                   a Director/Trustee  of Campus Crusade
                   for    Christ    and   the    Bradley
                   Foundation.  Formerly a  director  of
                   the  following:   Storage  Technology
                   Corporation     (a      publicly-held
                   computer      equipment      company)
                   (1991-February  2003),  International
                   Family   Entertainment    (television
                   channel)    (1992-1997)   and   Natec
                   Resources,    Inc.   (air   pollution
                   control    equipment   and   services
                   company)  (1991-1995),  Frontier Real
                   Estate,   Inc.    (residential   real
                   estate  brokerage)  (1994-1999),  and
                   Frontier   Title   (title   insurance
                   agency)   (1995-June  1999);  a  U.S.
                   Senator (January  1979-January 1991).
                   Oversees   42   portfolios   in   the
                   OppenheimerFunds complex.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Robert G. Avis,    Formerly,  Director and  President of    None    $1-$10,000
Trustee since 1993 A.G. Edwards Capital,  Inc.  (General
Age: 71.           Partner  of  private   equity  funds)
                   (until  February   2001);   Chairman,
                   President    and   Chief    Executive
                   Officer  of  A.G.   Edwards  Capital,
                   Inc.   (until   March   2000);   Vice
                   Chairman   and   Director   of   A.G.
                   Edwards,  Inc.  and Vice  Chairman of
                   A.G.   Edwards  &  Sons,   Inc.  (its
                   brokerage company  subsidiary) (until
                   March   1999);   Chairman   of   A.G.
                   Edwards   Trust  Company  and  A.G.E.
                   Asset     Management      (investment
                   advisor)  (until March  1999);  and a
                   Director  (until  March 2000) of A.G.
                   Edwards  &  Sons  and  A.G.   Edwards
                   Trust     Company.     Oversees    42
                   portfolios  in  the  OppenheimerFunds
                   complex.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

George C. Bowen,   Formerly  (until April 1999):  Senior    None       Over
Trustee since 1999 Vice President  (from September 1987)             $100,000
Age: 66.           and  Treasurer  (from  March 1985) of
                   the  Manager;  Vice  President  (from
                   June  1983)  and   Treasurer   (since
                   March   1985)   of   OppenheimerFunds
                   Distributor,  Inc. (a  subsidiary  of
                   the Manager);  Senior Vice  President
                   (since  February   1992),   Treasurer
                   (since    July    1991)     Assistant
                   Secretary   and  a  director   (since
                   December  1991) of  Centennial  Asset
                   Management     Corporation;      Vice
                   President  (since  October  1989) and
                   Treasurer   (since   April  1986)  of
                   HarbourView      Asset     Management
                   Corporation  (an investment  advisory
                   subsidiary     of    the    Manager);
                   President,  Treasurer  and a director
                   (June     1989-January    1990)    of
                   Centennial  Capital  Corporation  (an
                   investment   advisory  subsidiary  of
                   the  Manager);   Vice  President  and
                   Treasurer  (since  August  1978)  and
                   Secretary   (since   April  1981)  of
                   Shareholder    Services,    Inc.   (a
                   transfer  agent   subsidiary  of  the
                   Manager);  Vice President,  Treasurer
                   and Secretary  (since  November 1989)
                   of  Shareholder  Financial  Services,
                   Inc. (a transfer agent  subsidiary of
                   the  Manager);   Assistant  Treasurer
                   (since  March  1998)  of  Oppenheimer
                   Acquisition   Corp.   (the  Manager's
                   parent    corporation);     Treasurer
                   (since  November 1989) of Oppenheimer
                   Partnership    Holdings,    Inc.   (a
                   holding  company  subsidiary  of  the
                   Manager);    Vice    President    and
                   Treasurer   (since   July   1996)  of
                   Oppenheimer  Real  Asset  Management,
                   Inc.    (an    investment    advisory
                   subsidiary  of  the  Manager);  Chief
                   Executive    Officer   and   director
                   (since  March  1996)  of  MultiSource
                   Services,   Inc.   (a   broker-dealer
                   subsidiary     of    the    Manager);
                   Treasurer  (since  October  1997)  of
                   OppenheimerFunds  International  Ltd.
                   and Oppenheimer  Millennium Funds plc
                   (offshore       fund       management
                   subsidiaries    of   the    Manager).
                   Oversees   42   portfolios   in   the
                   OppenheimerFunds complex.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Edward L. Cameron, A member  of The Life  Guard of Mount    None     $50,001-
Trustee since 1999 Vernon,   George   Washington's  home             $100,000
Age: 64.           (since  June 2000).  Formerly  (March
                   2001 - May 2002)  Director of Genetic
                   ID,  Inc.  and  its  subsidiaries  (a
                   privately  held biotech  company);  a
                   partner  with  PricewaterhouseCoopers
                   LLP (from  1974-1999)  (an accounting
                   firm) and Chairman (from  1994-1998),
                   Price     Waterhouse    LLP    Global
                   Investment     Management    Industry
                   Services    Group.     Oversees    42
                   portfolios  in  the  OppenheimerFunds
                   complex.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Jon S. Fossel,     Chairman  and  Director  (since 1998)    None       Over
Trustee since      of Rocky  Mountain Elk  Foundation (a             $100,000
1990               not-for-profit  foundation);   and  a
Age: 61            director   (since  October  1999)  of
                   P.R.   Pharmaceuticals  (a  privately
                   held company) and  UNUMProvident  (an
                   insurance  company)  (since  June  1,
                   2002).   Formerly   Chairman   and  a
                   director  (until  October  1996)  and
                   President    and   Chief    Executive
                   Officer  (until  October 1995) of the
                   Manager;  President,  Chief Executive
                   Officer    and    a    director    of
                   Oppenheimer     Acquisition    Corp.,
                   Shareholders    Services   Inc.   and
                   Shareholder    Financials   Services,
                   Inc.  (until October 1995).  Oversees
                   42       portfolios       in      the
                   OppenheimerFunds complex.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Sam Freedman,      Director   of   Colorado   Uplift  (a    None       Over
Trustee since      non-profit  charity) (since September             $100,000
1996               1984).  Formerly (until October 1994)
Age: 62.           Mr.  Freedman held several  positions
                   in     subsidiary    or    affiliated
                   companies  of the  Manager.  Oversees
                   42       portfolios       in      the
                   OppenheimerFunds complex.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Beverly L.         Trustee  (since  1996) of  MassMutual    None    $10,001-$50,000
Hamilton, Trustee  Institutional   Funds   and   of  MML
since 2002         Series   Investment   Fund  (open-end
Age: 56.           investment  companies);  Director  of
                   MML  Services  (since April 1987) and
                   America   Funds   Emerging    Markets
                   Growth  Fund  (since   October  1991)
                   (both are investment companies),  The
                   California  Endowment (a philanthropy
                   organization)   (since  April  2002),
                   and  Community  Hospital  of Monterey
                   Peninsula,  (since  February 2002); a
                   trustee  (since   February  2000)  of
                   Monterey  International  Studies  (an
                   educational  organization),   and  an
                   advisor   to   Unilever   (Holland)'s
                   pension  fund  and to  Credit  Suisse
                   First    Boston's    Sprout   venture
                   capital unit.  Mrs.  Hamilton also is
                   a    member    of   the    investment
                   committees    of   the    Rockefeller
                   Foundation,    the    University   of
                   Michigan   and   Hartford   Hospital.
                   Formerly,     President     (February
                   1991-April   2000)  ARCO   Investment
                   Management   Company.   Oversees   41
                   portfolios  in  the  OppenheimerFunds
                   complex.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Robert J. Malone,  Director   (since   2001)   of  Jones    None       Over
Trustee since 2002 Knowledge,  Inc.  (a  privately  held             $100,000
Age: 58.           company),  U.S.  Exploration,   Inc.,
                   (since  1997),   Colorado  UpLIFT  (a
                   non-profit    organization)    (since
                   1986) and a trustee of the  Gallagher
                   Family     Foundation     (non-profit
                   organization)      (since      2000).
                   Formerly,  Chairman  of U.S.  Bank (a
                   subsidiary   of  U.S.   Bancorp   and
                   formerly   Colorado  National  Bank,)
                   (July   1996-April  1,  1999)  and  a
                   director of Commercial  Assets,  Inc.
                   (a  REIT)  (1993-2000).  Oversees  41
                   portfolios  in  the  OppenheimerFunds
                   complex.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

F. William         Trustee  (since  1996) of  MassMutual    None       Over
Marshall, Jr.,     Institutional   Funds   and   of  MML             $100,000
Trustee since 2000 Series   Investment   Fund  (open-end
Age: 61.           investment    companies);     Trustee
                   (since  1987),  Chairman of the Board
                   (since  2003)  and  Chairman  of  the
                   investment   committee  (since  1994)
                   for    the     Worcester     Polytech
                   Institute;  President  and  Treasurer
                   (since  January 1999) of the SIS Fund
                   (a private not for profit  charitable
                   fund);  Trustee  (since  1995) of the
                   Springfield    Library   and   Museum
                   Association;  Trustee (since 1996) of
                   the   Community   Music   School   of
                   Springfield.  Formerly, member of the
                   investment     committee    of    the
                   Community   Foundation   of   Western
                   Massachusetts    (1998    -    2003);
                   Chairman (January  1999-July 1999) of
                   SIS & Family Bank,  F.S.B.  (formerly
                   SIS    Bank);    President,     Chief
                   Executive  Officer and Director  (May
                   1993-December  1998) of SIS Bankcorp,
                   Inc.    and   SIS   Bank    (formerly
                   Springfield  Institution for Savings)
                   and    Executive    Vice    President
                   (January  1999-July  1999) of Peoples
                   Heritage    Financial   Group,   Inc.
                   Oversees   42   portfolios   in   the
                   OppenheimerFunds complex.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------


     The address of Mr.  Murphy in the chart below is 498  Seventh  Avenue,  New
York, NY 10018. Mr. Murphy serves for an indefinite term, until his resignation,
death or removal.

   Interested
  Trustee and
    Officer

- ---------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Name, Address,  Principal  Occupation(s)  During  Past 5 Dollar      Aggregate
                                                                      Dollar
                                                                     Range of
                                                                    y Shares
Age,                                                     Range of   Beneficially
Position(s)     Years               /              Other Shares      Owned in
Held with Fund  Trusteeships/Directorships    Held    by Beneficiallany of the
and Length of   Trustee / Number of  Portfolios  in Fund Owned in   Oppenheimer
Service         Complex Currently Overseen by Trustee    each Funds    Funds

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                                           As of December 31,
                                                                  2002

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

John V.         Chairman,  Chief  Executive  Officer and     None      Over
Murphy,         director    (since    June   2001)   and               $100,000
President and   President  (since September 2000) of the
Trustee, since  Manager;  President  and a  director  or
2001            trustee  of  other  Oppenheimer   funds;
Age: 53.        President  and a  director  (since  July
                2001) of Oppenheimer  Acquisition  Corp.
                and    of    Oppenheimer     Partnership
                Holdings,   Inc.;   a  director   (since
                November   2001)   of   OppenheimerFunds
                Distributor,   Inc.;   Chairman   and  a
                director    (since    July    2001)   of
                Shareholder   Services,   Inc.   and  of
                Shareholder  Financial  Services,  Inc.;
                President  and a  director  (since  July
                2001)   of    OppenheimerFunds    Legacy
                Program  (a  charitable   trust  program
                established by the Manager);  a director
                of  the  following  investment  advisory
                subsidiaries of OppenheimerFunds,  Inc.:
                OFI   Institutional   Asset  Management,
                Inc.  and  Centennial  Asset  Management
                Corporation   (since   November   2001),
                HarbourView       Asset       Management
                Corporation      and     OFI     Private
                Investments,  Inc.  (since  July  2001);
                President  (since  November 1, 2001) and
                a   director   (since   July   2001)  of
                Oppenheimer   Real   Asset   Management,
                Inc.; a director  (since  November 2001)
                of Trinity  Investment  Management Corp.
                and Tremont Advisers,  Inc.  (investment
                advisory  affiliates  of  the  Manager);
                Executive    Vice    President    (since
                February 1997) of  Massachusetts  Mutual
                Life  Insurance  Company (the  Manager's
                parent company);  a director (since June
                1995) of DLB Acquisition  Corporation (a
                holding  company  that  owns  shares  of
                David  L.   Babson  &  Company,   Inc.);
                formerly,    Chief   Operating   Officer
                (September   2000-June   2001)   of  the
                Manager;     President    and    trustee
                (November  1999-November  2001)  of  MML
                Series  Investment  Fund and  MassMutual
                Institutional       Funds      (open-end
                investment   companies);    a   director
                (September  1999-August  2000)  of  C.M.
                Life   Insurance   Company;   President,
                Chief  Executive  Officer  and  director
                (September  1999-August 2000) of MML Bay
                State   Life   Insurance    Company;   a
                director   (June   1989-June   1998)  of
                Emerald   Isle   Bancorp  and   Hibernia
                Savings Bank (a wholly-owned  subsidiary
                of Emerald  Isle  Bancorp).  Oversees 74
                portfolios   in   the   OppenheimerFunds
                complex.

- --------------------------------------------------------------------------------


      The address of the Officers in the chart below is as follows: Messes.
Molleur, Albers, Bartlett, Evans, Kourkoulakos, Leavy, Levine, Manioudakis,
Monoyios, Steinmetz, Turner, Wilby, Zavanelli, and Zack and Mess. Feld,
Putnam, and Switzer, 498 Seventh Avenue, New York, NY 10018; for Messrs.
Masterson, Vottiero, Weiss and Wixted and Mess. Bechtolt, Ives and Wolf 6803
S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual
term or until his or her earlier resignation, death or removal.


- -------------------------------------------------------------------------------

                            Officers of the Funds

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Name, Address, Age,     Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund and Length of
Service

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Charles Albers          Senior  Vice  President  (since  April  1998)  of  the
Vice President and      Manager; a Certified  Financial Analyst; an officer of
Portfolio Manager       6   portfolios   in  the   OppenheimerFunds   complex;
since 1998              formerly a Vice  President and  portfolio  manager for
Age:  62                Guardian Investor Services,  the investment management
                        subsidiary  of The  Guardian  Life  Insurance  Company
                        (1972 - April 1998).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Bruce Bartlett          Senior  Vice  President  (since  January  1999) of the
Vice President and      Manager;   an   officer   of  6   portfolios   in  the
Portfolio Manager       OppenheimerFunds   complex.   Prior  to  joining   the
since 1999              Manager in April,  1995,  he was a Vice  President and
Age:  53                Senior   Portfolio   Manager   at  First  of   America
                        Investment Corp. (September 1986 - April 1995).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

George Evans            Vice  President of the Manager  (since  October  1993)
Vice President and      and  of  HarbourView   Asset  Management   Corporation
Portfolio Manager       (since July 1994);  an officer of 2 portfolios  in the
since 1993              OppenheimerFunds complex.
Age:  43

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Emmanuel Ferreira       Vice  President of the Manager  (since  January 2003).
Vice President and      An officer  of 2  portfolios  in the  OppenheimerFunds
Portfolio Manager       complex.   Formerly,   Portfolio  Manager  at  Lashire
since 2003              Investments  (July  1999-December  2002), and a Senior
Age:  35                Analyst  at  Mark  Asset  Management  (July  1997-June
                        1999).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Dimitrios Kourkoulakos  Vice President of the Manager (since  December  2001);
Vice President and      an officer  of 3  portfolios  in the  OppenheimerFunds
Portfolio Manager       complex;  formerly a High Yield  Analyst (1998 - 2001)
since 2002              and a Securities Analyst (1995 - 1998) of the Manager.
Age:  36

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Christopher Leavy       Senior Vice President (since September 2000) of the
Vice President and      Manager; an officer of 6 portfolios in the
Portfolio Manager       OppenheimerFunds complex; prior to joining the
since 2000              Manager in September 2000, he was a portfolio manager
Age:  32                of Morgan Stanley Dean Witter Investment Management
                        (from 1997) prior to which he was a portfolio manager
                        and equity analyst of Crestar Asset Management (from
                        1995).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Michael S. Levine       Vice  President  (since June 1998) of the Manager;  an
Vice President and      officer  of  2  portfolios  in  the   OppenheimerFunds
Portfolio Manager       complex;   formerly   Assistant   Vice  President  and
since 1998              Portfolio  Manager of the  Manager  (April 1996 - June
Age:  37                1998);  prior to joining the Manager in June 1994,  he
                        was a portfolio  manager and  research  associate  for
                        Amas Securities, Inc. (February 1990 - February 1994).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Angelo Manioudakis      Senior  Vice  President  of the Manager  (since  April
Vice President and      2002);   an   officer   of  12   portfolios   in   the
Portfolio Manager       OppenheimerFunds  complex; formerly Executive Director
since 2003              and   portfolio   manager  for   Miller,   Anderson  &
Age:  36                Sherrerd,  a  division  of Morgan  Stanley  Investment
                        Management (August 1993-April 2002).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Nikolaos D. Monoyios    Vice President of the Manager  (since April 1998);  an
Vice President and      officer  of  4  portfolios  in  the   OppenheimerFunds
Portfolio Manager       complex;  a Certified  Financial  Analyst;  formerly a
since 1998              Vice  President  and  portfolio  manager for  Guardian
Age:  53                Investor   Services,    the   investment    management
                        subsidiary  of The  Guardian  Life  Insurance  Company
                        (1979 - March 1998).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Jane Putnam             Vice  President of the Manager  (since  October 1995);
Vice President and      an officer  of 2  portfolios  in the  OppenheimerFunds
Portfolio Manager       complex;  before  joining the Manager in May 1994, she
since 1995              was a portfolio  manager and equity  research  analyst
Age:  42                for Chemical Bank (June 1989 - May 1994).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Arthur P. Steinmetz     Senior  Vice  President  of the Manager  (since  March
Vice President and      1993) and of HarbourView Asset Management  Corporation
Portfolio Manager       (since March  2000);  an officer of 11  portfolios  in
since 2003              the OppenheimerFunds complex.
Age:  44

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Susan Switzer           Vice President of the Manager (since  December  2000);
Vice President and      Assistant  Vice  President  of the  Manager  (December
Portfolio Manager       1997 - December  2000);  an officer of 1 portfolios in
since 2003              the  OppenheimerFunds  complex.  Prior to joining  the
Age:  37                Manager,  she was a  portfolio  manager  at  Neuberger
                        Berman (November 1994 - November 1997).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

James F. Turner, II     Vice  President and  Portfolio  Manager of the Manager
Vice President and      since March 2001;  an officer of 3  portfolios  in the
Portfolio Manager       OppenheimerFunds  complex;  formerly portfolio manager
since 2001              for  Technology  Crossover  Ventures (May 2000 - March
Age:  36                2001);   Assistant   Vice   President   and  Associate
                        Portfolio  Manager of the Manager  (August  1999 - May
                        2000);  securities  analyst for the  Manager  (October
                        1996 - August  1999);  and a  securities  analyst with
                        First of America  Investment  Corporation  (May 1994 -
                        October 1996).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Barry D. Weiss          Vice  President of the Manager  (since July 2001);  an
Vice President and      officer  of  7  portfolios  in  the   OppenheimerFunds
Portfolio Manager       complex;  formerly Assistant Vice President and Senior
since 2001              Credit  Analyst  of the  Manager  (February  2000-June
Age: 38.                2001).  Prior to joining the Manager in February 2000,
                        he was Associate Director,  Structured Finance,  Fitch
                        IBCA  Inc.   (April  1998  -  February   2000);   News
                        Director,  Fitch Investors  Service  (September 1996 -
                        April 1998);  and Senior Budget  Analyst,  City of New
                        York,  Office of Management & Budget  (February 1990 -
                        September 1996).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

William L. Wilby        Senior  Vice  President  of the  Manager  (since  July
Vice President and      1994) and of HarbourView Asset Management  Corporation
Portfolio Manager       (since May 1999); Senior Investment Officer,  Director
since 1994              of  International  Equities  (since  May  2000) of the
Age:  58                Manager;   an   officer   of  2   portfolios   in  the
                        OppenheimerFunds  complex;  formerly Vice President of
                        the   Manager   (October   1991-  July  1994)  and  of
                        HarbourView Asset Management  Corporation (June 1992 -
                        May 1999).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Carol E. Wolf           Senior  Vice  President   (since  June  2000)  of  the
Vice President and
Portfolio Manager       Manager;   an   officer   of  7   portfolios   in  the
since 2000              OppenheimerFunds  complex;  formerly Vice President of
Age: 51                 the Manager (June 1990 - June 2000).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Mark Zavanelli          Vice President  (since  November 2000) of the Manager;
Vice President and      a  Chartered   Financial  Analyst;  an  officer  of  2
Portfolio Manager       portfolios in the OppenheimerFunds  complex.  Prior to
since 2000              joining  the Manager in May 1998 he was  President  of
Age:  32                Waterside Capital Management,  a registered investment
                        advisor  (August  1995 - April  1998) and a  financial
                        research  analyst  for  Elder  Research  (June  1997 -
                        April 1998).

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Brian W. Wixted         Senior  Vice  President  and  Treasurer  (since  March
Treasurer since 1999    1999) of the Manager;  Treasurer (since March 1999) of
Age: 43                 HarbourView Asset Management Corporation,  Shareholder
                        Services,  Inc.,  Oppenheimer  Real  Asset  Management
                        Corporation,  Shareholder  Financial  Services,  Inc.,
                        Oppenheimer  Partnership  Holdings,  Inc., OFI Private
                        Investments,      Inc.     (since     March     2000),
                        OppenheimerFunds  International  Ltd. and  Oppenheimer
                        Millennium   Funds  plc   (since  May  2000)  and  OFI
                        Institutional  Asset Management,  Inc. (since November
                        2000);  Treasurer and Chief  Financial  Officer (since
                        May  2000)  of  Oppenheimer  Trust  Company  (a  trust
                        company   subsidiary   of  the   Manager);   Assistant
                        Treasurer    (since   March   1999)   of   Oppenheimer
                        Acquisition Corp. and OppenheimerFunds  Legacy Program
                        (since  April  2000);  formerly  Principal  and  Chief
                        Operating  Officer (March  1995-March  1999),  Bankers
                        Trust   Company-Mutual  Fund  Services  Division.   An
                        officer  of  90  portfolios  in  the  OppenheimerFunds
                        complex.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Connie Bechtolt         Assistant Vice President of the Manager  (since
Assistant Treasurer     September 1998); formerly Manager/Fund Accounting
since 2002              (September 1994-September 1998) of the Manager. An
Age: 39                 officer of 90 portfolios in the OppenheimerFunds
                        complex.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Philip Vottiero         Vice  President/Fund  Accounting of the Manager (since
Assistant Treasurer     March   2002;   formerly   Vice    President/Corporate
since 2002              Accounting  of  the  Manager  (July  1999-March  2002)
Age: 39                 prior to  which  he was  Chief  Financial  Officer  at
                        Sovlink   Corporation   (April   1996-June  1999).  An
                        officer  of  90  portfolios  in  the  OppenheimerFunds
                        complex.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Robert G. Zack          Senior  Vice  President  (since May 1985) and  General
Vice President &    Counsel (since February 2002) of the Manager;  General
Secretary since 2001    Counsel  and  a  director  (since  November  2001)  of
Age: 54                 OppenheimerFunds   Distributor,   Inc.;   Senior  Vice
                        President and General  Counsel  (since  November 2001)
                        of  HarbourView  Asset  Management  Corporation;  Vice
                        President  and a  director  (since  November  2000) of
                        Oppenheimer  Partnership  Holdings,  Inc.; Senior Vice
                        President,  General  Counsel  and  a  director  (since
                        November   2001)  of   Shareholder   Services,   Inc.,
                        Shareholder  Financial  Services,  Inc.,  OFI  Private
                        Investments,  Inc.,  Oppenheimer Trust Company and OFI
                        Institutional Asset Management,  Inc.; General Counsel
                        (since November 2001) of Centennial  Asset  Management
                        Corporation;  a  director  (since  November  2001)  of
                        Oppenheimer  Real Asset  Management,  Inc.;  Assistant
                        Secretary  and a  director  (since  November  2001) of
                        OppenheimerFunds  International  Ltd.;  Vice President
                        (since  November  2001)  of  OppenheimerFunds   Legacy
                        Program;    Secretary   (since   November   2001)   of
                        Oppenheimer   Acquisition   Corp.;   formerly   Acting
                        General  Counsel  (November  2001-February  2002)  and
                        Associate General Counsel (May  1981-October  2001) of
                        the  Manager;   Assistant   Secretary  of  Shareholder
                        Services,  Inc. (May 1985-November 2001),  Shareholder
                        Financial  Services,   Inc.  (November   1989-November
                        2001);   OppenheimerFunds   International   Ltd.   And
                        Oppenheimer     Millennium    Funds    plc    (October
                        1997-November  2001).  An officer of 90  portfolios in
                        the OppenheimerFunds complex.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Katherine P. Feld       Vice  President and Senior  Counsel  (since July 1999)
Assistant Secretary     of the Manager;  Vice  President  (since June 1990) of
since 2001              OppenheimerFunds  Distributor,  Inc.;  Director,  Vice
Age: 44                 President  and Assistant  Secretary  (since June 1999)
                        of  Centennial  Asset  Management  Corporation;   Vice
                        President  (since  1997)  of  Oppenheimer  Real  Asset
                        Management,   Inc.;   formerly   Vice   President  and
                        Associate  Counsel  of  the  Manager  (June  1990-July
                        1999).   An   officer   of  90   portfolios   in   the
                        OppenheimerFunds complex.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Kathleen T. Ives        Vice  President  and  Assistant  Counsel  (since  June
Assistant Secretary     1998) of the Manager;  Vice President  (since 1999) of
since 2001              OppenheimerFunds  Distributor,  Inc.;  Vice  President
Age: 37                 and Assistant  Secretary  (since 1999) of  Shareholder
                        Services,  Inc.;  Assistant  Secretary (since December
                        2001)   of   OppenheimerFunds   Legacy   Program   and
                        Shareholder   Financial   Services,   Inc.;   formerly
                        Assistant Vice President and Assistant  Counsel of the
                        Manager (August 1997-June 1998);  Assistant Counsel of
                        the Manager (August  1994-August  1997). An officer of
                        90 portfolios in the OppenheimerFunds complex.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Philip T. Masterson     Vice President and Assistant Counsel of the Manager
Assistant Secretary     (since July 1998); formerly, an associate with Davis,
since 2002              Graham, & Stubbs LLP (January 1997-June 1998). An
Age: 39                 officer of 90 portfolios in the OppenheimerFunds
                        complex.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Denis R. Molleur        Vice  President  and  Senior  Counsel  of the  Manager
Assistant Secretary     (since  July  1999);  formerly  a Vice  President  and
since 2001              Associate Counsel of the Manager (September  1995-July
Age: 45                 1999).   An   officer   of  83   portfolios   in   the
                        OppenheimerFunds complex.

- -------------------------------------------------------------------------------


      |X|   Remuneration of Trustees. The officers of the Funds and one
Trustee of the Fund (Mr. Murphy) 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, 2002. The compensation from all
of the Board II 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 2002.


- ------------------------------------------------------------------------------

  Trustee Name and Other Fund        Aggregate       Total Compensation From
                                                      All Oppenheimer Funds
                                    Compensation       For Which Individual
                                 from the Funds as          Serves As
  Position(s) (as applicable)      of Fiscal Year        Trustee/Director
                                 Ended December 31,  As of December 31, 2002
                                       20021                (42 Funds)

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

 James C. Swain                       $33,846                $177,996
  Chairman   of  the  Board  of
  Trustees

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

William L. Armstrong                  $17,507                $92,076
  Audit Committee Member

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Robert G. Avis                        $17,532                $92,199
  Review Committee Member

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

George Bowen                          $17,328                $91,124
 Audit Committee Member

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Edward L. Cameron                     $18,968                $99,743
  Audit Committee Chairman

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Jon S. Fossel                         $17,986                $94,590
  Review Committee Chairman

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Sam Freedman                          $17,532                $92,199
  Review Committee Member

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Beverly Hamilton2                     $11,0893              $113,6594
   Review Committee Member

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Robert J. Malone2                     $11,0895               $58,326
   Audit Committee Member

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

F. William Marshall, Jr.              $17,328               $138,1246
  Review Committee Member

- ------------------------------------------------------------------------------

Effective July 1, 2002, C. Howard Kast and Robert M. Kirchner retired as
Trustees from the Board II Funds. For the fiscal year ended December 31,
2002, Mr. Kast received $7,882 and Mr. Kirchner received $7,226 aggregate
compensation from the Fund. For the calendar year ended December 31, 2002,
Mr. Kast received $41,451 and Mr. Kirchner received $38,001 total
compensation from all of the Oppenheimer funds for which they served as
Trustee.
1.    Aggregate Compensation From Fund includes fees and deferred
   compensation, if any, for a Trustee.
2.    Mrs. Hamilton and Mr. Malone were elected as Trustees of the Board II
   Funds effective June 1, 2002. Compensation for Mrs. Hamilton and Mr.
   Malone was paid by all the Board II Funds, with the exception of
   Oppenheimer Senior Floating Rate Fund for which they currently do not
   serve as Trustees (total of 41 Oppenheimer funds).
3.    Includes $5,510 deferred under Deferred Compensation Plan described
   below.
4.    Includes $55,333 compensation (of which 100% was deferred under a
   deferred compensation plan) paid to Mrs. Hamilton for serving as a trustee
   by two open-end investment companies (MassMutual Institutional Funds and
   MML Series Investment Fund) the investment adviser for which is the
   indirect parent company of the Fund's Manager. The Manager also serves as
   the Sub-Advisor to the MassMutual International Equity Fund, a series of
   MassMutual Institutional Funds.
5.    Includes $11,089 deferred under Deferred Compensation Plan described
   below.
6.    Includes $47,000 compensation paid to Mr. Marshall for serving as a
   trustee by two open-end investment companies (MassMutual Institutional
   Funds and MML Series Investment Fund) the investment adviser for which is
   the indirect parent company of the Fund's Manager. The Manager also serves
   as the Sub-Advisor to the MassMutual International Equity Fund, a series
   of MassMutual Institutional Funds.
7.    Effective July 1, 2002, Messrs. Kast and Kirchner retired as Trustees
   from the Board II funds.
* For purposes of this section only, "Fund Complex" includes the Oppenheimer
funds, MassMutual Institutional Funds and MML Series Investment Fund in
accordance with the instructions for Form N-1A. The Manager does not consider
MassMutual Institutional Funds and MML Series Investment Fund to be part of
the OppenheimerFunds "Fund Complex" as that term may be otherwise interpreted.

      |X|   Deferred Compensation Plan for Trustees. 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.

|X| Major Shareholders. As of March 17, 2003, the only entities owning of record
or known by the management of the Trust to be beneficial owners of 5% or more of
the outstanding shares of any Fund were the Manager and the following  insurance
companies and their respective affiliates:
(i)   Allianz Life Insurance Company of North America ("Allianz"),
         Minneapolis, MN;
(ii)  Allmerica Financial Life Insurance & Annuity Company ("Allmerica"),
         Worcester, MA;
(iii) Allstate Life Insurance Company, ("Allstate"), Northbrook, IL;
(iv)  American Express Financial Advisors Inc. ("American Express"),
         Minneapolis, MN;
(v)   American General Annuity Insurance Company ("American General"),
         Houston, TX;
(vi)  CUNA Mutual Life Insurance Company ("CUNA"), Madison, WI;
(vii) GE Life & Annuity Assurance Company ("GE"), Richmond, VA;
(viii)......ING Life Insurance and Annuity Company ("ING"), Hartford, CT;
(ix)  Massachusetts Mutual Life Insurance Company ("MassMutual"),
         Springfield, MA;
(x)   Minnesota Life Insurance Company ("Minnesota"), St. Paul, MN;
(xi)  Monarch Life Insurance Company ("Monarch"), Springfield MA;
(xii) Nationwide Life Insurance Company ("Nationwide"), Columbus, OH;
(xiii)......Protective Life Insurance Company ("Protective"), Birmingham, AL;
(xiv) The Prudential Insurance Company of America ("Prudential"), Newark, NJ;
(xv)  Sage Life Assurance of America, Inc. ("Sage"), Stamford, CT;
(xvi) Transamerica Life Insurance Company ("Transamerica"), Cedar Rapids, IO;and
(xvii)......Travelers Insurance Company ("Travelers"), Hartford, CT.
Such shares were held as shown in Appendix C.

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 Funds (except Money Fund/VA), the Manager and
the Distributor 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 Funds' portfolio
transactions. Covered persons include persons with knowledge of the
investments and investment intentions of the Funds 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 Funds, 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 Funds' 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 Funds' registration statement on the SEC's EDGAR database at the
SEC's Internet website at www.sec.gov. Copies may be obtained, after paying a
duplicating fee, by electronic request at the following E-mail address:
publicinfo@sec.gov 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
agreements, 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. Whenever 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.

    The Agreements contain no expense limitation. However, from January 1,
2002 to December 17, 2002, the Manager had undertaken to voluntarily reduce
the management fee of Strategic Bond Fund/VA, if the relative performance of
that Fund was at or below the following criteria. If the trailing 12-month
performance of Strategic Bond Fund/VA at the end of any calendar quarter were
ranked by Lipper, Inc. ("Lipper") in the fifth quintile of the Lipper peer
group for that Fund (funds dedicated to variable insurance products in
Lipper's general bond funds category), the Manager had undertaken to reduce
the management fee for that Fund by 0.10% for the following fiscal quarter
and for each quarter thereafter until its performance improved, and if ranked
in the fourth quintile of that peer group, the Manager had undertaken to
reduce the management fee by 0.05% for the following fiscal quarter and for
each quarter thereafter until its performance improved. The Fund's peer
ranking did improve, and the management fee waiver was terminated effective
December 17, 2002.


- ------------------------------------------------------------------------------

           Management Fees for the Fiscal Year Ended December 311

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Fund                               2000            2001            2002

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Aggressive Growth Fund/VA      $18,407,015      $12,164,540     $8,292,465

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Bond Fund/VA                    $4,030.064      $ 4,571,739     $4,896,856

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Capital Appreciation Fund/VA   $12,361,613      $12,843,798     $10,670,415

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Global Securities Fund/VA      $13,531,073      $12,404,364     $11,712,612

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

High Income Fund/VA             $2,436,299      $2,563,318      $2,518,441

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Main Street Fund(R)/VA            $5,651,580      $7,073,905      $7,045,796

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Main Street Small Cap           $94,162         $114,814        $170,358
Fund(R)/VA

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Money Fund/VA                    $920,505       $1,294,520      $1,738,866

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Multiple Strategies Fund/VA     $4,090,208      $4,312,500      $3,758,161

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

Strategic Bond Fund/VA          $2,147,021      $2,440,218      $2,771,6432

- ------------------------------------------------------------------------------

1.    Shares of Value Fund/VA were not offered for sale during the periods
   shown.
2.    The Manager voluntarily reimbursed $ 44,031 in management fees under
   the expense limitation described above. Management fees are shown in the
   table before reimbursement.

    The investment advisory agreements state that in the absence of willful
misfeasance, bad faith or, 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
advisor 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.

|X|   Annual Approval of Investment Advisory Agreements. Each year, the Board
of Trustees, including a majority of the Independent Trustees, is required to
approve the renewal of the investment advisory agreement for each Fund. The
Investment Company Act requires that the Board request and evaluate and the
Manager provide such information as may be reasonably necessary to evaluate
the terms of the investment advisory agreement. The Board employs an
independent consultant to prepare a report that provides such information as
the Board requests for this purpose.

      The Board also receives information about the 12b-1 distribution fees
the Funds pay with respect to Service shares. These distribution fees are
reviewed and approved at a different time of the year.

      The Board reviewed the foregoing information in arriving at its
decision to renew the investment advisory agreement. Among other factors, the
Board considered:
o     The nature, cost, and quality of the services provided to the Funds and
            their shareholders;
o     The profitability of the Funds to the Manager;
o     The investment performance of the Funds in comparison to regular market
            indices
o     Economies of scale that may be available to the Funds from the Manager;
o     Fees paid by other mutual funds for similar services;
o     The value and quality of any other benefits or services received by the
            Funds from their relationship with the Manager, and
o     The direct and indirect benefits the Manager received from its
            relationship with the Funds. These included services provided by
            the Distributor and the Transfer Agent, and brokerage and soft
            dollar arrangements permissible under Section 28(e) of the
            Securities Exchange Act.

      The Board considered that the Manager must be able to pay and retain
high quality personnel at competitive rates to provide services to the Funds.
The Board also considered that maintaining the financial viability of the
Manager is important so that the Manager will be able to continue to provide
quality services to the Funds and their shareholders in adverse times. The
Board also considered the investment performance of other mutual funds
advised by the Manager. The Board is aware that there are alternatives to the
use of the Manager.

      These matters were also considered by the Independent Trustees, meeting
separately from the full Board with experienced Counsel to the Independent
Trustees who assisted the Board in its deliberations. Counsel to the
Independent Trustees is independent of the Manager within the meaning and
intent of the SEC Rules regarding the independence of counsel.

      In arriving at a decision, the Board did not single out any one factor
or group of factors as being more important than other factors, but
considered all factors together. The Board judged the terms and conditions of
the investment advisory agreements, including the investment advisory fees,
in light of all of the surrounding circumstances. After careful deliberation
the Board of Trustees concluded that it was in the best interests of
shareholders to continue the investment advisory agreements for another year.

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 advisor.

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 broaden the scope and
supplement 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 and the Value Fund/VA, which did
not offer shares during the periods shown), not including spreads or
concessions on principal transactions on a net trade basis, for the Funds'
fiscal year ended December 31, 2000, 2001 and 2002; and (ii) for the Funds'
fiscal year ended December 31, 2002, 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:


- -----------------------------------------------------------------------------------

                                                         Transactions Commissions
                           Total Brokerage Commissions   Directed for     Paid
                                Paid by the Funds1        Research2       For
                                                                       Research2

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Fund                        2000       2001      2002        2002         2002

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Aggressive Growth Fund/VA $523,144  $2,943,962 $1,393,475$381,787,023   $514,217

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Bond Fund/VA              $248,630   $759,725  $389,802       $0           $0

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Capital Appreciation      $1,473,398$2,151,288 $1,335,268$275,648,151   $411,224
Fund/VA

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Global Securities Fund/VA $3,787,676$2,591,256 $2,699,449$273,054,493   $560,199

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

High Income Fund/VA        $7,335     $8,024    $4,865     $57,209        $400

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Main Street Fund(R)/VA    $1,278,160$1,563,519 $2,349,576$602,334,454   $831,863

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Main StreetSmall Cap     $16,832   $73,472   $136,159    $762,445      $1,633
Fund(R)/VA

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Multiple Strategies       $666,958   $565,744  $478,215  $16,102,556    $21,129
Fund/VA

- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------

Strategic Bond Fund/VA     $50,611   $38,184    $61,906       $0           $0

- -----------------------------------------------------------------------------------

1. Shares of Value Fund/VA were not offered for sale during the periods
   shown in the chart.
2. 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)


The Distributor. 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 compensation  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.

      Under the service plan, the Funds currently use the fees it receives to
pay brokers, dealers and other financial institutions (they are referred to
as "recipients") for personal services and account maintenance services they
provide for their customers who hold Service shares. The services include,
among others, answering customer inquiries about the Funds, assisting in
establishing and maintaining accounts in the Funds, and providing other
services at the request of the Funds.

      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. Although the Plans provide
for a fee of 0.25% of average annual net assets, the Board of Trustees had
set the fee at 0.15% of average annual net assets prior to May 1, 2002 (when
that rate increased to 0.25% for all series except Money Fund). The Board has
set no minimum asset amount. For the fiscal year ended December 31, 2002, all
payments made under the Service Class Plan were paid by the Funds'
distributor, to Recipients (including recipients affiliated with the Manager).

      Those Service class payments during the fiscal year ended December 31,
2002, for all Funds having Service class shares outstanding as of that date,
were as follows:


  -------------------------------------------------------------------------

                  Fund                       Service Plan Payments by OFDI

  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Oppenheimer Aggressive Growth Fund/VA                    $158
  Service Shares

  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Oppenheimer Bond Fund/VA Service Shares                  $1,382

  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Oppenheimer Capital Appreciation Fund/VA                 $9,320
  Service Shares

  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Oppenheimer Global Securities Fund/VA                    $78,934
  Service Shares

  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Oppenheimer High Income Fund/VA Service                  $13,856
  Shares

  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Oppenheimer Main Street Fund (R)/VA Service                 $53,627
  Shares

  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Oppenheimer Main Street Small Cap Fund(R)/VA               $5,396
  Service Shares

  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Oppenheimer Multiple Strategies Fund/VA                  $1,719
  Service Shares

  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Oppenheimer Strategic Bond Fund/VA Service               $5,687
  Shares

  -------------------------------------------------------------------------
      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 1.800.981.2871.

      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).

      Performance information is not shown for Value Fund/VA because shares
of the Fund were not offered for sale during the periods shown.

      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:
o     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.
o     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.
o     An investment in the Fund is not insured by the FDIC or any other
      government agency.
o     The Funds' performance returns do not reflect the effect of taxes on
      dividends and capital gains distributions.
o     The principal value of the Funds' shares and total returns are not
      guaranteed and normally will fluctuate on a daily basis.
o     When an investor's shares are redeemed, they may be worth more or less
      than their original cost.
o     The preceding two statements do not apply to Money Fund/VA, which seeks
      to maintain a stable net asset value of $1.00 per share. There can be
      no assurance that Money Fund/VA will be able to do so.
o     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.

o     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:


                               ERV - 1 = AVERAGE ANNUAL TOTAL RETURN
                               ---
                                P


o     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 12/31/02


- ---------------------------------------------------------------------------

  Fund and Class/Inception       1 Year         5 Years        10 Years
           Date2                  (or             (or            (or
                             life-of-class) life-of-class)  life-of-class)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Aggressive Growth Fund/VA       -27.79%         -1.89%          6.64%
Non-Service Shares (8/15/86)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Aggressive Growth Fund/VA       -28.05%         -37.21%          N/A
Service Shares (10/16/00)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Bond Fund/VA                     9.02%           5.57%          6.89%
Non-Service Shares (4/3/85)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Bond Fund/VA                     8.03%1           N/A            N/A
Service Shares (5/1/02)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Capital Appreciation Fund/VA    -26.86%          2.30%          10.15%
Non-Service Shares (4/3/85)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Capital Appreciation Fund/VA    -27.09%         -12.50%          N/A
Service Shares (9/18/01)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Global Securities Fund/VA
Non-Service Shares              -22.13%          5.41%          11.91%
(11/12/90)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Global Securities Fund/VA       -22.37%        -16.93%2          N/A
Service Shares (7/13/00)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

High Income Fund/VA              -2.40%          0.04%          6.68%
Non-Service Shares (4/30/86)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

High Income Fund/VA              -2.67%         -0.82%           N/A
Service Shares (9/18/01)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Main Street Fund(R)/VA            -18.80%         -3.24%          8.68%
Non-Service Shares (7/5/95)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Main Street Fund(R)/VA            -18.99%         -16.42%          N/A
Service Shares (7/13/00)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Main Street Small Cap
Fund(R)/VA                         -15.75%         -0.77%          N/A
Non-Service Shares (5/1/98)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Main Street Small Cap
Fund(R)/VA                         -15.93%         -8.71%           N/A
Service Shares (7/16/01)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Money Fund/VA (4/3/85)           1.47%           4.35%          4.51%

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Multiple Strategies Fund/VA     -10.40%          3.05%          8.06%
Non-Service Shares(2/9/87)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Multiple Strategies Fund/VA     -9.44%1           N/A            N/A
Service Shares (5/1/02)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Strategic Bond Fund/VA           7.44%           4.11%          5.80%
Non-Service Shares (5/3/93)

- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------

Strategic Bond Fund/VA           7.03%           5.01%           N/A
Service Shares (3/19/01)

- ---------------------------------------------------------------------------

(1)   Cumulative  total  return  for a  period  of less  than  one year is not
    annualized.
(2)   Because  Class 3 shares of Global  Securities  Fund/VA  were not offered
    for sales  during the Fund's  fiscal  year ended  December  31,  2002,  no
    performance information is included in the table above for Class 3 shares.

o     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 = 2 (A - B + 1)-1
                                                -----
                                                  CD


      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:
      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, 2003. The formula is shown below:

Dividend Yield = Distribution  Paid / No. of Days in the Period x No. of Days in
                 ------------  ---- - --- -- ---- -- --- ------ - --- -- ---- --
the Calendar Year Maximum Offering Price (payment date)
- --- -------- ----


        Fund            Standardized Dividend           Dividend Yield
                        for the 30-Day Period        for the 30-Day Period
                           Ended 12/31/02               Ended 3/31/03
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------

Bond Fund/VA
Non-Service Shares              4.89%                       5.75%

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Bond Fund/VA

Service Shares                  4.09%                       5.72

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------

High Income Fund/VA
Non-Service Shares              8.98%                       8.12%

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------

High Income Fund/VA
Service Shares                  8.81%                       8.07%

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------

Strategic Bond
Fund/VA                         5.57%                       6.85%
Non-Service Shares

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------

Strategic Bond
Fund/VA                         3.07%                       6.65%
Service Shares

- ----------------------------------------------------------------------------

o     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, 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 in categories based on 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|   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, while bank depository obligations
may be insured by the FDIC and may provide fixed rates of return. Repayment
of principal and payment of interest on Treasury securities is backed by the
full faith and credit of the U.S. government.


      From time to time, the Funds may publish rankings or ratings of the
Manager other than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings 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.

      From time to time the Funds may include in advertisements and sales
literature the total return performance of a hypothetical investment account
that includes shares of one or more of the Funds. The combined account may be
part of an illustration of an asset allocation model or similar presentation.
The account information may combine total return performance of the Funds
included in the account. Additionally, from time to time, advertisements and
sales literature may include, for illustrative or comparative purposes,
statistical data or other information about general or specific market and
economic conditions. That may include, for example,
o     information about the performance of certain securities or commodities
            markets or segments of those markets,
o     information about the performance of the economies of particular
            countries or regions,
o     the earnings of companies included in segments of particular
            industries, sectors, securities markets, countries or regions,
o     the availability of different types of securities or offerings of
            securities,
o     information relating to the gross national or gross domestic product of
            the United States or other countries or regions,
o     comparisons of various market sectors or indices to demonstrate
            performance, risk, or other characteristics of the Funds.


 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 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, certain 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 values of shares, and therefore are
indirectly borne by shareholders through their investment.

      For any Fund that has more than one class 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 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 distribution and service plan (12b-1) fees, 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 ("the 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., Eastern time, but
may close earlier on some other days (for example, in case of weather
emergencies or on days falling before a U.S. holiday). All references to time
in this Statement of Additional Information mean "Eastern time."  The
Exchange's most recent annual announcement (which is subject to change)
states that it will close on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.

      Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and
holidays) or after 4:00 P.M. on a regular business day. Because the Funds'
net asset values will not be calculated on those days, the Fund's net asset
values per share may be significantly affected on such 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 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 Exchange, will not be reflected
in the Funds' calculation of its net asset values that day unless the Manager
determines that the event is likely to effect a material change in the value
of the security. The Manager, or an internal valuation committee established
by the Manager, as applicable, may establish a valuation, under procedures
established by the Board and subject to the approval, ratification and
confirmation by the Board at its next ensuing meeting.

      Securities Valuation. The Funds' Board of Trustees has established
procedures for the valuation of those Funds' securities. In general the
procedures for all Funds other than Money Fund/VA 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 last sale price obtained by the Manager from the report of the
               principal exchange on which the security is traded at its last
               trading session on or immediately before the valuation date, or

3.    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.


o     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 Funds' 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, the Fund's Transfer Agent, is
a division of the Manager. It serves as the Transfer Agent for an annual per
account fee. The Transfer Agent has voluntarily agreed to limit transfer and
shareholder servicing agent fees to 0.35% per annum of shares of any class of
any Fund. That undertaking may be amended or withdrawn at any time. The
Transfer Agent also acts as shareholder servicing agent for the other
Oppenheimer funds. Information about your investment in the Fund through your
variable annuity contract, variable life insurance policy or other plan can
be obtained only from your participating insurance company or its servicing
            ----
agent. The Fund's Transfer Agent does not hold or have access to those
records. Instructions for buying or selling shares of the Fund should be
given to your insurance company or its servicing agent, not directly to the
Fund or its Transfer Agent.

The Custodian Bank. JPMorgan Chase Bank is the custodian of the Fund's
assets. The custodian's responsibilities include safeguarding and controlling
the Fund's portfolio securities and handling the delivery of such securities
to and from the Fund. It is the practice of the Funds to deal with the
custodian in a manner uninfluenced by any banking relationship the custodian
may have with the Manager and its affiliates. The Funds' cash balances with
the custodian 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' annual financial statements and perform
other related audit services. They also act as auditors for the Manager and
for certain other funds advised by the Manager and its affiliates.

                                  Appendix A

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.


CAE: Bonds rated CAE 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 CAE. 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 Corporation

- ------------------------------------------------------------------------------

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
- ------------------------------------------------------------------------------

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. Securities rates in this category are not
investment grade.

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. The ratings of obligations in this category are
based on their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected recovery values
are highly speculative and cannot be estimated with any precision, the
following serve as general guidelines. `DDD' obligations have the highest
potential for recovery, around 90%-100% of outstanding amounts and accrued
interest. `DD' indicates potential recoveries in the range of 50%-90%, and
`D' the lowest recovery potential, i.e., below 50%.


Entities rated in this category have defaulted on some or all of their
obligations. Entities rated `DDD' have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated `DD' and `D' are generally undergoing a formal
reorganization or liquidation process; those rated `DD' are likely to satisfy
a higher portion of their outstanding obligations, while entities rated `D'
have a poor prospect for repaying all obligations.


Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories. Plus and minus signs are
not added to the "AAA" category or to categories below "CCC," nor to
short-term ratings other than "F1" (see below).

International Short-Term Credit Ratings

F1:  Highest credit quality. Strongest capacity for timely payment of
financial commitments. May have an added "+" to denote any exceptionally
strong credit feature.

F2:   Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the
case of higher ratings.

F3:   Fair credit quality. Capacity for timely payment of financial
commitments is adequate. However, near-term adverse changes could result in a
reduction to non-investment grade.

B:    Speculative. Minimal capacity for timely payment of financial
commitments, 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.

:     Default. Denotes actual or imminent payment default.


Dominion Bond Rating Service Limited ("DBRS")

- ------------------------------------------------------------------------------


Short-Term Ratings

R-1: Short term debt rated "R-1 (high)" is of the highest credit quality, and
indicates an entity which possesses unquestioned ability to repay current
liabilities as they fall due. Entities rated in this category normally
maintain strong liquidity positions, conservative debt levels and
profitability which is both stable and above average. Companies achieving an
"R-1 (high)" rating are normally leaders in structurally sound industry
segments with proven track records, sustainable positive future results and
no substantial qualifying negative factors. Given the extremely tough
definition which DBRS has established for an "R-1 (high)", few entities are
strong enough to achieve this rating. Short term debt rated "R-1 (middle)" is
of superior credit quality and, in most cases, ratings in this category
differ from "R-1 (high)" credits to only a small degree. Given the extremely
tough definition which DBRS has for the "R-1 (high)" category (which few
companies are able to achieve), entities rated "R-1 (middle)" are also
considered strong credits which typically exemplify above average strength in
key areas of consideration for debt protection. Short term debt rated "R-1
(low)" is of satisfactory credit quality. The overall strength and outlook
for key liquidity, debt and profitability ratios is not normally as favorable
as with higher rating categories, but these considerations are still
respectable. Any qualifying negative factors which exist are considered
manageable, and the entity is normally of sufficient size to have some
influence in its industry.

R-2: Short term debt rated "R-2" is of adequate credit quality and within the
three subset grades (high, middle, low), debt protection ranges from having
reasonable ability for timely repayment to a level which is considered only
just adequate. The liquidity and debt ratios of entities in the "R-2"
classification are not as strong as those in the "R-1" category, and the past
and future trend may suggest some risk of maintaining the strength of key
ratios in these areas. Alternative sources of liquidity support are
considered satisfactory; however, even the strongest liquidity support will
not improve the commercial paper rating of the issuer. The size of the entity
may restrict its flexibility, and its relative position in the industry is
not typically as strong as the "R-1 credit". Profitability trends, past and
future, may be less favorable, earnings not as stable, and there are often
negative qualifying factors present which could also make the entity more
vulnerable to adverse changes in financial and economic conditions.

                                  Appendix B

             INDUSTRY CLASSIFICATIONS (Oppenheimer Money Fund/VA)

Aerospace & Defense           Household Products
Air Freight & Couriers        Industrial Conglomerates
Airlines                          Insurance
Asset Backed Securities           Internet & Catalog Retail
Auto Components                   Internet Software & Services
Automobiles                       Information Technology Consulting & Services
Banks                             Leasing & Factoring
Beverages                         Leisure Equipment & Products
Biotechnology                     Machinery
Broker-Dealer                     Marine
Building Products                 Media
Chemicals                         Metals & Mining
Commercial Finance                Multiline Retail
Commercial Services&Supplies  Multi-Utilities
Communications Equipment          Municipal
Computers & Peripherals       Office Electronics
Construction & Engineering    Oil & Gas
Construction Materials            Paper & Forest Products
Consulting & Services         Personal Products
Consumer Finance                  Pharmaceuticals
Containers & Packaging        Real Estate
Distributors                      Repurchase Agreements
Diversified Financials            Road & Rail
Diversified Telecommunication     Semiconductor Equipment & Products
Services
Electric Utilities                Software
Electrical Equipment              Special Purpose Financial
Electronic Equipment &        Specialty Retail
Instruments
Energy Equipment & Services   Textiles & Apparel
Food & Drug Retailing         Tobacco
Food Products                     Trading Companies & Distributors
Foreign Government                Transportation Infrastructure
Gas Utilities                     U.S. Government Agencies-Full Faith and Credit
                                  Agencies
Health Care Equipment & Supplies  U.S. Government Agencies-Government Sponsored
                                  Enterprises
Health Care Providers & Services  U.S. Government Instrumentalities
Hotels Restaurants & Leisure      U.S. Government Obligations
Household Durables                Water Utilities
                                  Wireless Telecommunication Services

- ------------------------------------------------------------------------------

                                  Appendix C

    INDUSTRY CLASSIFICATIONS (all Funds except Oppenheimer Money Fund/VA)

Aerospace & Defense            Household Durables
Air Freight & Couriers         Household Products
Airlines                           Industrial Conglomerates
Auto Components                    Insurance
Automobiles                        Internet & Catalog Retail
Banks                              Internet Software & Services
Beverages                          Information Technology Consulting &
                                   Services
Biotechnology                      Leisure Equipment & Products
Building Products                  Machinery
Chemicals                          Marine
Commercial Services & Supplies Media
Communications Equipment           Metals & Mining
Computers & Peripherals        Multiline Retail
Construction & Engineering     Multi-Utilities
Construction Materials             Office Electronics
Containers & Packaging         Oil & Gas
Distributors                       Paper & Forest Products
Diversified Financials             Personal Products
Diversified Telecommunication      Pharmaceuticals
Services
Electric Utilities                 Real Estate
Electrical Equipment               Road & Rail
Electronic Equipment & Instruments Semiconductor Equipment & Products
Energy Equipment & Services        Software
Food & Drug Retailing              Specialty Retail
Food Products                      Textiles & Apparel
Gas Utilities                      Tobacco
Health Care Equipment & Supplies   Trading Companies & Distributors
Health Care Providers & Services   Transportation Infrastructure
Hotels Restaurants & Leisure       Water Utilities
                                   Wireless Telecommunication Services

                                  Appendix D


Major  Shareholders.  As of  March  17,  2003,  the  total  number  of  shares
outstanding,  and the  number of shares  and  approximate  percentage  of Fund
shares  held  of  record  by  separate  accounts  of the  following  insurance
companies (and their respective  subsidiaries) and by  OppenheimerFunds,  Inc.
("OFI")  were as  follows.  ["*"  indicates  less  than 5% of the  outstanding
shares of that fund or class]:

                           Total                            Allstate
                           Shares                Allmerica    Life     American
                        in the fund   Allianz    Financial   Ins. Co    Express
Aggressive Growth                    1    *                     *
Fund/VA
Non-Service Shares      32,018,377.74                *                     *

Aggressive Growth                         *                                *
Fund/VA
Service Shares            22,727.994                 *      19,844.946
                                                                87.31%
Bond Fund/VA                         2    *                     *
Non-Service Shares      68,285,272.77                *                     *

Bond Fund/VA                              *                     *
Service Shares           334,995.053                 *                     *

Capital Appreciation                 4    *                     *
Fund/VA
Non-Service Shares      49,633,328.58                *                     *

Capital Appreciation                      *                     *
Fund/VA
Service Shares           831,371.171            286,761.549                *
                                                     34.49%
Global Securities                    7    *                     *
Fund/VA
Non-Service Shares      89,617,629.33                *                     *

Global Securities                         *                     *
Fund/VA
Service Shares          3,677,462.261           591,208.330                *
                                                     16.08%
High Income Fund/VA                  5    *                     *
Non-Service Shares      49,060,489.71                *                     *

High Income Fund/VA                       *                 2   *
Service Shares          3,126,787.344           2,727,948.89               *
                                                     87.24%
Main Street Fund /VA     58,122,194.442               *                     *
Non-Service Shares                  4,201,359.586               *
                                           7.23%
Main Street Fund/VA                       *                 64,236.023
Service Shares          4,203,081.054           362,674.4333               *
                                                      8.63%      8.67%
Main Street Small Cap                     *                 18,556.124
Fund/VA
Non-Service Shares      1,707,347.105                *     2               *
                                                                12.80%
Main Street Small Cap
Fund/VA                                   *          *      76,091.722
Service Shares           909,559.394                       7           54,220.590
                                                                85.33%      5.96%
Money Fund/VA           357,811,956.654   *          *          *          *

Multiple Strategies                  8    *                     *
Fund/VA
Non-Service Shares      34,727,311.99                *                     *

Multiple Strategies                       *                                *
Fund/VA
Service Shares           231,905.087            151,585.296 76,610.010
                                                     65.37%     33.04%
Strategic Bond Fund/VA               92   *                     *
Non-Service Shares      101,008,055.2                *                     *

Strategic Bond Fund/VA                    *                 25,886.212
Service Shares          3,099,709.946                *     6          270,062.863
                                                                20.19%      8.71%
Value Fund/VA            300,000.000      *          *          *          *


                          American                                     MassMutual
                           General      CUNA        GE         ING
Aggressive Growth                         *                 0   *
Fund/VA                                                                           31
Non-Service Shares            *                 3,544,037.37          17,188,282.1
                                                     11.07%                53.68%
Aggressive Growth                         *                     *
Fund/VA
Service Shares                *                      *                     *

Bond Fund/VA                              *                 39  *                 90
Non-Service Shares            *                 13,275,303.0          24,449,892.3
                                                     19.44%                35.81%
Bond Fund/VA                              *                     *
Service Shares                *                      *                     *

Capital Appreciation                      *                     *
Fund/VA                                                     0                     04
Non-Service Shares            *                 6,046,573.94          12,209,388.5
                                                     12.18%                24.60%
Capital Appreciation                      *                     *
Fund/VA
Service Shares                *                      *                     *

Global Securities                         *                 3,288,717.
Fund/VA                                                               069         59
Non-Service Shares            *                      *     1          33,483,523.6
                                                                14.83%     37.36%
Global Securities                         *                     *
Fund/VA                                                     3
Service Shares                *                 2,099,567.24               *
                                                     57.09%
High Income Fund/VA                   ,469,396.448              *
Non-Service Shares            *      7          14,632,046.587        15,257,953.040
                                          15.22%     29.82%                31.10%
High Income Fund/VA                       *                     *
Service Shares                *                      *                     *

Main Street Fund/VA                       *                 ,497,189.606
Non-Service Shares            *                      *     3          17,236,970.694
                                                                 6.02%     29.66%
Main Street Fund/VA                       *                     *
Service Shares                *                 2,406,688.614              *
                                                     57.26%
Main Street Small Cap
Fund/VA                                   *          *          *      58,966.903
Non-Service Shares        386,062.260                                 8
                               22.61%                                      50.31%
Main Street Small Cap                     *                     *
Fund/VA
Service Shares                *                      *                     *

                              *                      *          *
Money Fund/VA                             *                           302,526,277.230
                                                                           84.55%
Multiple Strategies                       *                     *
Fund/VA                                                     1                     0
Non-Service Shares            *                 5,669,233.11          8,882,630.51
                                                     16.32%                25.58%
Multiple Strategies                       *                     *
Fund/VA
Service Shares                *                      *                     *

Strategic Bond Fund/VA                    *          *
Non-Service Shares            *                            18,727,996.61,710,813.668
                                                                18.54%     61.09%
Strategic Bond Fund/VA                    *                     *
Service Shares                *                      *                     *

Value Fund/VA                 *           *          *          *          *


                       Minnesota            Nationwide             Protective
                         Life       Monarch               OFI
Aggressive Growth         *           *                    *
Fund/VA
Non-Service Shares            *             8,144,885.142               *
                                                25.44%
Aggressive Growth                         *                     *
Fund/VA
Service Shares                *                      *                     *

Bond Fund/VA                                                    *
Non-Service Shares                              25,396,313.788             *
                                                     37.19%
Bond Fund/VA                              *                     *
Service Shares                *                      *                     *

Capital Appreciation                      *                     *
Fund/VA                                                     43
Non-Service Shares            *                 23,506,877.2               *
                                                     47.36%
Capital Appreciation                      *
Fund/VA                                                         *          *
Service Shares                *                 342,478.215
                                                     41.19%
Global Securities                         *                     *
Fund/VA                                                     63
Non-Service Shares            *                 35,648,094.2               *
                                                     39.78%
Global Securities                         *
Fund/VA                                                         *          *
Service Shares                *                 844,204.186
                                                     22.96%
High Income Fund/VA                       *                     *
Non-Service Shares            *                      *                     *

High Income Fund/VA                                  *                     *
Service Shares            200,849.530     *                     *
                                6.42%
Main Street Fund/VA                       *                     *
Non-Service Shares            *                 24,221,685.600        4,233,858.528
                                                     41.67%                 7.28%
Main Street Fund/VA                       *                                *
Service Shares                *                 662,865.761     *
                                                     15.77%
Main Street Small Cap                     *                     *
Fund/VA
Non-Service Shares            *                      *                     *

Main Street Small Cap                     *                     *
Fund/VA
Service Shares                *                      *                     *

                              *                      *          *
Money Fund/VA                        18,067,231.372                   26,951,762.170
                                           5.05%                            7.53%
Multiple Strategies                   ,567,782.0            03  *
Fund/VA
Non-Service Shares            *      2          13,930,949.8               *
                                           7.39%     40.12%
Multiple Strategies                       *                     *
Fund/VA
Service Shares                *                      *                     *

Strategic Bond Fund/VA                    *                     *
Non-Service Shares            *                      *                11,850,299.945
                                                                           11.73%
Strategic Bond Fund/VA                    *                     *
Service Shares                *                 1,760,060.171              *
                                                     56.78%
                              *                      *
Value Fund/VA                             *                300,000.000     *
                                                               100.00%

                         Prudential     Sage    TransamericaTravelers
Aggressive Growth                         *                     *
Fund/VA
Non-Service Shares            *                      *

Aggressive Growth                         *                     *
Fund/VA
Service Shares              2,033.182                *
                                8.95%
Bond Fund/VA                              *                     *
Non-Service Shares            *                      *

Bond Fund/VA                  *                                 *
Service Shares                       334,854.479     *
                                          99.96%
Capital Appreciation                      *                     *
Fund/VA
Non-Service Shares            *                      *

Capital Appreciation                      *
Fund/VA
Service Shares                *                  42,389.667 68,829.567
                                                      5.10%      8.28%
Global Securities                         *                     *
Fund/VA
Non-Service Shares            *                      *

Global Securities                         *                     *
Fund/VA
Service Shares                *                      *

High Income Fund/VA                       *                     *
Non-Service Shares            *                      *

High Income Fund/VA                       *                     *
Service Shares                *                      *

Main Street Fund(R)/VA                       *                     *
Non-Service Shares            *                      *

Main Street Fund(R)/VA                       *                     *
Service Shares                *                      *

Main Street Small Cap                                           *
Fund(R)/VA                       *       26,226.250
Non-Service Shares                   1               *
                                           7.39%
Main Street Small Cap                     *                     *
Fund(R)/VA
Service Shares                *                      *

Money Fund/VA                 *           *          *          *

Multiple Strategies                       *                     *
Fund/VA
Non-Service Shares            *                      *

Multiple Strategies                       *                     *
Fund/VA
Service Shares                *                      *

Strategic Bond Fund/VA                    *                     *
Non-Service Shares            *                      *

Strategic Bond Fund/VA                    *
Service Shares                *                 422,932.846     *
                                                     13.64%
Value Fund/VA                 *           *          *          *

- ------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
- ------------------------------------------------------------------------------

Investment Advisor

      OppenheimerFunds, Inc.
      498 Seventh Avenue
      New York, New York 10018

Transfer Agent
      OppenheimerFunds Services
      P.O. Box 5270
      Denver, Colorado 80217
      1.800.981.2871

Custodian Bank

      JPMorgan Chase Bank
      4 Chase Metro Tech Center
      Brooklyn, New York 11245


Independent Auditors
      Deloitte & Touche LLP
      555 Seventeenth Street
      Denver, Colorado 80202


Counsel to the Funds

      Myer, Swanson, Adams & Wolf, P.C.
      1600 Broadway
      Denver, Colorado 80202


Legal Counsel to the Independent Trustees
      Mayer, Brown, Rowe & Maw
      1675 Broadway
      New York, New York 10019


1234


PXOVAF.001.0503                         PART 1 OF 2

EX-99.3

December 31, 2002
FINANCIAL STATEMENTS

Oppenheimer Aggressive Growth Fund/Va
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation/VA
Oppenheimer Global Securities Fund/VA
Oppenheimer High Income Fund/VA
Oppenheimer Main Street Fund(R)/VA
(Named "Oppenheimer Main Street Growth & Income Fund/VA" prior to May 1,2003
Oppenheimer Main Street Small Cap Fund(R)/VA
Oppenheimer Money Fund/VA
Oppenheimer Multiple Strategies Fund/VA
Oppenheimer Strategic Bond Fund/VA

Each a Series of Oppenheimer Variable Accounts Funds
6803 South Tucson Way, Centennial, CO 80122
1.800.225.5677

OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
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 of
Oppenheimer Aggressive Growth Fund/VA, which is a series of Oppenheimer
Variable Account Funds, including the statement of investments, as of December
31, 2002, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for the periods indicated. 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 auditing standards generally
accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Aggressive Growth Fund/VA as of December 31, 2002, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America.


/s/Deloitte & Touche LLP
Deloitte & Touche LLP

Denver, Colorado
January 23, 2003


OPPENHEIMER AGGRESSIVE GROWTH FUND/VA


STATEMENT OF INVESTMENTS  December 31, 2002

                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
Common Stocks--88.9%
- --------------------------------------------------------------------------------
Consumer Discretionary--17.2%
- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure--3.7%
Outback Steakhouse, Inc.                              454,000      $ 15,635,760
- --------------------------------------------------------------------------------
Wendy's International, Inc.                           750,000        20,302,500
                                                                   -------------
                                                                     35,938,260

- --------------------------------------------------------------------------------
Multiline Retail--3.2%
Family Dollar Stores, Inc.                          1,020,000        31,834,200
- --------------------------------------------------------------------------------
Specialty Retail--7.5%
Bed Bath & Beyond, Inc. 1                           1,800,000        62,154,000
- --------------------------------------------------------------------------------
CarMax, Inc. 1                                        630,000        11,264,400
                                                                   -------------
                                                                     73,418,400

- --------------------------------------------------------------------------------
Textiles & Apparel--2.8%
Coach, Inc. 1                                         833,000        27,422,360
- --------------------------------------------------------------------------------
Consumer Staples--1.5%
- --------------------------------------------------------------------------------
Food & Drug Retailing--1.5%
Whole Foods Market, Inc. 1                            285,000        15,028,050
- --------------------------------------------------------------------------------
Financials--16.1%
- --------------------------------------------------------------------------------
Banks--3.1%
Commerce Bancorp, Inc.                                695,000        30,017,050
- --------------------------------------------------------------------------------
Diversified Financials--2.1%
SLM Corp.                                             200,000        20,772,000
- --------------------------------------------------------------------------------
Insurance--10.9%
AMBAC Financial Group, Inc.                           545,000        30,650,800
- --------------------------------------------------------------------------------
MBIA, Inc.                                          1,040,000        45,614,400
- --------------------------------------------------------------------------------
Radian Group, Inc.                                    829,400        30,812,210
                                                                   -------------
                                                                    107,077,410

- --------------------------------------------------------------------------------
Health Care--30.9%
- --------------------------------------------------------------------------------
Biotechnology--7.8%
Gilead Sciences, Inc. 1                             1,913,000        65,042,000
- --------------------------------------------------------------------------------
IDEC Pharmaceuticals Corp. 1                          345,000        11,443,650
                                                                   -------------
                                                                     76,485,650

- --------------------------------------------------------------------------------
Health Care Equipment & Supplies--13.9%
Biomet, Inc.                                          160,000         4,585,600
- --------------------------------------------------------------------------------
Cytyc Corp. 1                                         320,000         3,264,000
- --------------------------------------------------------------------------------
Stryker Corp.                                         792,000        53,159,040
- --------------------------------------------------------------------------------
Varian Medical Systems, Inc. 1                      1,505,000        74,648,000
                                                                   -------------
                                                                    135,656,640

- --------------------------------------------------------------------------------
Health Care Providers & Services--9.2%
AmerisourceBergen Corp.                               652,000        35,410,120
- --------------------------------------------------------------------------------
Lincare Holdings, Inc. 1                            1,740,000        55,018,800
                                                                   -------------
                                                                     90,428,920

                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
Industrials--11.8%
- --------------------------------------------------------------------------------
Aerospace & Defense--2.5%
Alliant Techsystems, Inc. 1                           398,100      $ 24,821,535
- --------------------------------------------------------------------------------
Commercial Services & Supplies--5.8%
Apollo Group, Inc., Cl. A 1                           150,000         6,600,000
- --------------------------------------------------------------------------------
Concord EFS, Inc. 1                                 2,545,000        40,058,300
- --------------------------------------------------------------------------------
Weight Watchers International, Inc. 1                 215,800         9,920,326
                                                                   -------------
                                                                     56,578,626

- --------------------------------------------------------------------------------
Machinery--3.5%
SPX Corp. 1                                          900,000         33,705,000
- --------------------------------------------------------------------------------
Information Technology--11.4%
- --------------------------------------------------------------------------------
Communications Equipment--3.4%
UTStarcom, Inc. 1                                   1,669,500        33,106,185
- --------------------------------------------------------------------------------
Internet Software & Services--2.1%
Hotels.com, Cl. A 1                                   370,200        20,224,026
- --------------------------------------------------------------------------------
Semiconductor Equipment & Products--3.6%
Marvell Technology Group Ltd. 1                       995,000        18,765,700
- --------------------------------------------------------------------------------
QLogic Corp. 1                                        485,000        16,737,350
                                                                   -------------
                                                                     35,503,050

- --------------------------------------------------------------------------------
Software--2.3%
Cerner Corp. 1                                        741,000        23,163,660
                                                                   -------------
Total Common Stocks (Cost $930,553,310)                             871,181,022

- --------------------------------------------------------------------------------
Preferred Stocks--0.2%
Axsun Technologies, Inc.,
Cv., Series C 1,2,3                                 3,170,523           909,306
- --------------------------------------------------------------------------------
Blaze Network Products, Inc.,
8% Cv., Series D 1,2,3                              1,147,862                --
- --------------------------------------------------------------------------------
BroadBand Office, Inc., Cv., Series C 1,2,3           211,641                --
- --------------------------------------------------------------------------------
Centerpoint Broadband Technologies, Inc.:
Cv., Series D 1,2,3                                 1,298,701                --
Cv., Series Z 1,2,3                                   262,439                --
- --------------------------------------------------------------------------------
fusionOne, Inc., 8% Non-Cum. Cv.,
Series D 1,2,3                                      2,663,972           708,883
- --------------------------------------------------------------------------------
MicroPhotonix Integration Corp.,
Cv., Series C 1,2,3                                   633,383                --
- --------------------------------------------------------------------------------
Multiplex, Inc., Cv., Series C 1,2,3                2,330,253           301,534
- --------------------------------------------------------------------------------
Questia Media, Inc., Cv., Series B 1,2,3            2,329,735            20,036
                                                                   -------------
Total Preferred Stocks (Cost $113,962,357)                            1,939,759


STATEMENT OF INVESTMENTS  Continued

Principal        Market Value

Amount          See Note 1
- --------------------------------------------------------------------------------------------------
 Joint Repurchase Agreements--11.0% 4

 Undivided interest of 15.47% in joint repurchase
 agreement (Market Value $694,610,000) with Banc One
 Capital Markets, Inc., 1.07%, dated 12/31/02, to be repurchased
 at $107,466,388 on 1/2/03, collateralized by U.S. Treasury Nts.,
 3%--6.50%, 2/15/03--2/15/12, with a value of $311,989,144
 and U.S. Treasury Bonds, 1.75%--9.375%, 4/30/04--2/15/23,
 with a value of $397,082,690
 (Cost $107,460,000)
$107,460,000       $ 107,460,000

- --------------------------------------------------------------------------------------------------
 Total Investments, at Value
 (Cost $1,151,975,667)
100.1%        980,580,781
- --------------------------------------------------------------------------------------------------
 Liabilities in Excess
 of Other Assets
(0.1)           (518,065)

- ---------------------------------
 Net Assets
100.0%      $ 980,062,716

=================================
Footnotes to Statement of Investments
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 5 of
Notes to Financial Statements.
3. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended December 31, 2002.
The aggregate fair value of securities of affiliated companies held by the Fund
as of December 31, 2002 amounts to $1,939,759. Transactions during the period in
which the issuer was an affiliate are as follows:

                                                         Shares
Gross       Gross             Shares    Unrealized    Realized
                                              December 31, 2001  Additions
Reductions  December 31, 2002  Depreciation        Loss
- --------------------------------------------------------------------------------
Stocks and/or
Warrants
ApplianceWare Holding Corp., Cv., Series B            1,807,580         --
1,807,580                 --   $        --  $6,199,999
Axsun Technologies, Inc., Cv., Series C               3,170,523
- --          --          3,170,523    36,090,697          --
Blaze Network Products, Inc., 8% Cv., Series D        1,147,862
- --          --          1,147,862     7,346,317          --
BroadBand Office, Inc., Cv., Series C                   211,641
- --          --            211,641     4,000,015          --
Centerpoint Broadband Technologies,
Inc.,
  Cv., Series D                                       1,298,701
- --          --          1,298,701    13,999,997          --
Centerpoint Broadband Technologies,
Inc.,
  Cv., Series Z                                              --    262,439*
     --            262,439     6,999,992
fusionOne, Inc., 8% Non-Cum. Cv., Series D            2,663,972
- --          --          2,663,972    13,756,485          --
MicroPhotonix Integration Corp., Cv., Series C          633,383
- --          --            633,383     4,000,004          --
Multiplex, Inc., Cv., Series C                        2,330,253
- --          --          2,330,253    16,849,128          --
Questia Media, Inc., Cv., Series B                    2,329,735         --
         --          2,329,735     8,979,963          --
Zaffire, Inc., Cv., Series C                            484,764         --
484,764*                --            --
- --

- ----------

$6,199,999
                                                              ==========

*Result of a merger between Centerpoint Broadband Technologies, Inc. and
Zaffire, Inc.
4. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.

See accompanying Notes to Financial Statements.


STATEMENT OF ASSETS AND LIABILITIES  December 31, 2002
- --------------------------------------------------------------------------------
Assets

Investments, at value (including $107,460,000 in repurchase agreements)--see
ccompanying statement:
Unaffiliated companies (cost
$1,038,013,310)                                                   $  978,641,022
Affiliated companies (cost
$113,962,357)
1,939,759

- ---------------

                                                      980,580,781
- --------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold
                                                     539,133
Interest and
dividends
343,546
Other
                   8,747

- ---------------
Total
assets
981,472,207

- --------------------------------------------------------------------------------------------------------------
Liabilities
Bank
overdraft
50,213
- --------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest
redeemed                                                              1,326,169
Shareholder reports
                                                                    17,298
Trustees'
compensation
1,154
Transfer and shareholder servicing agent fees
                                   452
Distribution and service plan
fees                                                                        101
Other
14,104
- ---------------
Total
liabilities
1,409,491

Net
Assets
$980,062,716


Composition of Net Assets
Par value of shares of beneficial interest
                      $       33,528
- --------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
2,002,059,846
- --------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment
transactions                                         (850,635,772)
- --------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on
investments                                                       (171,394,886)

                             ---------------
Net
Assets
$  980,062,716

===============
- --------------------------------------------------------------------------------
Net Asset Value Per Share
Non-Service shares:
Net asset value, redemption price per share and offering price per share (based
on
net assets of $979,918,827 and 33,522,691 shares of beneficial interest
outstanding)                   $29.23
- --------------------------------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share (based
on
net assets of $143,889 and 4,939 shares of beneficial interest
outstanding)                            $29.13

See accompanying Notes to Financial Statements.


STATEMENT OF OPERATIONS  For the Year Ended December 31, 2002

- ------------------------------------------------------------------------------------------------------------
Investment Income

Interest
$    2,500,458
- ------------------------------------------------------------------------------------------------------------
Dividends
2,088,871
- ------------------------------------------------------------------------------------------------------------
Other
207,761

- ---------------
Total investment
income
4,797,090

- ------------------------------------------------------------------------------------------------------------
Expenses
Management fees
                                                      8,292,465
- ------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service
shares                                                      158
- ------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares
                          10,492
Service
shares
465
- ------------------------------------------------------------------------------------------------------------
Custodian fees and
expenses
56,067
- ------------------------------------------------------------------------------------------------------------
Trustees' compensation
                                                        23,599
- ------------------------------------------------------------------------------------------------------------
Other
                 49,990

- ---------------
Total
expenses
8,433,236
Less reduction to custodian
expenses                                                                 (1,604)
Less voluntary waiver of transfer and shareholder servicing agent fees--Service
shares                 (408)

                                        ---------------
Net
expenses
8,431,224

- ------------------------------------------------------------------------------------------------------------
Net Investment
Loss
(3,634,134)

- ------------------------------------------------------------------------------------------------------------
Realized and Unrealized Loss
Net realized loss on investments:
  Unaffiliated
companies
(229,978,563)
  Affiliated
companies
(6,199,999)

- ---------------
Net realized
loss
(236,178,562)
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation on
investments                                           (188,237,967)

                       ---------------
Net realized and unrealized loss
                  (424,416,529)
- ------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from
Operations                                         $ (428,050,663)

===============

See accompanying Notes to Financial Statements.


STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December
31,
2002              2001
- --------------------------------------------------------------------------------------------------------------------
Operations

Net investment income
(loss)                                                      $    (3,634,134)
$    8,952,923
- --------------------------------------------------------------------------------------------------------------------
Net realized loss
                                                         (236,178,562)
(605,467,300)
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation
                                   (188,237,967)     (222,526,858)

- ----------------------------------
Net decrease in net assets resulting from operations
             (428,050,663)     (819,041,235)

- --------------------------------------------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service
shares
(8,907,419)      (19,479,838)
Service
shares
(359)             (224)
- --------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service
shares
- --      (303,948,112)
Service
shares
          --            (3,502)
- --------------------------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service
shares
(204,697,344)      168,912,999
Service shares
                                   114,405            62,636

- --------------------------------------------------------------------------------------------------------------------
Net Assets
Total decrease
                   (641,541,380)     (973,497,276)
- --------------------------------------------------------------------------------------------------------------------
Beginning of
period
1,621,604,096     2,595,101,372

- ----------------------------------
End of period (including undistributed net investment income of $8,877,853
for the year ended December 31,
2001)                                             $   980,062,716
$1,621,604,096

==================================
See accompanying Notes to Financial Statements.


FINANCIAL HIGHLIGHTS

Non-Service shares  Year Ended December 31                        2002
2001          2000         1999          1998
- --------------------------------------------------------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of period                           $ 40.72       $
70.77       $ 82.31      $ 44.83       $ 40.96
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)
(.10)          .23           .53         (.09)         (.05)
Net realized and unrealized gain (loss)                         (11.16)
(21.38)        (8.59)       37.57          5.09

- ---------------------------------------------------------------------
Total from investment operations                                (11.26)
(21.15)        (8.06)       37.48          5.04
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                              (.23)
(.54)           --           --          (.10)
Distributions from net realized gain                                --
(8.36)        (3.48)          --         (1.07)

- ---------------------------------------------------------------------
Total dividends and/or distributions to shareholders              (.23)
(8.90)        (3.48)          --         (1.17)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                  $29.23
$40.72        $70.77       $82.31        $44.83

- ---------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                              (27.79)%
(31.27)%      (11.24)%      83.60%        12.36%

- --------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                    $  979,919
$1,621,550    $2,595,101   $2,104,128    $1,077,960
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                           $1,240,435
$1,898,088    $2,978,465   $1,314,349    $  954,848
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)                                     (0.29)%
0.47%         0.65%      (0.17)%        (0.12)%
Expenses                                                          0.68%
0.68%         0.64%        0.67%         0.71% 3
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
54%          134%           39%          66%           80%



1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.


Service shares    December 31
2002          2001        2000  1
- ----------------------------------------------------------------------------------------------------------

Per Share Operating
Data
Net asset value, beginning of period                                  $
40.70       $ 70.77     $ 97.75
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:

Net investment income
..16           .19         .20
Net realized and unrealized loss
(11.53)       (21.36)     (27.18)

- -------------------------------------
Total from investment operations
(11.37)       (21.17)     (26.98)
- ----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income
(.20)         (.54)         --
Distributions from net realized gain
- --         (8.36)         --

- -------------------------------------
Total dividends and/or distributions to shareholders
(.20)        (8.90)         --
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period
$29.13        $40.70      $70.77

- -------------------------------------


- ----------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 2
(28.05)%      (31.31)%    (27.60)%



- ----------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net assets, end of period (in thousands)
$144           $54          $1
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                                        $
72           $31          $1
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
3
Net investment income (loss)
(0.56)%        0.09%       1.14%
Expenses
1.55%         0.83%       0.64%
Expenses, net of reduction to custodian expenses
and/or
voluntary waiver of transfer agent fees
0.98%         0.83%       0.64%
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
54%          134%         39%

1. For the period from October 16, 2000 (inception of offering) to December 31,
2000.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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 of less than one full year.

See accompanying Notes to Financial Statements.

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), an 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 "growth type" companies. The Trust's investment advisor is
OppenheimerFunds, Inc. (the Manager).
   The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other
investment products. The class of shares designated as Service shares is
subject to a distribution and service plan. All classes of shares have
identical rights and voting privileges. Earnings, net assets and net asset
value per share may differ by minor amounts due to each class having its own
expenses directly attributable to that class.
   The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. In the absence of a sale, the security is valued at the last
sale price on the prior trading day, if it is within the spread of the closing
bid and asked prices, and if not, at the closing bid price. Securities
(including restricted securities) for which quotations are not readily
available are valued primarily using dealer-supplied valuations, a portfolio
pricing service authorized by the Board of Trustees, or at their fair value.
Fair value is determined in good faith under consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint
repurchase agreement accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each agreement requires that the market value of
the collateral be sufficient to cover payments of interest and principal;
however, in the event of default by the other party to the agreement, retention
of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily
to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
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 capital loss carryforwards, if any, to shareholders.

As of December 31, 2002, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:

                             Expiring
                             -------------------------
                             2009         $590,048,244
                             2010          230,224,822
                                          ------------
                             Total        $820,273,066
                                          ============

During the fiscal year ended December 31, 2002, the Fund did not utilize any
capital loss carryforward.
   As of December 31, 2002, the Fund had approximately $30,363,000 of
post-October losses available to offset future capital gains, if any. Such
losses, if unutilized, will expire in 2011.
- --------------------------------------------------------------------------------
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 Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during the
fiscal year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also, due to
timing of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net 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, 2002, amounts have been reclassified to reflect a
decrease in additional paid-in capital of $3,664,059. Overdistributed net
investment income was decreased by the same amount. Net assets of the Fund were
unaffected by the reclassifications.

The tax character of distributions paid during the years ended December 31,
2002 and December 31, 2001 was as follows:
                                            Year Ended           Year Ended
                                     December 31, 2002    December 31, 2001
          -----------------------------------------------------------------
          Distributions paid from:
          Ordinary income                   $8,907,778        $ 106,528,626
          Long-term capital gain                    --          216,903,050
          Return of capital                         --                   --
                                            -------------------------------
          Total                             $8,907,778         $323,431,676
                                            ===============================

As of December 31, 2002, the components of distributable earnings on a tax basis
were as follows:

          Accumulated net realized loss          $  (850,635,772)
          Net unrealized depreciation               (171,394,886)
                                                 ----------------
          Total                                  $(1,022,030,658)
                                                 ================

- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.

NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
                                                      Year Ended December 31,
2002       Year Ended December 31, 2001
                                                            Shares
Amount           Shares            Amount
- ----------------------------------------------------------------------------------------------------------------------

Non-Service shares
Sold                                                     7,012,727   $
240,059,154       20,034,675    $  970,735,337
Dividends and/or distributions reinvested                  230,762
8,907,419        7,069,463       323,427,949
Redeemed                                               (13,538,032)
(453,663,917)     (23,954,650)   (1,125,250,287)

- ----------------------------------------------------------------
Net increase (decrease)                                 (6,294,543)
$(204,697,344)       3,149,488    $  168,912,999

================================================================
- ----------------------------------------------------------------------------------------------------------------------
Service shares
Sold                                                         5,604   $
188,927            1,424    $       67,202
Dividends and/or distributions reinvested                        9
359               81             3,726
Redeemed                                                    (1,993)
(74,881)            (196)           (8,292)

- ----------------------------------------------------------------
Net increase                                                 3,620   $
114,405            1,309    $       62,636

================================================================
- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2002, were
$593,869,977 and $599,723,505, respectively.

As of December 31, 2002, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $1,151,975,667 was composed
of:

            Gross unrealized appreciation            $  77,338,066
            Gross unrealized depreciation             (248,732,952)
                                                     --------------
            Net unrealized depreciation              $(171,394,886)
                                                     ==============

The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts,
investments in passive foreign investment companies, and forward foreign
currency exchange contracts.

- --------------------------------------------------------------------------------
4. 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.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a $19.75 per account fee.
   Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $5,000 for assets of less than $10 million and
$10,000 for assets of $10 million or more. The Fund is subject to the minimum
fee in the event that the per account fee does not equal or exceed the
applicable minimum fee.
   OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average net assets of the Fund. This
undertaking may be amended or withdrawn at any time.

- --------------------------------------------------------------------------------
Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc., the Distributor, for distribution-related services for the
Fund's Service shares. Under the Plan, payments are made quarterly at an annual
rate of up to 0.25% of the average annual net assets of the Service shares of
the Fund. For the year ended December 31, 2002, payments under the Service Plan
totaled $158.

- --------------------------------------------------------------------------------
5. Illiquid or Restricted Securities
As of December 31, 2002, 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, 2002 was
$1,939,759, which represents 0.20% of the Fund's net assets, all of which is
considered restricted. Information concerning restricted securities is as
follows:

Acquisition                       Valuation as of           Unrealized
Security                                                  Dates
Cost     December 31, 2002         Depreciation
- --------------------------------------------------------------------------------

Stocks and/or Warrants
Axsun Technologies, Inc., Cv., Series C                12/13/00
$37,000,003              $909,306          $36,090,697
Blaze Network Products, Inc., 8% Cv., Series D         10/17/00
7,346,317                    --            7,346,317
BroadBand Office, Inc., Cv., Series C                   8/28/00
4,000,015                    --            4,000,015
Centerpoint Broadband Technologies, Inc., Cv.,
Series D                                               10/23/00
13,999,997                    --           13,999,997
Centerpoint Broadband Technologies, Inc., Cv.,
Series Z                                                5/26/00
6,999,992                    --            6,999,992
fusionOne, Inc., 8% Non-Cum. Cv., Series D               9/6/00
14,465,368               708,883           13,756,485
MicroPhotonix Integration Corp., Cv., Series C           7/6/00
4,000,004                    --            4,000,004
Multiplex, Inc., Cv., Series C                           2/9/01
17,150,662               301,534           16,849,128
Questia Media, Inc., Cv., Series B                      8/18/00
8,999,999                20,036            8,979,963

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 of
Oppenheimer Bond Fund/VA, which is a series of Oppenheimer Variable Account
Funds, including the statement of investments, as of December 31, 2002, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for the periods indicated. 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 auditing standards generally
accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Bond Fund/VA as of December 31, 2002, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America.


/s/Deloitte & Touche LLP
Deloitte & Touche LLP

Denver, Colorado
January 23, 2003



OPPENHEIMER BOND FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2002


                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Asset-Backed Securities--13.9%
AQ Finance NIM Trust, Home Equity
Collateralized Mtg. Obligations:
Series 2001-3A, Cl. Note,
8.835%, 2/25/32 1                  $   371,705   $     374,416
Series 2002-1, Cl. Note,
9.50%, 6/25/32 2                     2,418,513       2,410,955
- ---------------------------------------------------------------
Capital Auto Receivables Asset Trust,
Automobile Mtg. Backed Nts., Series
2002-4, Cl. A2B, 1.74%, 1/17/05 2    6,850,000       6,860,185
- ---------------------------------------------------------------
CitiFinancial Mortgage Securities, Inc.,
Home Equity Collateralized Mtg.
Obligations, Series 2002-1, Cl.
AF1, 2.474%, 9/25/32 2               3,264,536       3,273,665
- ---------------------------------------------------------------
Daimler Chrysler Auto Trust,
Automobile Loan Pass-Through
Certificates, Series 2002-B,
Cl. A2, 2.20%, 4/6/05                3,910,000       3,926,278
- ---------------------------------------------------------------
Ford Credit Auto Owner Trust,
Automobile Loan Certificates,
Series 2002-D, Cl. A2A,
2.10%, 3/15/05                       7,140,000       7,168,397
- ---------------------------------------------------------------
Harley-Davidson Motorcycle Trust,
Motorcycle Receivable Nts., Series
2002-2, Cl. A1, 1.91%, 4/16/07       3,646,236       3,656,818
- ---------------------------------------------------------------
Honda Auto Receivables Owner Trust,
Automobile Mtg. Obligations,
Series 2002-3, Cl. A2,
2.26%, 12/18/04                      4,940,000       4,964,195
- ---------------------------------------------------------------
Honda Auto Receivables Owner Trust,
Automobile Receivables Obligations,
Series 2002-4, Cl. A2,
1.66%, 6/15/05                       3,750,000       3,753,157
- ---------------------------------------------------------------
Household Automotive Trust,
Automobile Loan Certificates,
Series 2002-2, Cl. A2,
2.15%, 12/19/05                      3,570,000       3,587,142
- ---------------------------------------------------------------
Lease Investment Flight Trust,
Collateralized Plane Obligations,
Series 1A, Cl. D2, 8%, 7/15/31 2     5,754,318       1,265,950
- ---------------------------------------------------------------
Liberte American Loan Master Trust,
Collateralized Loan Obligations,
Series 1999-1A, Cl. D2,
6.424%, 11/25/06 2,3                 9,000,000       6,226,875
- ---------------------------------------------------------------
Litigation Settlement Monetized
Fee Trust, Asset-Backed
Certificates, Series 2001-1A,
Cl. A1, 8.33%, 4/25/31 2             5,074,954       5,347,986
- ---------------------------------------------------------------
Long Beach Asset Holdings Corp. NIM
Trust, Home Equity Asset-Backed
Pass-Through Certificates,
Series 2001-3, 7.87%, 9/25/31 2      1,143,095       1,144,167
- ---------------------------------------------------------------
M&I Auto Loan Trust, Automobile
Loan Certificates, Series 2002-1,
Cl. A2, 1.95%, 7/20/05               2,460,000       2,467,818

                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Asset-Backed Securities Continued
MMCA Auto Lease Trust, Auto
Retail Installment Contracts,
Series 2002-A, Cl. A2, 1.59%,
5/16/05 2,3                        $ 3,510,000   $   3,513,442
- ---------------------------------------------------------------
MSF Funding LLC, Collateralized
Mtg. Obligations, Series 2000-1,
Cl. C, 8.77%, 7/25/07 2,3              869,237         839,423
- ---------------------------------------------------------------
NC Finance Trust, Collateralized
Mtg. Obligations:
Series 1999-I, Cl. ECFD,
8.75%, 12/25/28 2                    4,282,993       1,884,517
Series 2002-I, Cl. ECFD,
9.25%, 3/25/32 1                     3,617,582       3,572,363
- ---------------------------------------------------------------
Nissan Auto Lease Trust, Auto Lease
Obligations, Series
2002-A, Cl. A2, 1.86%, 11/15/04 2    7,060,000       7,060,000
- ---------------------------------------------------------------
Nissan Auto Receivables Owner
Trust, Auto Receivable Nts.,
Series 2002-C, Cl. A2,
1.94%, 9/15/04 2                     5,180,000       5,193,427
- ---------------------------------------------------------------
ONYX Acceptance Auto Trust,
Automobile Asset-Backed Certificates,
Series 2002, Cl. A,
13.60%, 2/20/32                      1,513,624       1,498,488
- ---------------------------------------------------------------
Option One Mortgage
Securities Corp., Home Equity
Collateralized Mtg. Obligations:
Series 1999-1, Cl. CTFS,
10.06%, 3/26/29 2                      288,327         277,289
Series 1999-3, Cl. CTFS,
10.80%, 12/15/29                       326,760         320,429
- ---------------------------------------------------------------
Salomon Smith Barney Auto
Loan Trust, Asset-Backed Auto Loan
Obligations, Series 2002-1, Cl. A2,
1.83%, 9/15/05 2                     5,330,000       5,310,013
- ---------------------------------------------------------------
Tobacco Settlement Authority,
Asset-Backed Securities,
Series 2001-A, 6.79%, 6/1/10         2,100,000       2,230,179
- ---------------------------------------------------------------
USAA Auto Owner Trust, Automobile
Loan Asset-Backed Certificates,
Series 2002-1, Cl. A2,
1.95%, 3/15/05                       1,610,000       1,614,777
- ---------------------------------------------------------------
Volkswagen Auto Lease Trust,
Automobile Lease Asset-Backed
Securities, Series 2002-A,
Cl. A2, 1.77%, 2/20/05               6,900,000       6,906,210
- ---------------------------------------------------------------
Whole Auto Loan Trust, Auto Loans
Receivables, Series 2002-1, Cl. A2,
1.88%, 6/15/05                       4,540,000       4,546,384
                                                  -------------
Total Asset-Backed Securities
(Cost $107,701,321)                                101,194,945

                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Corporate Loans--0.2%
Ferrell Cos., Inc., Sr. Sec. Credit Facilities
Term Loan, Tranche B, 5.47%, 6/17/06 2,3
(Cost $1,368,337)                 $  1,382,159   $   1,352,788

- ---------------------------------------------------------------
Mortgage-Backed Obligations--24.7%
- ---------------------------------------------------------------
Government Agency--16.1%
- ---------------------------------------------------------------
FHLMC/FNMA/sponsored--15.9%
Asset Securitization Corp., Interest-Only
Stripped Mtg.-Backed Security
Collateralized Mtg. Obligations,
Series 1997-D4, Cl. PS1,
1.097%, 4/14/29 4                   50,303,179       2,562,318
- ---------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Gtd. Mtg. Pass-Through
Participation Certificates:
8%, 4/1/16                           4,484,956       4,856,163
9%, 8/1/22-5/1/25                    1,044,947       1,164,784
Series 151, Cl. F, 9%, 5/15/21         193,144         200,201
- ---------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through
Certificates, Series 2054, Cl. TE,
6.25%, 4/15/24                         109,000         111,048
- ---------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Home Equity Loan Structured
Pass-Through Certificates, Series
HOO2, Cl. A2, 1.861%, 12/15/06       5,820,000       5,793,173
- ---------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
Interest-Only Stripped
Mtg.-Backed Security:
Series 206, Cl. IO,
7.50%, 12/15/29 4                    6,856,275         903,100
Series 303, Cl. IO,
7.50%, 11/1/29 4                     2,605,457         352,958
- ---------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 3/1/11                          212,212         225,261
6.50%, 1/25/33 5                    32,350,000      33,684,438
7%, 11/1/25                            178,808         189,187
7%, 1/25/33 5                       60,618,000      63,762,559
7.50%, 1/1/08-1/1/26                   732,172         781,568
8%, 5/1/17                              90,266          98,644
- ---------------------------------------------------------------
Federal National Mortgage Assn.,
Collateralized Mtg. Obligations, Gtd.
Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 131,
Cl. G, 8.75%, 11/25/05                 304,008         321,022
- ---------------------------------------------------------------
Federal National Mortgage Assn., Gtd.
Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust
1989-17, Cl. E, 10.40%, 4/25/19        254,357         288,151
                                                 --------------
                                                   115,260,292

- ---------------------------------------------------------------
GNMA/Guaranteed--0.2%
Government National Mortgage Assn.:
7%, 1/15/09-5/15/09                    158,279         170,164
8.50%, 8/15/17-12/15/17              1,249,416       1,382,317
                                                 --------------
                                                     1,552,481


                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Private--8.6%
- ---------------------------------------------------------------
Commercial--5.4%
Asset Securitization Corp., Commercial
Mtg. Pass-Through Certificates,
Series 1996-MD6, Cl. A3, 7.089%,
11/13/29 3                        $  1,200,000   $   1,337,713
- ---------------------------------------------------------------
Asset Securitization Corp., Interest-Only
Stripped Mtg.-Backed Security
Commercial Mtg. Pass-Through
Certificates, Series 1997-D5, Cl. PS1,
8.338%, 2/14/41 4                   17,223,827       1,249,064
- ---------------------------------------------------------------
Capital Lease Funding Securitization LP,
Interest-Only Corporate-Backed
Pass-Through Certificates,
Series 1997-CTL1,
9.305%, 6/22/24 2,4                 27,703,411         919,840
- ---------------------------------------------------------------
Commercial Mortgage Acceptance Corp.,
Commercial Mtg. Obligations,
Series 1996-C1, Cl. D,
7.50%, 12/25/20 2,3                  1,103,590       1,109,108
- ---------------------------------------------------------------
CS First Boston Mortgage Securities Corp.,
Interest-Only Stripped Mtg.-Backed
Security, Series 1998-C1, Cl. AX,
7.226%, 4/11/30 4                   23,390,512       1,134,533
- ---------------------------------------------------------------
DLJ Commercial Mortgage Corp.,
Commercial Mtg. Pass-Through
Certificates, Series 1999-STF1,
Cl. B6, 5.01%, 7/5/08 2,8           34,282,670          34,283
- ---------------------------------------------------------------
DLJ Mortgage Acceptance Corp.,
Commercial Mtg. Obligations, Series
1996-CF1, Cl. A3, 7.848%, 3/13/28 3  2,000,000       2,266,644
- ---------------------------------------------------------------
FDIC Trust, Gtd. Real Estate
Mtg. Investment Conduit Pass-Through
Certificates:
Series 1994-C1, Cl.2D,
8.70%, 9/25/25 2                       381,974         371,470
Series 1994-C1, Cl.2E,
8.70%, 9/25/25 2                     1,500,000       1,457,578
- ---------------------------------------------------------------
First Union-Chase Commercial
Mortgage Trust, Interest-Only
Commercial Mtg. Pass-Through
Certificates, Series 1999-C2, Cl. IO,
10.117%, 6/15/31 4                  88,332,038       3,153,454
- ---------------------------------------------------------------
First Union-Lehman Brothers
Commercial Mortgage Trust,
Interest-Only Stripped Mtg.-Backed
Security, Series 1998-C2,
10.195%, 5/18/28 4                  17,845,330         518,978
- ---------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Interest-Only Stripped
Mtg.-Backed Security Pass-Through
Certificates, Series 1997-C1, Cl. X,
11.692%, 7/15/27 4                  16,149,676         951,317
- ---------------------------------------------------------------
Lehman Brothers Commercial Conduit
Mortgage Trust, Interest-Only
Stripped Mtg.-Backed Security, Series
1998-C1, Cl. IO,
11.541%, 2/18/28 4                  24,529,346       1,040,581


STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Commercial Continued
Lehman Structured Securities Corp.,
Collateralized Mtg. Obligations,
Series 2002-GE1, Cl. A,
6%, 7/26/24 2                    $   4,013,454   $   3,911,864
- ---------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates, Series 1996-WF1, Cl.
A2, 7.339%, 11/15/28 1,3             4,393,793       4,520,698
- ---------------------------------------------------------------
NationsBank Trust, Lease Pass-Through
Certificates, Series 1997A-1,
7.442%, 1/10/11 3                    2,051,757       2,293,272
- ---------------------------------------------------------------
PNC Mortgage Securities Corp.,
Collateralized Mtg. Obligations
Pass-Through Certificates,
Series 1998-12, Cl. 1A2,
5.75%, 1/25/29                       9,685,500       9,753,645
- ---------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Interest-Only
Commercial Mtg. Pass-Through
Certificates, Series 1999-C1,
Cl. X, 11.594%, 5/18/32 4          417,966,949       3,265,367
                                                  -------------
                                                    39,289,409

- ---------------------------------------------------------------
Other--0.0%
Salomon Brothers Mortgage
Securities VI, Inc., Interest-Only
Stripped Mtg.-Backed Security,
Series 1987-3, Cl. B, (25.42)%,
10/23/17 2,4                            27,601           6,055
- ---------------------------------------------------------------
Salomon Brothers Mortgage Securities
VI, Inc., Principal-Only Stripped
Mtg.-Backed Security, Series
1987-3, Cl. A,
(1.539)%, 10/23/17 2,6                  39,474          32,887
                                                  -------------
                                                        38,942

- ---------------------------------------------------------------
Residential--3.2%
Countrywide Funding Corp., Mtg.
Pass-Through Certificates, Series
1993-12, Cl. B1, 6.625%, 2/25/24       515,102         527,416
- ---------------------------------------------------------------
Granite Mortgages plc, Mtg.-Backed
Obligations, Series 2002-2, Cl. 1A1,
1.929%, 1/21/17 3                    3,570,000       3,570,000
- ---------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Commercial Mtg.
Pass-Through Certificates, Series
1999-NC2, Cl. M3, 4.67%, 4/25/29 3   1,047,006       1,035,227
- ---------------------------------------------------------------
Structured Asset Securities Corp.,
Collateralized Mtg. Obligations,
Mtg. Pass-Through Certificates:
Series 1998-8, Cl. B,
2.72%, 8/25/28 3                     2,397,589       2,323,471
Series 2002-AL1, Cl. B2,
3.45%, 2/25/32                       3,240,956       2,800,980


                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Residential Continued
Washington Mutual Mortgage
Securities Corp., Collateralized
Mtg. Obligations, Pass-Through
Certificates:
Series 2002-AR10, Cl. A1,
2.359%, 10/25/32 2,3              $  2,165,353   $   2,168,858
Series 2002-AR15, Cl. A1, 2.26%,
11/25/32 2                           3,928,864       3,939,674
Series 2002-AR19,
Cl. A-1, 1.771%, 1/25/33             7,010,000       7,010,000
                                                  -------------
                                                    23,375,626
                                                  -------------
Total Mortgage-Backed Obligations
(Cost $176,645,235)                                179,551,033

- ---------------------------------------------------------------
U.S. Government Obligations--18.2%
- ---------------------------------------------------------------
Federal Home Loan Mortgage
Corp. Unsec. Nts.:
3%, 7/15/04                         25,900,000      26,473,763
6.25%, 7/15/32                      11,000,000      12,505,834
- ---------------------------------------------------------------
Federal National Mortgage Assn.
Unsec. Nts.:
5.25%, 6/15/06                      15,000,000      16,359,150
6%, 5/15/11                          5,000,000       5,661,260
6.375%, 6/15/09                     24,000,000      27,807,960
- ---------------------------------------------------------------
U.S. Treasury Bonds,
5.375%, 2/15/31                     14,981,000      16,336,316
- ---------------------------------------------------------------
U.S. Treasury Nts.:
3%, 11/15/07                         3,766,000       3,812,488
4%, 11/15/12                        21,809,000      22,124,227
5.875%, 11/15/04                       550,000         594,194
6.50%, 2/15/10                         550,000         657,594
                                                  -------------
Total U.S. Government
Obligations (Cost $127,214,674)                    132,332,786

- ---------------------------------------------------------------
Foreign Government Obligations--0.4%
United Mexican States Nts.,
7.50%, 1/14/12 (Cost $2,638,602)     2,610,000       2,799,225

- ---------------------------------------------------------------
Corporate Bonds and Notes--45.3%
- ---------------------------------------------------------------
Consumer Discretionary--9.5%
- ---------------------------------------------------------------
Auto Components--0.5%
Delphi Corp., 6.55% Nts., 6/15/06    3,180,000       3,355,526
- ---------------------------------------------------------------
Automobiles--3.4%
Ford Motor Co.,
7.45% Bonds, 7/16/31                 5,035,000       4,391,572
- ---------------------------------------------------------------
General Motors Acceptance Corp.:
6.875% Unsec. Unsub. Nts., 8/28/12   3,970,000       3,920,228
7% Auto Loan Nts., 2/1/12            6,579,000       6,617,849
- ---------------------------------------------------------------
Hertz Corp. (The), 7.625% Sr.
Nts., 6/1/12                         9,200,000       8,796,092
- ---------------------------------------------------------------
U.S. Leasing International, Inc.,
6.625% Sr. Nts., 5/15/03               750,000         749,096
                                                  -------------

                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Household Durables--0.6%
Pulte Corp., 8.125% Sr.
Unsec. Nts., 3/1/11               $  3,890,000   $   4,361,340
- ---------------------------------------------------------------
Media--3.8%
AOL Time Warner, Inc.,
6.875% Nts., 5/1/12                  6,800,000       7,196,386
- ---------------------------------------------------------------
Cox Communications, Inc.,
7.125% Nts., 10/1/12                 3,450,000       3,838,877
- ---------------------------------------------------------------
News America Holdings, Inc.,
7.75% Sr. Unsec. Debs., 12/1/45      5,826,000       5,743,247
- ---------------------------------------------------------------
Reed Elsevier Capital, Inc.,
6.75% Bonds, 8/1/11                  2,810,000       3,176,753
- ---------------------------------------------------------------
Viacom, Inc., 7.70%
Sr. Unsec. Nts., 7/30/10             3,330,000       3,962,024
- ---------------------------------------------------------------
Walt Disney Co.,
6.75% Sr. Nts., 3/30/06              3,665,000       4,005,288
                                                  -------------
                                                    27,922,575

- ---------------------------------------------------------------
Multiline Retail--1.2%
Federated Department Stores, Inc.,
6.30% Sr. Nts., 4/1/09               5,455,000       5,828,117
- ---------------------------------------------------------------
Sears Roebuck Acceptance Corp.:
6% Unsec. Bonds, 3/20/03             1,865,000       1,866,106
6.90% Nts., 8/1/03                   1,295,000       1,306,656
                                                  -------------
                                                     9,000,879

- ---------------------------------------------------------------
Consumer Staples--2.6%
- ---------------------------------------------------------------
Food & Drug Retailing--1.4%
Albertson's, Inc., 7.45%
Unsec. Debs., 8/1/29                 2,620,000       2,902,431
- ---------------------------------------------------------------
Kroger Co. (The), 6.75%
Nts., 4/15/12                        2,635,000       2,921,000
- ---------------------------------------------------------------
Safeway, Inc., 4.80%
Sr. Unsec. Nts., 7/16/07             3,980,000       4,110,429
                                                  -------------
                                                     9,933,860

- ---------------------------------------------------------------
Household Products--0.0%
Styling Technology Corp., 10.875%
Sr. Unsec. Sub. Nts., 7/1/08 2,7,8     360,000              --
- ---------------------------------------------------------------
Tobacco--1.2%
Philip Morris Cos., Inc., 7.25%
Nts., 1/15/03                        9,140,000       9,149,862
- ---------------------------------------------------------------
Energy--0.3%
- ---------------------------------------------------------------
Energy Equipment & Services--0.0%
Ocean Rig Norway AS, 10.25% Sr.
Sec. Nts., 6/1/08                      400,000         362,000
- ---------------------------------------------------------------
Oil & Gas--0.3%
Petroleos Mexicanos, 9.50%
Sr. Sub. Nts., 9/15/27               1,730,000       1,941,925
- ---------------------------------------------------------------
Financials--14.0%
- ---------------------------------------------------------------
Banks--2.7%
ABN Amro NA Holding Capital
NV, 6.473% Bonds, 12/29/49 1         2,690,000       2,764,150


                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Banks Continued
Credit Suisse First Boston (USA),
Inc., 6.125% Nts., 11/15/11       $  5,585,000   $   5,837,286
- ---------------------------------------------------------------
Dime Capital Trust I, 9.33%
Capital Securities,
Series A, 5/6/27                     4,848,000       5,528,906
- ---------------------------------------------------------------
Socgen Real Estate LLC, 7.64%
Bonds, 12/29/49 1,3                  4,800,000       5,285,395
                                                  -------------
                                                    19,415,737

- ---------------------------------------------------------------
Diversified Financials--3.3%
Aeltus CBO II Ltd./Aeltus CBO II
Corp., 0.319% Sr. Sec. Sub.
Bonds, 8/6/09 2                      5,622,860         281,205
- ---------------------------------------------------------------
CIT Group, Inc., 7.75% Sr. Unsec.
Unsub. Nts., 4/2/12                  3,080,000       3,465,135
- ---------------------------------------------------------------
Citigroup, Inc., 6.625%
Unsec. Sub. Nts., 6/15/32            2,120,000       2,322,316
- ---------------------------------------------------------------
Goldman Sachs Group, Inc. (The),
6.60% Sr. Unsec. Nts., 1/15/12       2,620,000       2,900,073
- ---------------------------------------------------------------
Household Finance Corp.,
7% Nts., 5/15/12                     4,900,000       5,376,241
- ---------------------------------------------------------------
J.P. Morgan Chase & Co., 6.625%
Sub. Nts., 3/15/12                   2,675,000       2,904,245
- ---------------------------------------------------------------
MBNA America Bank NA, 6.625%
Sub. Nts., 6/15/12                   3,310,000       3,375,108
- ---------------------------------------------------------------
Morgan Stanley, 6.60% Nts., 4/1/12   3,410,000       3,785,993
                                                  -------------
                                                    24,410,316

- ---------------------------------------------------------------
Insurance--6.4%
American International Group, Inc./
SunAmerica Global Financing VI,
6.30% Sr. Sec. Nts., 5/10/11 1       3,860,000       4,261,560
- ---------------------------------------------------------------
AXA Group, 8.60% Unsec. Sub.
Nts., 12/15/30                       4,870,000       5,582,496
- ---------------------------------------------------------------
Farmers Insurance Exchange,
8.625% Nts., 5/1/24 1                1,800,000       1,351,922
- ---------------------------------------------------------------
John Hancock Global Funding II:
5% Nts., 7/27/07 1                   4,015,000       4,211,518
7.90% Nts., 7/2/10 1                 2,495,000       2,931,126
- ---------------------------------------------------------------
Metropolitan Life Global Funding
I, 4.75% Nts., 6/20/07               5,250,000       5,526,659
- ---------------------------------------------------------------
Nationwide CSN Trust, 9.875%
Sec. Nts., 2/15/25 1                 9,000,000       9,786,897
- ---------------------------------------------------------------
Nationwide Financial
Services, Inc., 5.90% Nts., 7/1/12   3,185,000       3,253,363
- ---------------------------------------------------------------
Prudential Holdings LLC,
8.695% Bonds, Series C, 12/18/23 1   4,090,000       4,747,247
- ---------------------------------------------------------------
Prudential Insurance Co.
of America, 8.30% Nts., 7/1/25 1     4,670,000       5,233,454
                                                  -------------

STATEMENT OF INVESTMENTS  Continued

                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Real Estate--1.6%
EOP Operating LP, 7.75%
Unsec. Nts., 11/15/07             $  3,595,000   $   4,081,501
- ---------------------------------------------------------------
Simon DeBartolo Group LP, 6.875%
Unsec. Nts., 11/15/06                3,685,000       4,013,101
- ---------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec.
Unsub. Nts., 6/15/07                 3,260,000       3,324,965
                                                 --------------
                                                    11,419,567

- ---------------------------------------------------------------
Health Care--3.1%
- ---------------------------------------------------------------
Health Care Providers & Services--1.5%
Anthem, Inc., 6.80% Unsec.
Unsub. Bonds, 8/1/12                 4,050,000       4,414,646
- ---------------------------------------------------------------
Cardinal Health, Inc.,
4.45% Nts., 6/30/05                  3,230,000       3,392,372
- ---------------------------------------------------------------
WellPoint Health Networks, Inc.,
6.375% Nts., 1/15/12                 2,720,000       2,957,031
                                                 --------------
                                                    10,764,049

- ---------------------------------------------------------------
Pharmaceuticals--1.6%
Bristol-Myers Squibb Co., 5.75%
Nts., 10/1/11 9                      5,265,000       5,616,128
- ---------------------------------------------------------------
Pharmacia Corp., 6.60% Sr.
Unsec. Nts., 12/1/28                 1,730,000       1,961,049
- ---------------------------------------------------------------
Wyeth, 5.875% Nts., 3/15/04          3,960,000       4,117,798
                                                 --------------
                                                    11,694,975

- ---------------------------------------------------------------
Industrials--6.2%
- ---------------------------------------------------------------
Aerospace & Defense--2.2%
Boeing Capital Corp., 5.65% Sr.
Unsec. Nts., 5/15/06                 4,865,000       5,101,532
- ---------------------------------------------------------------
Lockheed Martin Corp., 8.20%
Nts., 12/1/09                        3,565,000       4,411,677
- ---------------------------------------------------------------
Raytheon Co., 5.70%
Sr. Unsec. Nts., 11/1/03             6,475,000       6,603,755
                                                 --------------
                                                    16,116,964

- ---------------------------------------------------------------
Building Products--0.1%
GSP I Corp., 10.15% First
Mtg. Bonds, 6/24/10 1                  854,166         918,070
- ---------------------------------------------------------------
Commercial Services & Supplies--1.3%
PHH Corp., 8.125% Nts., 2/3/03 2     4,550,000       4,561,493
- ---------------------------------------------------------------
Protection One, Inc./Protection One
Alarm Monitoring, Inc.,
7.375% Sr. Unsec. Nts., 8/15/05        300,000         247,500
- ---------------------------------------------------------------
Safety-Kleen Corp., 9.25% Sr.
Unsec. Nts., 5/15/09 2,7,8             800,000          32,000
- ---------------------------------------------------------------
Waste Management, Inc.:
7% Sr. Nts., 7/15/28                 3,790,000       3,760,946
7.75% Bonds, 5/15/32 1                 610,000         657,367
                                                 --------------
                                                     9,259,306



                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Industrial Conglomerates--2.0%
General Electric Capital Corp.:
6% Nts., 6/15/12                  $  5,000,000   $   5,408,180
6.75% Nts., Series A, 3/15/32        1,110,000       1,231,334
- ---------------------------------------------------------------
MMCaps Funding I Ltd., Inc.,
8.03% Sr. Nts., 6/15/31 1            7,150,000       7,507,229
                                                 --------------
                                                    14,146,743

- ---------------------------------------------------------------
Road & Rail--0.6%
Burlington Northern Santa Fe Corp.,
5.90% Sr. Nts., 7/1/12               4,000,000       4,346,404
- ---------------------------------------------------------------
Materials--0.3%
- ---------------------------------------------------------------
Chemicals--0.3%
Union Carbide Corp., 6.25%
Nts., 6/15/03                        1,985,000       2,004,477
- ---------------------------------------------------------------
Metals & Mining--0.0%
National Steel Corp., 9.875%
First Mtg. Bonds, Series D,
3/1/09 7,8                             500,000         196,875
- ---------------------------------------------------------------
Telecommunication Services--5.3%
- ---------------------------------------------------------------
Diversified Telecommunication Services--3.6%
Citizens Communications Co., 9.25%
Sr. Nts., 5/15/11                    1,885,000       2,249,127
- ---------------------------------------------------------------
Deutsche Telekom International BV,
8.25% Unsec. Unsub. Nts., 6/15/05 3  5,000,000       5,470,680
- ---------------------------------------------------------------
France Telecom SA, 8.70%
Sr. Unsec. Nts., 3/1/06 3            3,265,000       3,577,702
- ---------------------------------------------------------------
GTE North, Inc., 6.73% Debs.,
Series G, 2/15/28                    3,270,000       3,482,943
- ---------------------------------------------------------------
New England Telephone & Telegraph
Co., 7.875% Debs., 11/15/29          2,335,000       2,820,752
- ---------------------------------------------------------------
Sprint Capital Corp.,
8.75% Nts., 3/15/32                  3,270,000       3,115,960
- ---------------------------------------------------------------
TCI Communications, Inc., 9.80%
Sr. Unsec. Debs., 2/1/12             4,700,000       5,658,377
                                                 --------------
                                                    26,375,541

- ---------------------------------------------------------------
Wireless Telecommunication Services--1.7%
AT&T Corp.:
6.375% Nts., 3/15/04 3               3,300,000       3,383,708
8.50% Sr. Nts., 11/15/31 3           1,310,000       1,448,885
- ---------------------------------------------------------------
AT&T Wireless Services, Inc., 7.50%
Sr. Unsec. Nts., 5/1/07              7,405,000       7,635,525
                                                 --------------
                                                    12,468,118

- ---------------------------------------------------------------
Utilities--4.0%
- ---------------------------------------------------------------
Electric Utilities--3.0%
Dominion Resources, Inc., 8.125%
Sr. Unsub. Nts., 6/15/10             3,390,000       3,950,699
- ---------------------------------------------------------------
Duke Energy Corp.,
5.625% Nts., 11/30/12                1,325,000       1,324,818
- ---------------------------------------------------------------
FirstEnergy Corp., 7.375%
Sr. Unsub. Nts., Series C, 11/15/31  4,705,000       4,576,953


                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Electric Utilities Continued
MidAmerican Energy Holdings Co.,
5.875% Sr. Nts., 10/1/12 1        $  7,015,000   $   7,124,420
- ---------------------------------------------------------------
Progress Energy, Inc., 7.10%
Nts., 3/1/11                         3,835,000       4,234,477
- ---------------------------------------------------------------
South Carolina Electric & Gas Co.,
9% Mtg. Bonds, 7/15/06                 500,000         549,436
                                                 --------------
                                                    21,760,803

- ---------------------------------------------------------------
Gas Utilities--1.0%
Colorado Interstate Gas Corp., 10%
Sr. Debs., 6/15/05                     500,000         495,314
- ---------------------------------------------------------------
Kinder Morgan, Inc., 6.50%
Nts., 9/1/12 1                       1,980,000       2,072,951
- ---------------------------------------------------------------
NiSource Finance Corp., 7.875%
Sr. Unsec. Nts., 11/15/10            3,920,000       4,314,568
                                                 --------------
                                                     6,882,833

- ---------------------------------------------------------------
Multi-Utilities--0.0%
Enron Corp., 9.875%
Debs., 6/15/03 7,8                     375,000          50,625
                                                 --------------
Total Corporate Bonds and Notes
(Cost $322,207,760)                                329,620,449


                                         Units
- ---------------------------------------------------------------
Rights, Warrants and Certificates--0.0%
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10  (Cost $14,872)             5,408           4,164

                                     Principal
                                        Amount
- ---------------------------------------------------------------
Structured Notes--6.2%
JPMorgan Chase Bank, High Yield
Index Credit-Linked Trust Nts.,
7.55%, 11/15/07                   $ 29,550,000      30,067,125
- ---------------------------------------------------------------
UBS AG, High Grade Credit-Linked
Nts., 3.065%, 12/10/04 3            15,300,000      15,284,700
                                                 --------------
Total Structured Notes
(Cost $44,850,000)                                  45,351,825



                                     Principal    Market Value
                                        Amount      See Note 1
- ---------------------------------------------------------------
Joint Repurchase Agreements--4.3%
Undivided interest of 4.49% in joint
repurchase agreement (Market Value
$694,610,000) with Banc One Capital
Markets, Inc., 1.07%, dated 12/31/02, to
be repurchased at $31,206,855 on 1/2/03,
collateralized by U.S. Treasury Nts.,
3%--6.50%, 2/15/03--2/15/12, with a
value of $311,989,144 and U.S. Treasury
Bonds, 1.75%--9.375%, 4/30/04--2/15/23,
with a value of $397,082,690
(Cost $31,205,000)                $ 31,205,000    $ 31,205,000

- ---------------------------------------------------------------
Total Investments, at Value
(Cost $813,845,801)                      113.2%    823,412,215
- ---------------------------------------------------------------
Liabilities in Excess of Other Assets    (13.2)    (96,189,662)
                                  -----------------------------
Net Assets                               100.0%   $727,222,553
                                  =============================


Footnotes to Statement of Investments
1. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $67,320,783 or 9.30% of the Fund's net
assets as of December 31, 2002.
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. 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. These securities amount to $16,057,565 or 2.21% of the Fund's net assets
as of December 31, 2002.
5. When-issued security to be delivered and settled after December 31, 2002.
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.
7. Issuer is in default.
8. Non-income producing security.
9. Securities with an aggregate market value of $2,133,382 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
See accompanying Notes to Financial Statements.

STATEMENT OF ASSETS AND LIABILITIES  December 31, 2002

- ----------------------------------------------------------------------------------------------------------------
Assets
Investments, at value (cost $813,845,801)--see accompanying
statement                              $823,412,215
- ----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal
paydowns                                                            7,187,734
Investments sold on a when-issued
basis                                                               2,806,549
Shares of beneficial interest
sold
236,364
Daily variation on futures
contracts
57,438
Other
8,093

                                                                   -------------
Total
assets
833,708,393

- ----------------------------------------------------------------------------------------------------------------
Liabilities
Bank
overdraft
5,410,812
- ----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued
basis                                                         99,967,291
Shares of beneficial interest redeemed
                      1,059,708
Shareholder
reports
14,787
Trustees'
compensation
2,613
Distribution and service plan
fees
1,073
Transfer and shareholder servicing agent
fees                                                               436
Other
                                                                         29,120

- -------------
Total liabilities
                    106,485,840
- ----------------------------------------------------------------------------------------------------------------
Net
Assets
       $727,222,553

                  =============
- ----------------------------------------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of beneficial
interest                                                         $     64,282
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
736,378,030
- ----------------------------------------------------------------------------------------------------------------
Undistributed net investment
income
40,713,852
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions
                                      (58,790,479)
- ----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on
investments                                                            8,856,868

- -------------
Net
Assets
$727,222,553


=============

- ----------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share
Non-Service shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $724,787,458 and 64,066,177 shares of beneficial
interest outstanding)           $11.31
- ----------------------------------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $2,435,095 and 215,409 shares of beneficial interest
outstanding)                $11.30

See accompanying Notes to Financial Statements.

STATEMENT OF OPERATIONS  For the Year Ended December 31, 2002

- ------------------------------------------------------------------------------------------------------------
Investment Income

Interest

$45,396,060
- ------------------------------------------------------------------------------------------------------------
Dividends
                                        243,249

- ------------
Total investment
income
45,639,309

- ------------------------------------------------------------------------------------------------------------
Expenses
Management
fees
4,896,856
- ------------------------------------------------------------------------------------------------------------
Distribution and service plan fees-Service
shares                                                     1,382
- ------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service
shares
10,435
Service shares
                                                      14
- ------------------------------------------------------------------------------------------------------------
Custodian fees and
expenses
           31,840
- ------------------------------------------------------------------------------------------------------------
Trustees'
compensation
27,545
- ------------------------------------------------------------------------------------------------------------
Other
33,130

- ------------
Total
expenses
5,001,202
Less reduction to custodian expenses
                                                              (8,389)
Less voluntary waiver of transfer and shareholder servicing agent fees--Service
shares                   (4)

                   ------------
Net
expenses
4,992,809

- ------------------------------------------------------------------------------------------------------------
Net Investment
Income
40,646,500

- ------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments
(22,890,224)
Closing of futures
contracts
7,840,025
Closing and expiration of option contracts
written                                                  138,286

- ------------
Net realized loss
                                       (14,911,913)
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on
investments                                             33,764,082

- ------------
Net realized and unrealized
gain                                                                 19,963,596
- ------------------------------------------------------------------------------------------------------------
Payment from
affiliate
1,111,427

- ------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From
Operations                                            $60,610,096

============

See accompanying Notes to Financial Statements.

STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December
31,
2002            2001
- -----------------------------------------------------------------------------------------------------------------------
Operations

Net investment
income                                                                     $
40,646,500    $ 50,640,353
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain
(loss)
(14,911,913)      6,571,787
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation)                                        33,764,082
(14,467,548)
- -----------------------------------------------------------------------------------------------------------------------
Payment from
affiliate
1,111,427              --

  -----------------------------
Net increase in net assets resulting from
operations                                        60,610,096      42,744,592

- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service
shares
(50,820,794)    (44,272,510)
Service shares

- --              --

- -----------------------------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions:
Non-Service
shares
21,383,866     132,884,316
Service shares
                                2,348,380              --

- -----------------------------------------------------------------------------------------------------------------------
Net Assets
Total increase
                          33,521,548     131,356,398
- -----------------------------------------------------------------------------------------------------------------------
Beginning of
period
693,701,005     562,344,607

- -----------------------------
End of period [including undistributed net investment income of $40,713,852
and $50,773,326,
respectively]
$727,222,553    $693,701,005

=============================

See accompanying Notes to Financial Statements.


FINANCIAL HIGHLIGHTS

Non-Service shares    Year Ended December 31                    2002
2001          2000          1999          1998
- -----------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                          $11.21
$11.25        $11.52        $12.32        $11.91
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                            .65
..81           .94           .88           .72
Net realized and unrealized gain (loss)                          .27
..03          (.29)        (1.06)          .07
Payment from affiliate                                           .01
- --            --            --            --

- ---------------------------------------------------------------
Total from investment operations                                 .93
..84           .65          (.18)          .79
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                            (.83)
(.88)         (.92)         (.57)         (.20)
Distributions from net realized gain                              --
- --            --          (.05)         (.18)

- ---------------------------------------------------------------
Total dividends and/or distributions to shareholders            (.83)
(.88)         (.92)         (.62)         (.38)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                $11.31
$11.21        $11.25        $11.52        $12.32

===============================================================

- -----------------------------------------------------------------------------------------------------------------------------
Total Return
Total return at net asset value 1                               9.02%
7.79%         6.10%        (1.52)%        6.80%
Total return before payment from affiliate 2                    8.93%
N/A           N/A           N/A           N/A

- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                    $724,787
$693,701      $562,345      $601,064      $655,543
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                           $686,932
$638,820      $557,873      $633,059      $586,242
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income before payment from affiliate             5.91% 2
7.93%         7.94%         7.22%         6.31%
Net investment income after payment from affiliate              6.07%
N/A           N/A           N/A           N/A
Expenses                                                        0.73%
0.77%         0.76%         0.73%         0.74% 4
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                          157%
186%          260%          256%           76%

1. Assumes an 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. The Manager voluntarily reimbursed the Class $1,107,704 from an error in the
calculation of the Fund's net asset value per share.
3. Annualized for periods of less than one full year.
4. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.




FINANCIAL HIGHLIGHTS  Continued
- --------------------------------------------------------------------------------

Service shares    Period Ended December
31                                                                2002 1
- ---------------------------------------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of
period                                                                    $10.46
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment
income
..11
Net realized and unrealized
gain
..72
Payment from affiliate

..01

- --------
Total from investment
operations
..84
- ---------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income                                                                        --
Distributions from net realized
gain                                                                        --

                                                            --------
Total dividends and/or distributions to
shareholders                                                        --

                           --------
Net asset value, end of
period
$11.30

========

- ---------------------------------------------------------------------------------------------------------------
Total Return
Total return at net asset value
2                                                                         8.03%
Total return before payment from affiliate
3                                                              7.94%

- ---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in
thousands)                                                               $ 2,435
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)
                                                 $   834
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income before payment from affiliate
                                                   4.37% 3
Net investment income after payment from
affiliate                                                        5.04%
Expenses
                     0.98%
Expenses, net of reduction to custodian expenses and/or voluntary waiver of
transfer agent fees           0.98% 5
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate
157%
1. For the period from May 1, 2002 (inception of offering) to December 31, 2002.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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. The Manager voluntarily reimbursed the Class $3,723 from an error in the
calculation of the Fund's net asset value per share.
4. Annualized for periods of less than one full year.
5. Less than 0.01%.

See accompanying Notes to Financial Statements.

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), an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
main investment objective is to seek a high level of current income. The
Trust's investment advisor is OppenheimerFunds, Inc. (the Manager).
   The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other
investment products. The class of shares designated as Service shares is
subject to a distribution and service plan. All classes of shares have
identical rights and voting privileges. Earnings, net assets and net asset
value per share may differ by minor amounts due to each class having its own
expenses directly attributable to that class.
   The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. In the absence of a sale, the security is valued at the last
sale price on the prior trading day, if it is within the spread of the closing
bid and asked prices, and if not, at the closing bid price. Securities
(including restricted securities) for which quotations are not readily
available are valued primarily using dealer-supplied valuations, a portfolio
pricing service authorized by the Board of Trustees, or at their fair value.
Fair value is determined in good faith under consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
Securities Purchased on a When-issued Basis. Delivery and payment for
securities that have been purchased by the Fund on a when-issued basis can take
place a month or more after the trade date. Normally the settlement date occurs
within six months after the trade date; however, the Fund may, from time to
time, purchase securities whose settlement date extends six months 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 commitments. These transactions of
securities on a when-issued basis may increase the volatility of the Fund's net
asset value to the extent the Fund executes such transactions while remaining
substantially fully invested. As of December 31, 2002, the Fund had entered
into when-issued purchase commitments of $99,967,291 and when-issued sale
commitments of $2,806,549.
   In connection with its ability to purchase securities on a when-issued
basis, the Fund may enter into forward roll transactions with respect to
mortgage-related securities. Forward roll transactions require the sale of
securities for delivery in the current month, and a simultaneous agreement with
the same counterparty to repurchase similar (same type, coupon and maturity)
but not identical securities on a specified future date. The forward roll may
not extend for a period of greater than one year. The Fund generally records
the incremental difference between the forward purchase and sell of each
forward roll as interest income.
   Risks to the Fund of entering into forward roll transactions include the
potential inability of the counterparty to meet the terms of the agreement; the
potential of the Fund to receive inferior securities to what was sold to the
counterparty at redelivery; counterparty credit risk; and the potential pay
down speed variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
Structured Notes. The Fund invests in index-linked structured notes whose
principal and/or interest payments depend on the performance of an underlying
index. The structured notes are leveraged, which increases the volatility of
each note's market value relative to the change in the underlying index.
Fluctuations in value of these securities are recorded as unrealized gains and
losses in the accompanying financial statements. The Fund records a realized
gain or

NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
loss when a structured note is sold or matures. As of December 31, 2002, the
market value of these securities comprised of 6.2% of the Fund's net assets,
and resulted in unrealized gains in the current period of $501,825.
- --------------------------------------------------------------------------------
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, 2002,
securities with an aggregate market value of $279,500, representing 0.04% 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.
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint
repurchase agreement accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each agreement requires that the market value of
the collateral be sufficient to cover payments of interest and principal;
however, in the event of default by the other party to the agreement, retention
of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily
to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
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 capital loss carryforwards, if any, to shareholders.

As of December 31, 2002, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:

                              Expiring
                              -------------------------
                              2008          $13,955,380
                              2010           44,376,811
                                            -----------
                              Total         $58,332,191
                                            ===========

During the fiscal year ended December 31, 2002, the Fund did not utilize any
capital loss carryforward.
   As of December 31, 2002, the Fund had approximately $22,000 of post-October
losses available to offset future capital gains, if any. Such losses, if
unutilized, will expire in 2011.
- --------------------------------------------------------------------------------
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 Dividends and 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 dividends and distributions made during the fiscal year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of dividends and distributions,
the fiscal year in which amounts are distributed may differ from the fiscal year
in which the income or net 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, 2002, amounts have been reclassified to reflect an
increase in undistributed net investment income of $114,820. Accumulated net
realized loss was increased by the same amount. Net assets of the Fund were
unaffected by the reclassifications.

The tax character of distributions paid during the years ended December 31,
2002 and December 31, 2001 was as follows:

                                             Year Ended               Year Ended
                                      December 31, 2002        December 31, 2001
      --------------------------------------------------------------------------
      Distributions paid from:
      Ordinary income                       $50,820,794              $44,272,510
      Long-term capital gain                         --                       --
      Return of capital                              --                       --
                                            ------------------------------------
      Total                                 $50,820,794              $44,272,510
                                            ====================================

As of December 31, 2002, the components of distributable earnings on a tax
basis were as follows:

                Undistributed net investment income        $40,713,852
                Accumulated net realized loss              (58,790,479)
                Net unrealized appreciation                  8,856,868
                                                           -----------
                Total                                      $(9,219,759)
                                                           ===========

- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
                                                Year Ended December 31, 2002
1       Year Ended December 31, 2001
                                                      Shares
Amount           Shares            Amount
- ------------------------------------------------------------------------------------------------------------------
Non-Service Shares
Sold                                              18,951,559
$204,469,491       24,573,653      $275,467,781
Dividends and/or distributions reinvested          4,914,970
50,820,794        4,099,306        44,272,510
Redeemed                                         (21,695,172)
(233,906,419)     (16,752,613)     (186,855,975)

- -----------------------------------------------------------------
Net increase                                       2,171,357      $
21,383,866       11,920,346      $132,884,316

=================================================================
NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
2. Shares of Beneficial Interest Continued

                                              Year Ended December 31, 2002
1         Year Ended December 31, 2001
                                                      Shares
Amount             Shares            Amount
- ------------------------------------------------------------------------------------------------------------------
Service Shares

Sold                                                 309,112     $
3,377,815                 --              $ --
Dividends and/or distributions reinvested                 --
- --                 --                --
Redeemed                                             (93,703)
(1,029,435)                --                --

- -----------------------------------------------------------------
Net increase                                         215,409     $
2,348,380                 --              $ --

=================================================================
1. For the year ended December 31, 2002, for Non-Service shares and for the
period from May 1, 2002 (inception of offering) to December 31, 2002, for
Service shares.

- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2002, were
$1,350,346,639 and $1,312,356,860, respectively.

As of December 31, 2002, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $814,991,805 was composed of:

                    Gross unrealized appreciation              $25,444,295
                    Gross unrealized depreciation              (17,023,885)
                                                               -----------
                    Net unrealized appreciation                $ 8,420,410
                                                               ===========

The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts,
investments in passive foreign investment companies, and forward foreign
currency exchange contracts.

- --------------------------------------------------------------------------------
4. 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.
   For the year ended December 31, 2002, the Manager voluntarily agreed to
reimburse the Fund in the amount of $1,111,427 for the inaccurate calculation
of the Fund's net asset value. The miscalculation of the net asset value
resulted from the receipt of an incorrect price from an independent third party
pricing service engaged to provide prices for the portfolio of securities.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a $22.50 per account fee.
   Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $5,000 for assets of less than $10 million and
$10,000 for assets of $10 million or more. The Fund is subject to the minimum
fee in the event that the per account fee does not equal or exceed the
applicable minimum fee.
   OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average net assets of the Fund. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc., the Distributor, for distribution-related services for the
Fund's Service shares. Under the Plan, payments are made quarterly at an annual
rate of up to 0.25% of the average annual net assets of the Service shares of
the Fund. For the year ended December 31, 2002, payments under the Service Plan
totaled $1,382.

- --------------------------------------------------------------------------------
5. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a particular price on a stipulated future
date at a negotiated price. Futures contracts are traded on a commodity
exchange. The Fund may buy and sell futures contracts that relate to broadly
based securities indices "financial futures" or debt securities "interest rate
futures" in order to gain exposure to or to seek to protect against changes in
market value of stock and bonds or 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 decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes 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 recognizes 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. Realized
gains and losses are reported on the Statement of Operations as closing and
expiration of futures contracts.
   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, 2002, the Fund had outstanding futures contracts as follows:

Unrealized
                                 Expiration      Number of        Valuation as
of      Appreciation
     Contract Description             Dates      Contracts      December 31,
2002    (Depreciation)

- -----------------------------------------------------------------------------------------------
     Contracts to Purchase
     U.S. Long Bonds                3/20/03            263          $
29,636,813       $   824,578
     U.S. Treasury Nts., 2 yr.      3/27/03            558
120,074,625         1,381,766
     U.S. Treasury Nts., 10 yr.     3/20/03             20
2,300,938            53,125

                  -----------

2,259,469

- -----------
     Contracts to Sell
     U.S. Treasury Nts., 5 yr.      3/20/03          1,147
129,897,750        (2,969,015)

- -----------

                                                                             $
(709,546)

===========
- --------------------------------------------------------------------------------
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

NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
6. Option Activity Continued
Statement of Investments. Options written are reported as a liability in the
Statement of Assets and Liabilities. Realized 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, 2002 was as follows:
                                                                  Call
Options                        Put Options
                                           -----------------------------------
- -----------------------------------
                                           Principal (000s)/
Principal (000s)/
                                                   Number of         Amount
of         Number of        Amount of
                                                   Contracts
Premiums         Contracts         Premiums
- --------------------------------------------------------------------------------
Options outstanding as of

December 31, 2001                                         --         $
- --                --       $       --
Options written                                       63,087
414,409             2,400          667,688
Options closed or expired                            (63,087)
(414,409)           (2,400)        (667,688)

- -----------------------------------------------------------------------
Options outstanding as of December 31, 2002               --         $
- --                --       $       --

=======================================================================
- --------------------------------------------------------------------------------
7. Illiquid Securities
As of December 31, 2002, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 15% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of
December 31, 2002 was $70,786,997, which represents 9.73% of the Fund's net
assets.

OPPENHEIMER CAPITAL APPRECIATION FUND/VA
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 of
Oppenheimer Capital Appreciation Fund/VA, which is a series of Oppenheimer
Variable Account Funds, including the statement of investments, as of December
31, 2002, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for the periods indicated. 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 auditing standards generally
accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Capital Appreciation Fund/VA as of December 31, 2002, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for the periods indicated, in conformity with accounting principles generally
accepted in the United States of America.

/s/Deloitte & Touche LLP
Deloitte & Touche LLP

Denver, Colorado
January 23, 2003


OPPENHEIMER CAPITAL APPRECIATION FUND/VA

STATEMENT OF INVESTMENTS  December 31, 2002


                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
Common Stocks--93.2%
- --------------------------------------------------------------------------------
Consumer Discretionary--27.6%
- --------------------------------------------------------------------------------
Automobiles--0.7%
Harley-Davidson, Inc.                                 190,400      $  8,796,480
- --------------------------------------------------------------------------------
Winnebago Industries, Inc.                             15,200           596,296
                                                                   -------------
                                                                      9,392,776

- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure--4.0%
Brinker International, Inc. 1                         299,700         9,665,325
- --------------------------------------------------------------------------------
Carnival Corp.                                        889,100        22,183,045
- --------------------------------------------------------------------------------
Mandalay Resort Group 1                               126,700         3,878,287
- --------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd.                          954,500        15,940,150
- --------------------------------------------------------------------------------
Starwood Hotels &
Resorts Worldwide, Inc.                                83,500         1,982,290
                                                                   -------------
                                                                     53,649,097

- --------------------------------------------------------------------------------
Household Durables--0.6%
Centex Corp.                                           27,800         1,395,560
- --------------------------------------------------------------------------------
Ethan Allen Interiors, Inc.                           201,200         6,915,244
                                                                   -------------
                                                                      8,310,804

- --------------------------------------------------------------------------------
Internet & Catalog Retail--0.1%
ValueVision Media, Inc., Cl. A 1                      100,300         1,502,494
- --------------------------------------------------------------------------------
Leisure Equipment & Products--0.5%
Mattel, Inc.                                          370,000         7,085,500
- --------------------------------------------------------------------------------
Media--17.3%
AOL Time Warner, Inc. 1                             2,173,800        28,476,780
- --------------------------------------------------------------------------------
Cablevision Systems New York
Group, Cl. A 1                                        317,800         5,319,972
- --------------------------------------------------------------------------------
Clear Channel Communications, Inc. 1                  534,800        19,942,692
- --------------------------------------------------------------------------------
Comcast Corp., Cl. A Special,
Non-Vtg. 1                                          1,881,800        42,509,862
- --------------------------------------------------------------------------------
Fox Entertainment Group, Inc.,
A Shares 1                                            264,700         6,863,671
- --------------------------------------------------------------------------------
Gannett Co., Inc.                                      66,800         4,796,240
- --------------------------------------------------------------------------------
Gray Television, Inc.                                  42,200           411,450
- --------------------------------------------------------------------------------
Hispanic Broadcasting Corp. 1                         260,900         5,361,495
- --------------------------------------------------------------------------------
McGraw-Hill Cos., Inc. (The)                          394,200        23,825,448
- --------------------------------------------------------------------------------
New York Times Co., Cl. A                             190,100         8,693,273
- --------------------------------------------------------------------------------
News Corp. Ltd. (The),
Sponsored ADR                                         690,200        18,117,750
- --------------------------------------------------------------------------------
Omnicom Group, Inc.                                   219,400        14,173,240
- --------------------------------------------------------------------------------
Univision Communications, Inc., Cl. A 1               218,200         5,345,900
- --------------------------------------------------------------------------------
Viacom, Inc., Cl. B 1                               1,264,300        51,532,868
                                                                   -------------
                                                                    235,370,641


- --------------------------------------------------------------------------------
Multiline Retail--2.1%
Costco Wholesale Corp. 1                              249,900         7,012,194
- --------------------------------------------------------------------------------
Kohl's Corp. 1                                        174,100         9,740,895
- --------------------------------------------------------------------------------
Target Corp.                                          379,900        11,397,000
                                                                   -------------
                                                                     28,150,089

                                                                   Market Value
                                                      Shares         See Note 1
- --------------------------------------------------------------------------------
Specialty Retail--2.0%
AutoNation, Inc. 1                                    101,400      $  1,273,584
- --------------------------------------------------------------------------------
Best Buy Co., Inc. 1                                  243,000         5,868,450
- --------------------------------------------------------------------------------
Gap, Inc. (The)                                       601,700         9,338,384
- --------------------------------------------------------------------------------
Gymboree Corp. 1                                      182,800         2,899,208
- --------------------------------------------------------------------------------
Limited Brands, Inc.                                  128,700         1,792,791
- --------------------------------------------------------------------------------
Pier 1 Imports, Inc.                                  110,400         2,089,872
- --------------------------------------------------------------------------------
Tiffany & Co.                                         158,600         3,792,126
                                                                   -------------
                                                                     27,054,415

- --------------------------------------------------------------------------------
Textiles & Apparel--0.3%
Nike, Inc., Cl. B                                      96,400         4,286,908
- --------------------------------------------------------------------------------
Consumer Staples--6.8%
- --------------------------------------------------------------------------------
Beverages--3.8%
Anheuser-Busch Cos., Inc.                             626,100        30,303,240
- --------------------------------------------------------------------------------
PepsiCo, Inc.                                         486,000        20,518,920
                                                                   -------------
                                                                     50,822,160

- --------------------------------------------------------------------------------
Food & Drug Retailing--1.0%
Kroger Co. (The) 1                                     91,700         1,416,765
- --------------------------------------------------------------------------------
Safeway, Inc. 1                                       284,000         6,634,240
- --------------------------------------------------------------------------------
Sysco Corp.                                           180,900         5,389,011
                                                                   -------------
                                                                     13,440,016

- --------------------------------------------------------------------------------
Food Products--1.6%
Dean Foods Co. 1                                      301,600        11,189,360
- --------------------------------------------------------------------------------
General Mills, Inc.                                   237,000        11,127,150
                                                                   -------------
                                                                     22,316,510

- --------------------------------------------------------------------------------
Personal Products--0.4%
Avon Products, Inc.                                    43,900         2,364,893
- --------------------------------------------------------------------------------
Estee Lauder Cos., Inc. (The), Cl. A                  121,500         3,207,600
                                                                   -------------
                                                                      5,572,493

- --------------------------------------------------------------------------------
Energy--7.2%
- --------------------------------------------------------------------------------
Energy Equipment & Services--1.9%
BJ Services Co. 1                                     312,600        10,100,106
- --------------------------------------------------------------------------------
Halliburton Co.                                       201,200         3,764,452
- --------------------------------------------------------------------------------
Noble Corp. 1                                         139,500         4,903,425
- --------------------------------------------------------------------------------
Rowan Cos., Inc.                                      175,200         3,977,040
- --------------------------------------------------------------------------------
Varco International, Inc. 1                           152,500         2,653,500
                                                                   -------------
                                                                     25,398,523

- --------------------------------------------------------------------------------
Oil & Gas--5.3%
Amerada Hess Corp.                                    222,600        12,254,130
- --------------------------------------------------------------------------------
BP plc, ADR                                            94,100         3,825,165
- --------------------------------------------------------------------------------
Encana Corp.                                          310,440         9,585,557
- --------------------------------------------------------------------------------
Exxon Mobil Corp.                                     720,500        25,174,270
- --------------------------------------------------------------------------------
TotalFinaElf SA, Sponsored ADR                        306,400        21,907,600
                                                                   -------------
                                                                     72,746,722

STATEMENT OF INVESTMENTS  Continued

                                                                  Market Value
                                                      Shares        See Note 1
- --------------------------------------------------------------------------------
Financials--15.5%
- --------------------------------------------------------------------------------
Banks--2.5%
Bank of America Corp.                                198,200      $ 13,788,774
- --------------------------------------------------------------------------------
Bank One Corp.                                       548,600        20,051,330
                                                                  --------------
                                                                    33,840,104

- --------------------------------------------------------------------------------
Diversified Financials--10.2%
American Express Co.                                 396,800        14,026,880
- --------------------------------------------------------------------------------
Citigroup, Inc.                                      977,500        34,398,225
- --------------------------------------------------------------------------------
Countrywide Financial Corp.                          195,100        10,076,915
- --------------------------------------------------------------------------------
Fannie Mae                                           125,900         8,099,147
- --------------------------------------------------------------------------------
Freddie Mac                                          323,900        19,126,295
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The)                      106,400         7,245,840
- --------------------------------------------------------------------------------
J.P. Morgan Chase & Co.                              333,500         8,004,000
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.                            226,300         8,588,085
- --------------------------------------------------------------------------------
Morgan Stanley                                       493,700        19,708,504
- --------------------------------------------------------------------------------
Schwab (Charles) Corp.                               852,700         9,251,795
                                                                  --------------
                                                                   138,525,686

- --------------------------------------------------------------------------------
Insurance--2.3%
American International Group, Inc.                   328,350        18,995,047
- --------------------------------------------------------------------------------
Everest Re Group Ltd.                                 55,200         3,052,560
- --------------------------------------------------------------------------------
St. Paul Cos., Inc.                                  124,100         4,225,605
- --------------------------------------------------------------------------------
XL Capital Ltd., Cl. A                                70,800         5,469,300
                                                                  --------------
                                                                    31,742,512

- --------------------------------------------------------------------------------
Real Estate--0.5%
Host Marriott Corp. 1                                763,900         6,760,515
- --------------------------------------------------------------------------------
Health Care--8.5%
- --------------------------------------------------------------------------------
Biotechnology--1.8%
Amgen, Inc. 1                                        289,300        13,984,762
- --------------------------------------------------------------------------------
IDEC Pharmaceuticals Corp. 1                         162,800         5,400,076
- --------------------------------------------------------------------------------
Medimmune, Inc. 1                                     28,200           766,194
- --------------------------------------------------------------------------------
Serono SA, Sponsored ADR                             357,900         4,853,124
                                                                  --------------
                                                                    25,004,156

- --------------------------------------------------------------------------------
Health Care Equipment & Supplies--1.5%
Applera Corp./Applied
Biosystems Group                                     410,800         7,205,432
- --------------------------------------------------------------------------------
Medtronic, Inc.                                      186,800         8,518,080
- --------------------------------------------------------------------------------
St. Jude Medical, Inc. 1                              80,100         3,181,572
- --------------------------------------------------------------------------------
Steris Corp. 1                                        69,600         1,687,800
                                                                  --------------
                                                                    20,592,884

- --------------------------------------------------------------------------------
Health Care Providers & Services--2.1%
Anthem, Inc. 1                                        109,400        6,881,260
- --------------------------------------------------------------------------------
Apria Healthcare Group, Inc. 1                        68,100         1,514,544
- --------------------------------------------------------------------------------
Caremark Rx, Inc. 1                                  230,000         3,737,500
- --------------------------------------------------------------------------------
Covance, Inc. 1                                      310,600         7,637,654


                                                                  Market Value
                                                      Shares        See Note 1
- --------------------------------------------------------------------------------
Health Care Providers & Services Continued
Humana, Inc. 1                                       262,200      $  2,622,000
- --------------------------------------------------------------------------------
McKesson Corp.                                       133,500         3,608,505
- --------------------------------------------------------------------------------
Quest Diagnostics, Inc. 1                             50,000         2,845,000
                                                                  --------------
                                                                    28,846,463

- --------------------------------------------------------------------------------
Pharmaceuticals--3.1%
Abbott Laboratories                                  201,500         8,060,000
- --------------------------------------------------------------------------------
Perrigo Co. 1                                        394,100         4,788,315
- --------------------------------------------------------------------------------
Pfizer, Inc.                                         877,900        26,837,403
- --------------------------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd., Sponsored ADR                                   54,300         2,096,523
                                                                  --------------
                                                                    41,782,241

- --------------------------------------------------------------------------------
Industrials--5.3%
- --------------------------------------------------------------------------------
Aerospace & Defense--1.7%
Boeing Co.                                            90,300         2,978,997
- --------------------------------------------------------------------------------
Honeywell International, Inc.                        465,100        11,162,400
- --------------------------------------------------------------------------------
Northrop Grumman Corp.                                96,200         9,331,400
                                                                  --------------
                                                                    23,472,797

- --------------------------------------------------------------------------------
Commercial Services & Supplies--2.0%
Automatic Data Processing, Inc.                      158,800         6,232,900
- --------------------------------------------------------------------------------
First Data Corp.                                     149,200         5,283,172
- --------------------------------------------------------------------------------
Waste Management, Inc.                               640,900        14,689,428
                                                                  --------------
                                                                    26,205,500

- --------------------------------------------------------------------------------
Industrial Conglomerates--0.4%
Tyco International Ltd.                              316,400         5,404,112
- --------------------------------------------------------------------------------
Machinery--0.9%
Dover Corp.                                          105,900         3,088,044
- --------------------------------------------------------------------------------
Ingersoll-Rand Co., Cl. A                            220,500         9,494,730
                                                                  --------------
                                                                    12,582,774

- --------------------------------------------------------------------------------
Road & Rail--0.3%
Canadian Pacific Ltd.                                202,511         3,993,048
- --------------------------------------------------------------------------------
Information Technology--16.3%
- --------------------------------------------------------------------------------
Communications Equipment--3.5%
Cisco Systems, Inc. 1                              1,061,300        13,903,030
- --------------------------------------------------------------------------------
Lucent Technologies, Inc.                          1,349,800         1,700,748
- --------------------------------------------------------------------------------
Nokia Corp., Sponsored
ADR, A Shares                                      1,717,000        26,613,500
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 1                                     142,800         5,196,492
                                                                  --------------
                                                                    47,413,770

- --------------------------------------------------------------------------------
Computers & Peripherals--0.9%
Dell Computer Corp. 1                                429,900        11,495,526
- --------------------------------------------------------------------------------
Seagate Technology International, Inc.
Escrow Shares 1,2                                    325,000                --
- --------------------------------------------------------------------------------
                                                                    11,495,526

                         Market Value

Shares             See Note 1
- ---------------------------------------------------------------------------------------------------

Electronic Equipment & Instruments--1.4%
Flextronics International Ltd. 1
604,200        $     4,948,398
- ---------------------------------------------------------------------------------------------------
Millipore Corp.
90,200              3,066,800
- ---------------------------------------------------------------------------------------------------
Sanmina-SCI Corp. 1
1,171,900              5,261,831
- ---------------------------------------------------------------------------------------------------
Vishay Intertechnology, Inc. 1
558,300              6,241,794

- ----------------

19,518,823

- ---------------------------------------------------------------------------------------------------
Internet Software & Services--0.5%
Overture Services, Inc. 1
130,200              3,555,762
- ---------------------------------------------------------------------------------------------------
WebEx Communications, Inc. 1
181,500              2,722,500

                          ----------------

6,278,262

- ---------------------------------------------------------------------------------------------------
Semiconductor Equipment & Products--3.7%
Analog Devices, Inc. 1
148,200              3,537,534
- ---------------------------------------------------------------------------------------------------
Cypress Semiconductor Corp. 1
618,900              3,540,108
- ---------------------------------------------------------------------------------------------------
Intel Corp.
1,081,700             16,842,069
- ---------------------------------------------------------------------------------------------------
International Rectifier Corp. 1
288,000              5,316,480
- ---------------------------------------------------------------------------------------------------
Micron Technology, Inc. 1
563,100              5,484,594
- ---------------------------------------------------------------------------------------------------
National Semiconductor Corp. 1
334,600              5,022,346
- ---------------------------------------------------------------------------------------------------
RF Micro Devices, Inc. 1
567,600              4,160,508
- ---------------------------------------------------------------------------------------------------
Texas Instruments, Inc.
318,100              4,774,681
- ---------------------------------------------------------------------------------------------------
Vitesse Semiconductor Corp. 1
705,300              1,541,081

          ----------------

50,219,401

- ---------------------------------------------------------------------------------------------------
Software--6.3%
Cadence Design Systems, Inc. 1
496,700              5,856,093
- ---------------------------------------------------------------------------------------------------
Electronic Arts, Inc. 1
248,000             12,342,960
- ---------------------------------------------------------------------------------------------------
Microsoft Corp. 1
1,090,800             56,394,360
- ---------------------------------------------------------------------------------------------------
Peoplesoft, Inc. 1
330,900              6,055,470
- ---------------------------------------------------------------------------------------------------
Reynolds & Reynolds Co., Cl. A
30,800                784,476
- ---------------------------------------------------------------------------------------------------
SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung),
Sponsored ADR
223,700              4,362,150

- ----------------

                                                                    85,795,509

- ---------------------------------------------------------------------------------------------------
Materials--3.0%
- ---------------------------------------------------------------------------------------------------
Chemicals--2.3%
Air Products & Chemicals, Inc.
168,500              7,203,375
- ---------------------------------------------------------------------------------------------------
International Flavors &
Fragrances, Inc.
318,000             11,161,800
- ---------------------------------------------------------------------------------------------------
Praxair, Inc.
225,800             13,044,466

- ----------------

31,409,641

- ---------------------------------------------------------------------------------------------------
Paper & Forest Products--0.7%
International Paper Co.
259,400              9,071,218
- ---------------------------------------------------------------------------------------------------
Telecommunication Services--1.4%
- ---------------------------------------------------------------------------------------------------
Diversified Telecommunication Services--0.8%
Sprint Corp. (Fon Group)
349,100              5,054,968


                         Market Value

Shares             See Note 1
- ---------------------------------------------------------------------------------------------------
Diversified Telecommunication Services Continued
Telefonos de Mexico SA,
Sponsored ADR
169,100        $     5,407,818

- ----------------


10,462,786

- ---------------------------------------------------------------------------------------------------
Wireless Telecommunication Services--0.6%
Sprint Corp. (PCS Group) 1
103,900                455,082
- ---------------------------------------------------------------------------------------------------
Vodafone Group plc,
Sponsored ADR
421,800              7,643,016

- ----------------

8,098,098

- ---------------------------------------------------------------------------------------------------
Utilities--1.6%
- ---------------------------------------------------------------------------------------------------
Electric Utilities--0.7%
Duke Energy Corp.
500,700              9,783,678
- ---------------------------------------------------------------------------------------------------
Gas Utilities--0.8%
El Paso Corp.
649,700              4,521,912
- ---------------------------------------------------------------------------------------------------
Kinder Morgan Management LLC
194,086              6,131,177


- ----------------

10,653,089

- ---------------------------------------------------------------------------------------------------
Water Utilities--0.1%
Philadelphia Suburban Corp.
57,000              1,174,200

- ----------------
Total Common Stocks
(Cost
$1,690,701,310)
1,265,225,941

- ---------------------------------------------------------------------------------------------------
Other Securities--0.5%
Nasdaq-100 Unit Investment Trust 1
(Cost $6,838,977)
242,900              5,919,473

                                                                  Principal
                                                                     Amount
- ---------------------------------------------------------------------------------------------------
Joint Repurchase Agreements--6.4%
Undivided interest of 12.52% in joint repurchase
agreement (Market Value $694,610,000) with Banc One
Capital Markets, Inc., 1.07%, dated 12/31/02, to be
repurchased at $86,993,171 on 1/2/03, collateralized by
U.S. Treasury Nts., 3%--6.50%, 2/15/03--2/15/12, with
a value of $311,989,144 and U.S. Treasury Bonds,
1.75%--9.375%, 4/30/04--2/15/23, with a value of
$397,082,690
(Cost $86,988,000)                                          $
86,988,000             86,988,000

- ---------------------------------------------------------------------------------------------------
Total Investments, at Value
(Cost $1,784,528,287)
100.1%         1,358,133,414
- ---------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets
(0.1)            (1,104,486)

- ---------------------------------------
Net Assets
100.0%       $ 1,357,028,928

=======================================
Footnotes to Statement of Investments
1. Non-income producing security.
2. Identifies issues considered to be illiquid--See Note 6 of Notes to Financial
Statements.

See accompanying Notes to Financial Statements.

STATEMENT OF ASSETS AND LIABILITIES  December 31, 2002

- ---------------------------------------------------------------------------------------------------------------


Assets
Investments, at value (cost $1,784,528,287)--see accompanying
statement                      $   1,358,133,414
- ---------------------------------------------------------------------------------------------------------------
Cash
                                  165,469
- ---------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold
                             1,596,626
Interest and
dividends
964,568
Other
11,716

- -----------------
Total
assets
1,360,871,793

- ---------------------------------------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Investments
purchased
2,635,889
Shares of beneficial interest
redeemed                                                               1,170,637
Shareholder
reports
29,652
Distribution and service plan fees
                                                       3,369
Trustees'
compensation
1,250
Other
2,068

- -----------------
Total liabilities
                                                                    3,842,865

- ---------------------------------------------------------------------------------------------------------------
Net Assets
                               $1,357,028,928

=================

- ---------------------------------------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of beneficial
interest                                                   $          50,973
- ---------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
1,997,528,806
- ---------------------------------------------------------------------------------------------------------------
Undistributed net investment
income
5,696,906
- ---------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions                    (219,852,605)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and  translation of assets and
liabilities
 denominated in foreign
currencies
(426,395,152)

- -----------------
Net Assets
                                                              $1,357,028,928

=================

- ---------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share
Non-Service shares:
Net asset value, redemption price per share and offering price per share (based
on
net assets of $1,338,768,732 and 50,284,703 shares of beneficial interest
outstanding)                  $26.62
- ---------------------------------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share (based
on
net assets of $18,260,196 and 688,346 shares of beneficial interest
outstanding)                        $26.53

See accompanying Notes to Financial Statements.


STATEMENT OF OPERATIONS  For the Year Ended December 31, 2002


Investment Income
Dividends (net of foreign withholding taxes of
$231,037)                                   $    14,548,436
- -----------------------------------------------------------------------------------------------------------
Interest
1,804,698
- -----------------------------------------------------------------------------------------------------------
Other

160,628

- ----------------
Total investment income
                                                                     16,513,762

- -----------------------------------------------------------------------------------------------------------
Expenses
Management fees
                                      10,670,415
- -----------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Service
shares                                                   9,320
- -----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service
shares
       10,561
Service
shares
562
- -----------------------------------------------------------------------------------------------------------
Trustees' compensation
                                                                         29,369
- -----------------------------------------------------------------------------------------------------------
Custodian fees and expenses
                                22,763
- -----------------------------------------------------------------------------------------------------------
Other
38,193


- ----------------
Total
expenses
10,781,183
Less reduction to custodian expenses
                                                           (474)
Less voluntary waiver of transfer and shareholder servicing agent fees--Service
shares                (385)

        ----------------

Net
expenses
10,780,324

- -----------------------------------------------------------------------------------------------------------
Net Investment
Income
5,733,438

- -----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized loss on:
Investments
(179,570,523)
Foreign currency
transactions
(33,436)


- ----------------
Net realized
loss
(179,603,959)
- -----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments
(369,840,203)
Translation of assets and liabilities denominated in foreign
currencies                            123,538

- ----------------
Net
change
            (369,716,665)

- ----------------
Net realized and unrealized
loss                                                              (549,320,624)


- -----------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from
Operations                                         $(543,587,186)

                                       ================

See accompanying Notes to Financial Statements.


STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December
31,
2002            2001
- -------------------------------------------------------------------------------------------------------------------
Operations

Net investment
income                                                               $
5,733,438  $   10,207,039
- -------------------------------------------------------------------------------------------------------------------
Net realized
loss
(179,603,959)    (37,893,430)
- -------------------------------------------------------------------------------------------------------------------
Net change in unrealized
depreciation                                                 (369,716,665)
(256,855,458)

- -------------------------------
Net decrease in net assets resulting from
operations                                  (543,587,186)   (284,541,849)

- -------------------------------------------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service
shares
(10,120,100)    (12,638,065)
Service shares
                                          (1,731)             --
- -------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Non-Service shares
                                                           --    (189,649,710)
Service
shares
- --              --

- -------------------------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest
ransactions:
Non-Service shares

(83,859,897)    366,372,108
Service
shares
19,162,943          89,253

- -------------------------------------------------------------------------------------------------------------------
Net Assets
Total
decrease
(618,405,971)   (120,368,263)
- -------------------------------------------------------------------------------------------------------------------
Beginning of
period
1,975,434,899   2,095,803,162

- -------------------------------
End of period [including undistributed net investment income of
$5,696,906 and $10,092,208,
respectively]                                           $1,357,028,928
$1,975,434,899

                                      ===============================
See accompanying Notes to Financial Statements.


FINANCIAL HIGHLIGHTS


Non-Service Shares    December 31                             2002
2001          2000          1999          1998
- ---------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period                       $ 36.58       $
46.63       $ 49.84       $ 36.67       $ 32.44
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                          .11
..18           .27           .06           .13
Net realized and unrealized gain (loss)                      (9.89)
(5.86)          .02         14.68          7.28

- ----------------------------------------------------------------
Total from investment operations                             (9.78)
(5.68)          .29         14.74          7.41
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                          (.18)
(.27)         (.06)         (.13)         (.24)
Distributions from net realized gain                            --
(4.10)        (3.44)        (1.44)        (2.94)

- ----------------------------------------------------------------
Total dividends and/or distributions to shareholders          (.18)
(4.37)        (3.50)        (1.57)        (3.18)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                              $26.62
$36.58        $46.63        $49.84        $36.67

================================================================

- ---------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                          (26.86)%
(12.58)%       (0.23)%       41.66%        24.00%

- ---------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                $1,338,769
$1,975,345    $2,095,803    $1,425,197      $768,550
- ---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                       $1,630,430
$2,000,314    $1,922,099    $1,002,835      $609,246
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                         0.35%
0.51%         0.66%         0.21%         0.50%
Expenses                                                      0.66%
0.68%         0.67%         0.70%         0.75% 3
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                         32%
45%           38%           56%           56%

1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.

FINANCIAL HIGHLIGHTS  Continued

Service Shares    December
31
2002        2001 1
- --------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of
period                                                               $
36.56       $ 31.66
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment
income
        .20            -- 2
Net realized and unrealized gain
(loss)
(10.05)         4.90

- -----------------------
Total from investment
operations
(9.85)         4.90
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income
(.18)           --
Distributions from net realized
gain
- --            --

- -----------------------
Total dividends and/or distributions to
shareholders                                                  (.18)           --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period
$26.53        $36.56

=======================

- --------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value
3
(27.09)%       15.51%

- --------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in
thousands)
$18,260           $90
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands)                                                                  $
6,263           $16
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment
income
0.26%         0.11%
Expenses
                        0.81%         0.81%
Expenses, net of reduction to custodian expenses and/or voluntary waiver of
transfer agent fees       0.81% 5       0.81%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate
32%           45%

1. For the period from September 18, 2001 (inception of offering) to December
31, 2001.
2. Less than $0.005 per share.
3. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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.
4. Annualized for periods of less than one full year.
5. Less than 0.01%.

See accompanying Notes to Financial Statements.


NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Capital Appreciation Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), an 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 Trust's
investment advisor is OppenheimerFunds, Inc. (the Manager).
   The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other
investment products. The class of shares designated as Service shares is
subject to a distribution and service plan. All classes of shares have
identical rights and voting privileges. Earnings, net assets and net asset
value per share may differ by minor amounts due to each class having its own
expenses directly attributable to that class.
   The following is a summary of significant accounting policies consistently
followed by the Fund.
- -------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. In the absence of a sale, the security is valued at the last
sale price on the prior trading day, if it is within the spread of the closing
bid and asked prices, and if not, at the closing bid price. Securities
(including restricted securities) for which quotations are not readily
available are valued primarily using dealer-supplied valuations, a portfolio
pricing service authorized by the Board of Trustees, or at their fair value.
Fair value is determined in good faith under consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint
repurchase agreement accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each agreement requires that the market value of
the collateral be sufficient to cover payments of interest and principal;
however, in the event of default by the other party to the agreement, retention
of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily
to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
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 capital loss carryforwards, if any, to shareholders.


NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
 1. Significant Accounting Policies Continued

 As of December 31, 2002, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:
                              Expiring
                              -------------------------
                              2009         $ 14,552,938
                              2010          152,282,354
                                           ------------
                              Total        $166,835,292
                                           ============

 During the fiscal year ended December 31, 2002, the Fund did not utilize any
capital loss carryforward.
   As of December 31, 2002, the Fund had approximately $39,333,000 of
post-October losses available to offset future capital gains, if any. Such
losses, if unutilized, will expire in 2011.
- -------------------------------------------------------------------------------
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 Dividends and 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 dividends and distributions made during the fiscal year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividends and distributions, the fiscal year in which amounts are distributed
may differ from the fiscal year in which the income or net 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, 2002, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $6,909. Accumulated net
realized loss on investments was decreased by the same amount. Net assets of
the Fund were unaffected by the reclassifications.

The tax character of distributions paid during the years ended December 31, 2002
and December 31, 2001 was as follows:

                                             Year Ended            Year Ended
                                      December 31, 2002     December 31, 2001
           ------------------------------------------------------------------
           Distributions paid from:
           Ordinary income                  $10,121,831          $100,017,118
           Long-term capital gain                    --           102,270,657
           Return of capital                         --                    --
                                            ---------------------------------
           Total                            $10,121,831          $202,287,775
                                            =================================

As of December 31, 2002, the components of distributable earnings on a tax basis
were as follows:

           Undistributed net investment income     $    5,696,906
           Accumulated net realized loss             (219,852,605)
           Net unrealized depreciation               (426,395,152)
                                                   ---------------
           Total                                   $ (640,550,851)
                                                   ===============

- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.

- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:

                                                  Year Ended December 31,
2002      Year Ended December 31, 2001 1
                                                     Shares
Amount           Shares            Amount
- -------------------------------------------------------------------------------------------------------------------

Non-Service shares
Sold                                              13,374,630     $
416,985,488       15,808,805    $  618,618,659
Dividends and/or distributions reinvested            282,921
10,120,100        5,299,654       202,287,775
Redeemed                                         (17,368,883)
(510,965,485)     (12,057,267)     (454,534,326)

- -------------------------------------------------------------------
Net increase (decrease)                           (3,711,332)    $
(83,859,897)       9,051,192    $  366,372,108

===================================================================


Service shares
Sold                                                 733,299     $
20,471,072            2,703    $       97,939
Dividends and/or distributions reinvested                 48
1,731               --                --
Redeemed                                             (47,465)
(1,309,860)            (239)           (8,686)

- -------------------------------------------------------------------
Net increase                                         685,882     $
19,162,943            2,464    $       89,253

===================================================================

1. For the year ended December 31, 2001, for Non-Service shares and for the
period from September 18, 2001 (inception of offering) to December 31, 2001,
for the Service shares.


- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2002, were
$498,812,980 and $570,791,424, respectively.

As of December 31, 2002, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $1,798,211,803 was composed
of:

           Gross unrealized appreciation            $  46,972,130
           Gross unrealized depreciation             (487,050,519)
                                                    --------------
           Net unrealized depreciation              $(440,078,389)
                                                    ==============

The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts,
investments in passive foreign investment companies, and forward foreign
currency exchange contracts.

- --------------------------------------------------------------------------------
4. 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.


NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates Continued
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a $19.75 per account fee.
   Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $5,000 for assets of less than $10 million and
$10,000 for assets of $10 million or more. The Fund is subject to the minimum
fee in the event that the per account fee does not equal or exceed the
applicable minimum fee.
   OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average net assets of the Fund. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc., the Distributor, for distribution-related services for the
Fund's Service shares. Under the Plan, payments are made quarterly at an annual
rate of up to 0.25% of the average annual net assets of the Service shares of
the Fund. For the year ended December 31, 2002, payments under the Service Plan
totaled $9,320.
- --------------------------------------------------------------------------------
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 as a receivable or payable and in the Statement of
Operations with the change in unrealized appreciation or depreciation.
   The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Such realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
- --------------------------------------------------------------------------------
6. Illiquid Securities
As of December 31, 2002, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 15% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of
December 31, 2002 was zero.

OPPENHEIMER GLOBAL SECURITIES FUND/VA
INDEPENDENT AUDITOR'S REPORT

- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of Oppenheimer Global Securities
Fund/VA:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Global Securities Fund/VA, which is a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2002,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for the periods indicated. 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 auditing standards generally
accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer Global Securities Fund/VA as of December 31, 2002, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America.


/s/Deloitte & Touche LLP
Deloitte & Touche LLP

Denver, Colorado
January 23, 2003


OPPENHEIMER GLOBAL SECURITIES FUND/VA
STATEMENT OF INVESTMENTS December 31, 2002

                                                                  Market Value
                                                       Shares       See Note 1
- --------------------------------------------------------------------------------
Common Stocks--97.1%
- --------------------------------------------------------------------------------
Consumer Discretionary--15.8%
- --------------------------------------------------------------------------------
Auto Components--0.2%
Valeo SA                                              116,474     $  3,654,612
- --------------------------------------------------------------------------------
Automobiles--2.6%
Porsche AG, Preferred                                  65,782       27,336,526
- --------------------------------------------------------------------------------
Volkswagen Ag                                         370,456       13,505,401
                                                                   -------------
                                                                    40,841,927

- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure--0.7%
International Game Technology 1                       151,600       11,509,472
- --------------------------------------------------------------------------------
Household Durables--2.6%
Koninklijke (Royal) Philips
Electronics NV 1                                      324,900        5,693,866
- --------------------------------------------------------------------------------
Nintendo Co. Ltd.                                      85,872        8,024,947
- --------------------------------------------------------------------------------
Sharp Corp.                                         1,645,000       15,622,440
- --------------------------------------------------------------------------------
Sony Corp.                                            287,400       12,012,337
                                                                   -------------
                                                                    41,353,590

- --------------------------------------------------------------------------------
Media--7.2%
Comcast Corp., Cl. A 1                                188,309        4,438,443
- --------------------------------------------------------------------------------
Grupo Televisa SA,
Sponsored GDR 1                                       406,299       11,347,931
- --------------------------------------------------------------------------------
JC Decaux SA 1                                        485,714        5,861,645
- --------------------------------------------------------------------------------
Pearson plc                                         1,547,670       14,314,207
- --------------------------------------------------------------------------------
Reed Elsevier plc                                   2,497,776       21,392,623
- --------------------------------------------------------------------------------
Singapore Press Holdings Ltd.                       1,744,033       18,300,029
- --------------------------------------------------------------------------------
Sirius Satellite Radio, Inc. 1                        879,500          562,880
- --------------------------------------------------------------------------------
Television Broadcasts Ltd.                          4,640,832       14,639,473
- --------------------------------------------------------------------------------
Wolters Kluwer NV                                     868,249       15,124,933
- --------------------------------------------------------------------------------
Zee Telefilms Ltd.                                  4,768,900        9,696,929
                                                                   -------------
                                                                   115,679,093

- --------------------------------------------------------------------------------
Specialty Retail--2.5%
Best Buy Co., Inc. 1                                  227,062        5,483,547
- --------------------------------------------------------------------------------
Circuit City Stores, Inc./
Circuit City Group                                  1,536,149       11,398,226
- --------------------------------------------------------------------------------
Gap, Inc. (The)                                       686,700       10,657,584
- --------------------------------------------------------------------------------
New Dixons Group plc                                3,067,440        7,160,494
- --------------------------------------------------------------------------------
RadioShack Corp. 2                                    316,900        5,938,706
                                                                   -------------
                                                                    40,638,557

- --------------------------------------------------------------------------------
Consumer Staples--10.2%
- --------------------------------------------------------------------------------
Beverages--2.7%
Companhia de Bebidas
das Americas, ADR                                     548,615        8,536,449
- --------------------------------------------------------------------------------
Diageo plc                                          1,425,700       15,492,833
- --------------------------------------------------------------------------------
Fomento Economico Mexicano
SA de CV, UBD                                       2,757,700        9,948,698
- --------------------------------------------------------------------------------

                                                                  Market Value
                                                       Shares       See Note 1
- --------------------------------------------------------------------------------
Beverages Continued
Grupo Modelo SA de CV, Series C                     3,708,000      $ 9,036,124
                                                                   -------------
                                                                    43,014,104

- --------------------------------------------------------------------------------
Food & Drug Retailing--1.0%
Boots Co. plc                                         998,080        9,415,901
- --------------------------------------------------------------------------------
Delhaize Group                                        141,552        2,632,211
- --------------------------------------------------------------------------------
Seven-Eleven Japan Co. Ltd.                           119,000        3,630,067
                                                                   -------------
                                                                    15,678,179

- --------------------------------------------------------------------------------
Food Products--1.0%
Cadbury Schweppes plc                               2,564,785       15,979,413
- --------------------------------------------------------------------------------
Household Products--3.6%
Hindustan Lever Ltd.                                4,257,900       16,139,172
- --------------------------------------------------------------------------------
Reckitt Benckiser plc                               2,177,459       42,241,170
                                                                   -------------
                                                                    58,380,342

- --------------------------------------------------------------------------------
Personal Products--1.9%
Shiseido Co. Ltd.                                     706,000        9,179,725
- --------------------------------------------------------------------------------
Wella AG, Preference, Non-Vtg                         361,397       21,617,251
                                                                   -------------
                                                                    30,796,976
- --------------------------------------------------------------------------------
Energy--5.0%
- --------------------------------------------------------------------------------
Oil & Gas--5.0%
BP plc, ADR                                           474,869       19,303,425
- --------------------------------------------------------------------------------
ChevronTexaco Corp.                                   230,572       15,328,427
- --------------------------------------------------------------------------------
Encana Corp.                                          351,017       10,838,466
- --------------------------------------------------------------------------------
Husky Energy, Inc.                                  1,630,615       16,999,765
- --------------------------------------------------------------------------------
Royal Dutch Petroleum Co.,
NY Shares                                             385,260       16,959,145
                                                                   -------------
                                                                    79,429,228

- --------------------------------------------------------------------------------
Financials--15.0%
- --------------------------------------------------------------------------------
Banks--8.3%
ABN Amro Holding NV 1                                 967,300       15,815,018
- --------------------------------------------------------------------------------
Australia & New Zealand
Banking Group Ltd.                                  2,065,743       20,181,865
- --------------------------------------------------------------------------------
Bank One Corp.                                        946,539       34,596,000
- --------------------------------------------------------------------------------
Royal Bank of Scotland
Group plc (The)                                       897,727       21,505,331
- --------------------------------------------------------------------------------
Societe Generale, Cl. A 1                             335,530       19,541,838
- --------------------------------------------------------------------------------
Wachovia Corp.                                        586,829       21,384,049
                                                                   -------------
                                                                   133,024,101

- --------------------------------------------------------------------------------
Diversified Financials--4.2%
American Express Co.                                  536,500       18,965,275
- --------------------------------------------------------------------------------
Citigroup, Inc.                                       204,866        7,209,235
- --------------------------------------------------------------------------------
Credit Saison Co. Ltd.                                646,500       11,031,958
- --------------------------------------------------------------------------------
Fannie Mae                                            238,900       15,368,437
- --------------------------------------------------------------------------------
ICICI Bank Ltd., Sponsored ADR                      1,713,750       11,139,375

                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
Diversified Financials Continued
MBNA Corp.                                             198,450     $  3,774,519
                                                                   -------------
                                                                     67,488,799

- --------------------------------------------------------------------------------
Insurance--2.5%
ACE Ltd.                                               485,571       14,246,653
- --------------------------------------------------------------------------------
Berkshire Hathaway, Inc., Cl. B 1                        7,040       17,057,920
- --------------------------------------------------------------------------------
Manulife Financial Corp.                               367,013        7,989,351
                                                                   -------------
                                                                     39,293,924

- --------------------------------------------------------------------------------
Health Care--16.1%
- --------------------------------------------------------------------------------
Biotechnology--3.3%
Affymetrix, Inc. 1                                     250,700        5,738,523
- --------------------------------------------------------------------------------
Amgen, Inc. 1                                          378,200       18,282,188
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1                                448,480       15,248,320
- --------------------------------------------------------------------------------
Human Genome Sciences, Inc. 1                          234,900        2,069,469
- --------------------------------------------------------------------------------
IDEC Pharmaceuticals Corp. 1                           200,500        6,650,585
- --------------------------------------------------------------------------------
Oxford GlycoSciences plc 1                             413,272          918,151
- --------------------------------------------------------------------------------
Qiagen NV 1                                            832,493        4,237,048
                                                                   -------------
                                                                     53,144,284

- --------------------------------------------------------------------------------
Health Care Equipment & Supplies--2.0%
Amersham plc                                           902,670        8,079,839
- --------------------------------------------------------------------------------
Applera Corp./
Applied Biosystems Group                               488,500        8,568,290
- --------------------------------------------------------------------------------
Essilor International SA                               177,140        7,296,210
- --------------------------------------------------------------------------------
Smith & Nephew plc                                   1,338,150        8,197,065
                                                                   -------------
                                                                     32,141,404

- --------------------------------------------------------------------------------
Health Care Providers & Services--2.5%
Fresenius AG, Preference                               413,671       15,823,176
- --------------------------------------------------------------------------------
Oxford Health Plans, Inc. 1                            173,000        6,305,850
- --------------------------------------------------------------------------------
Quest Diagnostics, Inc. 1                              266,400       15,158,160
- --------------------------------------------------------------------------------
Quintiles Transnational Corp. 1                        143,428        1,735,479
                                                                   -------------
                                                                     39,022,665

- --------------------------------------------------------------------------------
Pharmaceuticals--8.3%
AstraZeneca plc                                        215,025        7,684,946
- --------------------------------------------------------------------------------
Aventis SA 1                                           272,780       14,828,026
- --------------------------------------------------------------------------------
Eisai Co. Ltd.                                         430,000        9,656,611
- --------------------------------------------------------------------------------
Johnson & Johnson                                      356,180       19,130,428
- --------------------------------------------------------------------------------
Novartis AG                                            475,163       17,337,075
- --------------------------------------------------------------------------------
Pfizer, Inc.                                           525,819       16,074,287
- --------------------------------------------------------------------------------
Sanofi-Synthelabo SA                                   632,399       38,657,001
- --------------------------------------------------------------------------------
Takeda Chemical Industries Ltd.                        233,000        9,738,603
                                                                   -------------
                                                                    133,106,977

                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
Industrials--5.9%
- --------------------------------------------------------------------------------
Aerospace & Defense--3.7%
Bombardier, Inc., Cl. B                              1,573,900     $  5,300,132
- --------------------------------------------------------------------------------
Empresa Brasileira de
Aeronautica SA (Embraer), ADR                          918,334       14,601,510
- --------------------------------------------------------------------------------
Lockheed Martin Corp.                                  153,800        8,881,950
- --------------------------------------------------------------------------------
Northrop Grumman Corp.                                 133,600       12,959,200
- --------------------------------------------------------------------------------
Raytheon Co.                                           579,600       17,822,700
                                                                   -------------
                                                                     59,565,492

- --------------------------------------------------------------------------------
Commercial Services & Supplies--2.2%
Amadeus Global Travel
Distribution SA                                        821,601        3,388,400
- --------------------------------------------------------------------------------
Rentokil Initial plc                                 5,148,889       18,236,232
- --------------------------------------------------------------------------------
Societe BIC SA                                         397,229       13,693,592
                                                                   -------------
                                                                     35,318,224

- --------------------------------------------------------------------------------
Information Technology--20.4%
- --------------------------------------------------------------------------------
Communications Equipment--5.6%
JDS Uniphase Corp. 1                                 3,421,500        8,451,105
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 1                                     1,223,300       44,515,887
- --------------------------------------------------------------------------------
Scientific-Atlanta, Inc.                               960,400       11,390,344
- --------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson
AB, B Shares 1                                      35,438,900       24,810,036
                                                                   -------------
                                                                     89,167,372

- --------------------------------------------------------------------------------
Computers & Peripherals--0.6%
International Business
Machines Corp.                                          65,117        5,046,568
- --------------------------------------------------------------------------------
Toshiba Corp. 1                                      1,647,000        5,162,922
                                                                   -------------
                                                                     10,209,490

- --------------------------------------------------------------------------------
Electronic Equipment & Instruments--1.4%
Keyence Corp.                                           28,700        4,994,143
- --------------------------------------------------------------------------------
Kyocera Corp.                                          114,800        6,684,655
- --------------------------------------------------------------------------------
Tandberg ASA 1                                       1,960,500       11,319,611
                                                                   -------------
                                                                     22,998,409

- --------------------------------------------------------------------------------
It Consulting & Services--1.4%
Cap Gemini SA 1                                        135,670        3,100,864
- --------------------------------------------------------------------------------
Infosys Technologies Ltd.                              193,900       19,293,556
                                                                   -------------
                                                                     22,394,420

- --------------------------------------------------------------------------------
Semiconductor Equipment & Products--2.2%
Applied Materials, Inc. 1                              459,700        5,989,891
- --------------------------------------------------------------------------------
Broadcom Corp., Cl. A 1                                461,300        6,947,178
- --------------------------------------------------------------------------------
National Semiconductor Corp. 1                       1,090,200       16,363,902
- --------------------------------------------------------------------------------
Novellus Systems, Inc. 1                               188,300        5,287,464
                                                                   -------------
                                                                     34,588,435


STATEMENT OF INVESTMENTS Continued

Market Value

Shares             See Note 1
- ---------------------------------------------------------------------------------------------------------
Software--9.2%
Amdocs Ltd. 1
627,900          $   6,165,978
- ---------------------------------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1
4,448,970             52,453,356
- ---------------------------------------------------------------------------------------------------------
Electronic Arts, Inc. 1
251,221             12,503,269
- ---------------------------------------------------------------------------------------------------------
Microsoft Corp. 1
612,300             31,655,910
- ---------------------------------------------------------------------------------------------------------
Sybase, Inc. 1
1,125,110             15,076,474
- ---------------------------------------------------------------------------------------------------------
Symantec Corp. 1
224,900              9,110,699
- ---------------------------------------------------------------------------------------------------------
Synopsys, Inc. 1
375,643             17,335,925
- ---------------------------------------------------------------------------------------------------------
Trend Micro, Inc. 1
151,500              2,591,599

- --------------

146,893,210

- ---------------------------------------------------------------------------------------------------------
Materials--1.1%
- ---------------------------------------------------------------------------------------------------------
Chemicals--1.1%
International Flavors &
Fragrances, Inc.
523,430             18,372,393
- ---------------------------------------------------------------------------------------------------------
Telecommunication Services--6.6%
- ---------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services--1.4%
BT Group plc
3,916,160             12,294,021
- ---------------------------------------------------------------------------------------------------------
Tele Norte Leste Participacoes SA
(Telemar), Preference
1,329,455,753             10,252,582

- --------------

22,546,603

- ---------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services--5.2%
AT&T Corp.
116,420              3,039,726
- ---------------------------------------------------------------------------------------------------------
KDDI Corp.
11,898             38,600,573
- ---------------------------------------------------------------------------------------------------------
SK Telecom Co. Ltd.
43,540              8,406,610
- ---------------------------------------------------------------------------------------------------------
SK Telecom Co. Ltd., ADR
358,700              7,658,245
- ---------------------------------------------------------------------------------------------------------
Vodafone Group plc
14,313,420             26,096,396

- --------------

83,801,550

- ---------------------------------------------------------------------------------------------------------
Utilities--1.0%
- ---------------------------------------------------------------------------------------------------------
Gas Utilities--0.6%
Hong Kong & China Gas Co. Ltd.
7,912,000             10,247,128
- ---------------------------------------------------------------------------------------------------------
Multi-Utilities--0.4%
Suez SA
334,590              5,807,504

- --------------
Total Common Stocks (Cost
$1,735,631,566)                                                  1,556,087,877


Principal

Amount
- ---------------------------------------------------------------------------------------------------------
Non-Convertible Corporate Bonds and Notes--0.0%
Telewest Communications plc,
11% Sr. Disc. Debs., 10/1/073
(Cost $1,929,441)                                                 $
2,392,000                442,520



Principal           Market Value

Amount             See Note 1
- ---------------------------------------------------------------------------------------------------------
Joint Repurchase Agreements--3.2%
Undivided interest of 7.36% in joint repurchase agreement
(Market Value $694,610,000) with Banc One Capital Markets,
Inc., 1.07% 12/31/02, dated to be repurchased at $51,155,041
on 1/2/03, collateralized by U.S. Treasury Nts., 3%--6.50%,
2/15/03--2/15/12, with a value of $311,989,144 and U.S.
Treasury Bonds, 1.75%--9.375%, 4/30/04--2/15/23, with
a value of $397,082,690
(Cost $51,152,000)                                                $
51,152,000        $    51,152,000

- ---------------------------------------------------------------------------------------------------------
Total Investments, at Value
(Cost $1,788,713,007)
100.3%         1,607,682,397
- ---------------------------------------------------------------------------------------------------------
Liabilities in Excess
of Other Assets
(0.3)            (4,860,152)

- ---------------------------------------
Net Assets
100.0%       $ 1,602,822,245


Footnotes to Statement of Investments
1. Non-income producing security.
2. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of Notes to Financial Statements.
3. Issuer is in default.

Distribution of investments representing geographic diversification, as a
percentage of total investments at value, is as follows:

Geographical Diversification              Market Value          Percent
- -------------------------------------------------------------------------
United States                           $  659,156,214             41.0%
Great Britain                              248,754,565             15.4
Japan                                      136,930,581              8.5
France                                     112,441,293              7.0
Germany                                     78,282,355              4.9
The Netherlands                             57,830,010              3.6
India                                       56,269,032              3.5
Canada                                      41,127,715              2.6
Brazil                                      33,390,543              2.1
Mexico                                      30,332,753              1.9
Hong Kong                                   24,886,601              1.5
Sweden                                      24,810,036              1.5
Australia                                   20,181,865              1.3
Singapore                                   18,300,029              1.1
Switzerland                                 17,337,075              1.1
Korea, Republic of (South)                  16,064,855              1.0
Bermuda                                     14,246,653              0.9
Norway                                      11,319,611              0.7
Spain                                        3,388,399              0.2
Belgium                                      2,632,212              0.2
                                        ---------------------------------
Total                                   $1,607,682,397            100.0%
                                        =================================

See Accompanying Notes to Financial Statements.

STATEMENT OF ASSETS AND LIABILITIES December 31, 2002

- --------------------------------------------------------------------------------------------------------

Assets
Investments, at value (cost $1,788,713,007)--see accompanying
statement                  $1,607,682,397
- --------------------------------------------------------------------------------------------------------
Cash
                                                       3,064
- --------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency
contracts                                             2,649
- --------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest
sold                                                            3,610,171
Interest and
dividends
2,796,582
Investments
sold
384,114
Other
                                                 14,442

- ---------------
Total
assets
1,614,493,419

- --------------------------------------------------------------------------------------------------------
Liabilities
Unrealized depreciation on foreign currency
contracts                                         3,425,503
- --------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments
purchased
7,256,839
Shares of beneficial interest redeemed
                                                        932,674
Distribution and service plan
fees                                                               29,753
Shareholder
reports
         18,119
Trustees'
compensation
2,471
Transfer and shareholder servicing agent
fees                                                     1,877
Other
                                                                  3,938

- ---------------
Total liabilities
              11,671,174

- --------------------------------------------------------------------------------------------------------
Net
Assets
$1,602,822,245


===============

- --------------------------------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of beneficial
interest                                               $       90,567
- --------------------------------------------------------------------------------------------------------
Additional paid-in
capital
2,015,934,853
- --------------------------------------------------------------------------------------------------------
Undistributed net investment income
                      16,334,525
- --------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions             (245,306,432)
- --------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign
currencies                                              (184,231,268)

- ---------------
Net
Assets
$1,602,822,245

                                                        ===============

- --------------------------------------------------------------------------------------------------------
Net Asset Value Per Share
Non-Service shares:
Net asset value, redemption price per share and offering price per share (based
on
net assets of $1,549,992,594 and 87,567,213 shares of beneficial interest
outstanding)           $17.70
- --------------------------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share (based
on
net assets of $52,829,651 and 2,999,306 shares of beneficial interest
outstanding)               $17.61

See Accompanying Notes to Financial Statements.

STATEMENT OF OPERATIONS For the Year Ended December 31, 2002

- ------------------------------------------------------------------------------------------------
Investment Income

Dividends (net of foreign withholding taxes of $2,286,909)
$    24,982,825
- ------------------------------------------------------------------------------------------------
Interest
1,571,890
- ------------------------------------------------------------------------------------------------
Other
82,358

- ----------------
Total investment income
                                             26,637,073

- ------------------------------------------------------------------------------------------------
Expenses
Management
fees
11,712,612
- ------------------------------------------------------------------------------------------------
Custodian fees and
expenses                                                             418,643
- ------------------------------------------------------------------------------------------------
Distribution and service plan fees-Service
shares                                        78,934
- ------------------------------------------------------------------------------------------------
Trustees' compensation
                                                               48,350
- ------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent
fees                                            21,767
- ------------------------------------------------------------------------------------------------
Other
9,622

- ----------------
Total
expenses
12,289,928
Less reduction to custodian
expenses                                                     (2,504)

- ----------------
Net
expenses
12,287,424

- ------------------------------------------------------------------------------------------------
Net Investment
Income                                                                14,349,649

- ------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized loss on:
Investments
(167,487,650)
Foreign currency
transactions                                                        (5,307,838)

- ----------------
Net realized
loss
(172,795,488)
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (net of foreign capital gains tax of
$100,090)                         (369,595,492)
Translation of assets and liabilities denominated in foreign
currencies              85,933,365

- ----------------
Net
change
(283,662,127)

- ----------------
Net realized and unrealized
loss                                                   (456,457,615)

- ------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting From Operations
$  (442,107,966)

================
See Accompanying Notes to Financial Statements.


STATEMENT OF CHANGES IN NET ASSETS


Year Ended December 31,
2002                 2001
- -----------------------------------------------------------------------------------------------------
Operations
Net investment income                                          $
14,349,649      $    13,444,980
- -----------------------------------------------------------------------------------------------------
Net realized loss
(172,795,488)         (57,715,516)
- -----------------------------------------------------------------------------------------------------
Net change in unrealized depreciation
(283,662,127)        (213,948,491)

- --------------------------------------
Net decrease in net assets resulting from operations
(442,107,966)        (258,219,027)



- -----------------------------------------------------------------------------------------------------
Dividends And/or Distributions to
Shareholders
Dividends from net investment
income:
Non-Service shares
(9,494,638)         (13,806,412)
Service shares
(108,690)             (14,765)
- -----------------------------------------------------------------------------------------------------
Distributions from net realized gain:

Non-Service shares
- --         (255,967,620)
Service shares
- --             (277,910)

- -----------------------------------------------------------------------------------------------------
Beneficial Interest
Transactions
Net increase in net assets resulting
from
beneficial interest
transactions:
Non-Service shares
86,880,795          297,559,831
Service shares
41,295,581           19,680,174

- -----------------------------------------------------------------------------------------------------
Net
Assets
Total decrease
(323,534,918)        (211,045,729)
- -----------------------------------------------------------------------------------------------------
Beginning of period
1,926,357,163        2,137,402,892

- --------------------------------------
End of period [including undistributed net investment
income
of $16,334,525 and $8,817,380 respectively]                    $
1,602,822,245      $ 1,926,357,163

======================================

See Accompanying Notes to Financial Statements.


FINANCIAL HIGHLIGHTS

Non-service Shares    Year Ended December 31,                    2002
2001         2000         1999         1998
- -------------------------------------------------------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of period                       $    22.84   $
30.33   $    33.41   $    22.07  $     21.37
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                             .16
..17          .27          .14          .24
Net realized and unrealized gain (loss)                         (5.19)
(3.85)        1.82        12.21         2.64

- --------------------------------------------------------------------
Total from investment operations                                (5.03)
(3.68)        2.09        12.35         2.88
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                             (.11)
(.19)        (.09)        (.14)        (.46)
Dividends in excess of net investment income                       --
- --           --         (.13)          --
Distributions from net realized gain                               --
(3.62)       (5.08)        (.74)       (1.72)

- --------------------------------------------------------------------
Total dividends and/or distributions to shareholders             (.11)
(3.81)       (5.17)       (1.01)       (2.18)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                             $    17.70   $
22.84   $    30.33   $    33.41  $     22.07

====================================================================

- -------------------------------------------------------------------------------------------------------------------------------
Total Return, At Net Asset Value 1                             (22.13)%
(12.04)%       5.09%       58.48%       14.11%

- -------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                   $1,549,993
$1,905,890   $2,136,420   $1,762,366  $ 1,135,029
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                          $1,776,289
$1,918,335   $2,116,100   $1,251,190  $ 1,055,123
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                            0.80%
0.70%        0.83%        0.57%        1.22%
Expenses                                                         0.67%
0.70%        0.68%        0.69%        0.74% 3
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                            34%
39%          50%          64%          81%

1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


Service Shares   Year Ended December 31,
2002             2001          2000 1
- -----------------------------------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of period                            $   22.78
    $   30.30       $   32.65
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income
..12              .21             .03
Net realized and unrealized loss
(5.19)           (3.92)          (2.38)

- -------------------------------------------
Total from investment operations
(5.07)           (3.71)          (2.35)
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income
(.10)            (.19)             --
Distributions from net realized gain
- --            (3.62)             --

- -------------------------------------------
Total dividends and/or distributions to shareholders
(.10)           (3.81)             --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period                                  $
17.61        $   22.78       $   30.30

===========================================

- -----------------------------------------------------------------------------------------------------------
Total Return, At Net Asset Value 2
(22.37)%         (12.17)%         (7.20)%


- -----------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                        $
52,830        $  20,467       $     983
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                               $
34,847        $   8,502       $     325
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
3
Net investment income
0.51%            0.44%           0.60%
Expenses
0.90%            0.85%           0.83%
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
34%              39%             50%

1. For the period from July 13, 2000 (inception of offering) to December 31,
2000.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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 of less than one full year.

See Accompanying Notes to Financial Statements.

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), an 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 Trust's
investment advisor is OppenheimerFunds, Inc. (the Manager).
   The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. All classes of shares have identical rights and
voting privileges. Earnings, net assets and net asset value per share may differ
by minor amounts due to each class having its own expenses directly attributable
to that class.
   The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. In the absence of a sale, the security is valued at the last sale
price on the prior trading day, if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Trustees, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
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, 2002, securities with an
aggregate market value of $442,520, representing 0.03% 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.
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint repurchase
agreement accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities pledged as
collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal; however,
in the event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.

- --------------------------------------------------------------------------------
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 capital loss carryforwards, if any, to shareholders.

As of December 31, 2002, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:

                      Expiring
                      ------------------------------
                      2009             $  47,254,011
                      2010               147,620,574
                                       -------------
                      Total            $ 194,874,585
                                       =============

During the fiscal year ended December 31, 2002, the Fund did not utilize any
capital loss carryforward.
   As of December 31, 2002, the Fund had approximately $38,817,000 of
post-October losses available to offset future capital gains, if any. Such
losses, if unutilized, will expire in 2011. Additionally, the Fund had
approximately $3,724,000 of post-October foreign currency losses which were
deferred. If unutilized by the Fund in the following fiscal year, such losses
will expire.
- --------------------------------------------------------------------------------
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 Dividends and 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 dividends and distributions made during the fiscal year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividends and distributions, the fiscal year in which amounts are distributed
may differ from the fiscal year in which the income or net 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, 2002, amounts have been reclassified to reflect an
increase in undistributed net investment income of $2,770,824. Accumulated net
realized loss on investments was increased by the same amount. Net assets of the
Fund were unaffected by the reclassifications.

The tax character of distributions paid during the years ended December 31, 2002
and December 31, 2001 was as follows:

                                         Year Ended            Year Ended
                                  December 31, 2002     December 31, 2001
       ------------------------------------------------------------------
       Distributions paid from:
       Ordinary income                  $ 9,603,328         $  81,846,743
       Long-term capital gain                    --           188,219,964
       Return of capital                         --                    --
                                        ---------------------------------
       Total                            $ 9,603,328         $ 270,066,707
                                        =================================

As of December 31, 2002, the components of distributable earnings on a tax basis
were as follows:

       Undistributed net investment income   $    16,334,525
       Accumulated net realized loss           (245,306,432)
       Net unrealized depreciation             (184,231,268)
                                             ---------------
       Total                                 $ (413,203,175)
                                             ===============


NOTES TO FINANCIAL STATMENTS Continued
- --------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:

                                                              Year Ended
December 31, 2002          Year Ended December 31, 2001

Shares               Amount           Shares               Amount
- ---------------------------------------------------------------------------------------------------------------------------------
Non-Service Shares
Sold                                                      148,964,909     $
2,936,874,923       71,467,613     $  1,685,381,975
Dividends and/or distributions reinvested
405,580            9,494,638       11,900,045          269,774,032
Redeemed                                                 (145,263,047)
(2,859,488,766)     (70,355,513)      (1,657,596,176)

- --------------------------------------------------------------------------
Net increase                                                4,107,442     $
86,880,795       13,012,145     $    297,559,831

==========================================================================

- ---------------------------------------------------------------------------------------------------------------------------------
Service
Shares
Sold                                                        5,676,692     $
108,715,377        1,048,232     $     23,626,500
Dividends and/or distributions reinvested
4,653              108,690           12,927              292,675
Redeemed                                                   (3,580,556)
(67,528,486)        (195,068)          (4,239,001)

- --------------------------------------------------------------------------
Net increase                                                2,100,789     $
41,295,581          866,091     $     19,680,174

==========================================================================
3.PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2002, were
$762,232,713 and $590,218,454, respectively.

As of December 31, 2002, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $1,799,438,078 was composed of:

        Gross unrealized appreciation       $ 141,360,482
        Gross unrealized depreciation        (333,116,163)
                                            -------------
        Net unrealized appreciation         $(191,755,681)
                                            =============

The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts, investments
in passive foreign investment companies, and forward foreign currency exchange
contracts.

- -----------------------------------------------------------
4. 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.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a $19.75 per account fee.
   Additionally, funds offered in variable annuity separate accounts are subject
to minimum fees of $5,000 for assets of less than $10 million and $10,000 for
assets of $10 million or more. The Fund is subject to the minimum fee in the
event that the per account fee does not equal or exceed the applicable minimum
fee.
   OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average net assets of the Fund. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc., the Distributor, for distribution-related services for the
Fund's Service shares. Under the Plan, payments are made quarterly at an annual
rate of up to 0.25% of the average annual net assets of the Service shares of
the Fund. For the year ended December 31, 2002, payments under the Service Plan
totaled $78,934.

- --------------------------------------------------------------------------------
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 as a receivable or payable and in the Statement of
Operations with the change in unrealized appreciation or depreciation.
   The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Such realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.

As of December 31, 2002, the Fund had outstanding foreign currency contracts as
follows:

                                                  Expiration
Contract        Valuation as of    Unrealized      Unrealized
Contract Description                                   Dates    Amount
(000S)      December 31, 2002  Appreciation    Depreciation
OPPENHEIMER HIGH INCOME FUND/VA
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 of
Oppenheimer High Income Fund/VA, which is a series of Oppenheimer Variable
Account Funds, including the statement of investments, as of December 31, 2002,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for the periods indicated. 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 auditing standards generally
accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer High Income Fund/VA as of December 31, 2002, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America.


/s/Deloitte & Touche LLP
Deloitte & Touche LLP

Denver, Colorado
January 23, 2003


OPPENHEIMER HIGH INCOME FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2002

                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Asset-Backed Securities--0.1%
Consumer Credit Reference Index
Securities Program, Credit Card
Asset-Backed Certificates, Series 2002-B,
Cl. FX, 10.421%, 3/22/07 1
(Cost $497,606)                       $   500,000     $     519,063

- --------------------------------------------------------------------
Corporate Loans--0.0%
Telergy, Inc., Sr. Sec. Credit Facilities
Term Loan, 11.111%, 1/1/02 1,2,3
(Cost $966,644)                           986,362             4,932

- --------------------------------------------------------------------
Mortgage-Backed Obligations--2.8%
AMRESCO Commercial Mortgage
Funding I Corp., Multiclass Mtg.
Pass-Through Certificates,
Series 1997-C1, Cl. H, 7%,
6/17/29 4                                 200,000           182,563
- --------------------------------------------------------------------
Asset Securitization Corp., Commercial
Mtg. Pass-Through Certificates:
Series 1996-D2, Cl. A3,
7.499%, 2/14/29 5                       3,000,000         3,150,201
Series 1997-D4, Cl. B1,
7.525%, 4/14/29                           167,000           164,220
Series 1997-D4, Cl. B2,
7.525%, 4/14/29                           167,000           139,732
Series 1997-D4, Cl. B3,
7.525%, 4/14/29                           166,000           132,722
- --------------------------------------------------------------------
CBA Mortgage Corp., Commercial
Mtg. Pass-Through Certificates,
Series 1993-C1, Cl. F, 6.72%, 12/25/03 4  700,000           696,631
- --------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through Certificates:
Series 1997-CHL1, Cl. D, 8.114%,
4/29/39 1,5                               300,000           304,828
Series 1997-CHL1, Cl. E, 8.114%,
4/29/39 1,5                             1,500,000         1,285,782
- --------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial
Mtg. Pass-Through Certificates:
Series 1996-C1, Cl. E, 7.428%,
2/15/28 1,5                               835,342           847,873
Series 1997-RR, Cl. D, 7.727%,
4/30/39 4,5                             2,150,116         1,989,529
- --------------------------------------------------------------------
Mortgage Capital Funding, Inc.,
Commercial Mtg. Pass-Through
Certificates, Series 1997-MC1, Cl. F,
7.452%, 5/20/07 4                         509,780           495,946
- --------------------------------------------------------------------
Salomon Brothers Mortgage Securities
VII, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-B, Cl. 1,
6.957%, 4/25/26 1,5                       811,029           659,468
                                                      --------------
Total Mortgage-Backed Obligations
(Cost $9,518,632)                                        10,049,495


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Corporate Bonds and Notes--80.2%
- --------------------------------------------------------------------
Consumer Discretionary--26.7%
- --------------------------------------------------------------------
Auto Components--2.4%
American Axle & Manufacturing, Inc.,
9.75% Sr. Sub. Nts., 3/1/09          $    400,000      $    431,000
- --------------------------------------------------------------------
Burke Industries, Inc., 10% Sr. Sub. Nts.,
8/15/07 2,3                               400,000            92,000
- --------------------------------------------------------------------
Collins & Aikman Floorcoverings, Inc.,
9.75% Sr. Sub. Nts., Series B, 2/15/10    800,000           804,000
- --------------------------------------------------------------------
Collins & Aikman Products Co.,
10.75% Sr. Nts., 12/31/11                 500,000           478,750
- --------------------------------------------------------------------
Dana Corp.:
9% Unsec. Nts., 8/15/11                 1,180,000         1,144,600
10.125% Nts., 3/15/10                     500,000           508,750
- --------------------------------------------------------------------
Dura Operating Corp.:
8.625% Sr. Nts., Series B, 4/15/12      1,000,000         1,010,000
9% Sr. Sub. Nts., Series B,
5/1/09 [EUR]                              300,000           292,782
9% Sr. Unsec. Sub. Nts., Series D, 5/1/09 400,000           366,000
- --------------------------------------------------------------------
Exide Corp., 10% Sr. Unsec. Nts.,
4/15/05 1,2,3                             600,000            54,000
- --------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The),
8.125% Unsub. Nts., 3/15/03               200,000           200,121
- --------------------------------------------------------------------
Lear Corp., 8.11% Sr. Unsec. Nts.,
Series B, 5/15/09                       1,400,000         1,487,500
- --------------------------------------------------------------------
Metaldyne Corp., 11% Sr. Sub. Nts.,
6/15/12                                   750,000           618,750
- --------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts.,
5/1/12                                  1,100,000         1,056,000
                                                      --------------
                                                          8,544,253

- --------------------------------------------------------------------
Automobiles--0.9%
Ford Motor Credit Co.:
7.25% Nts., 10/25/11                    2,360,000         2,296,816
7.375% Unsec. Nts., 2/1/11              1,000,000           973,841
                                                      --------------
                                                          3,270,657

- --------------------------------------------------------------------
Hotels, Restaurants & Leisure--7.0%
Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts.,
3/15/08 1                                 940,000           286,700
- --------------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec. Sub. Nts.,
8/15/11                                   450,000           463,500
- --------------------------------------------------------------------
Boca Resorts, Inc., 9.875% Sr. Sub. Nts.,
4/15/09                                   800,000           836,000
- --------------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr. Sub. Nts.,
4/15/12                                   800,000           836,000
- --------------------------------------------------------------------
Buffets, Inc., 11.25% Sr. Sub. Nts.,
7/15/10 4                                 200,000           190,000
- --------------------------------------------------------------------
Capital Gaming International, Inc., 11.50%
Promissory Nts., 8/1/1995 1,2,3             9,500                --

STATEMENT OF INVESTMENTS  Continued

                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Hotels, Restaurants & Leisure Continued
Coast Hotels & Casinos, Inc., 9.50%
Sr. Unsec. Sub. Nts., 4/1/09         $  1,100,000      $  1,182,500
- --------------------------------------------------------------------
Family Restaurants, Inc., 10.875%
Sr. Sub. Disc. Nts., 2/1/04 1,2,3         100,000             1,000
- --------------------------------------------------------------------
Hilton Hotels Corp.:
7.625% Nts., 5/15/08                      700,000           716,981
7.625% Nts., 12/1/12                      500,000           505,796
- --------------------------------------------------------------------
Hollywood Casino Corp.,
11.25% Sr. Sec. Nts., 5/1/07 1            500,000           542,500
- --------------------------------------------------------------------
Hollywood Park, Inc., 9.25% Sr.
Unsec. Sub. Nts., Series B, 2/15/07       500,000           445,000
- --------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08  900,000           922,500
- --------------------------------------------------------------------
Isle of Capri Casinos, Inc., 9% Sr.
Sub. Nts., 3/15/12                      1,000,000         1,045,000
- --------------------------------------------------------------------
John Q. Hammons Hotels, Inc.,
8.875% Sr. Nts., Series B, 5/15/12        900,000           909,000
- --------------------------------------------------------------------
Jupiters Ltd., 8.50% Sr. Unsec. Nts.,
3/1/06                                  1,000,000         1,015,000
- --------------------------------------------------------------------
Mandalay Resort Group, 10.25% Sr.
Unsec. Sub. Nts., Series B, 8/1/07        800,000           882,000
- --------------------------------------------------------------------
MGM Mirage, Inc., 8.375% Sr. Unsec.
Sub. Nts., 2/1/11 6                     1,700,000         1,840,250
- --------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
8% Sr. Sub. Nts., 4/1/12                  700,000           733,250
8.375% Sr. Sub. Nts., 7/1/11            1,200,000         1,267,500
8.75% Sr. Unsec. Sub. Nts., 1/1/09      1,500,000         1,582,500
- --------------------------------------------------------------------
Park Place Entertainment Corp.,
7.875% Sr. Sub. Nts., 3/15/10           1,500,000         1,533,750
- --------------------------------------------------------------------
Penn National Gaming, Inc.,
8.875% Sr. Sub. Nts., 3/15/10             600,000           618,000
- --------------------------------------------------------------------
Premier Parks, Inc., 0%/10% Sr.
Disc. Nts., 4/1/08 7                    1,200,000         1,167,000
- --------------------------------------------------------------------
Prime Hospitality Corp., 8.375% Sr.
Sub. Nts., 5/1/12                         400,000           390,000
- --------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 8.75%
Sr. Unsub. Nts., 2/2/11                   900,000           841,500
- --------------------------------------------------------------------
Six Flags, Inc., 8.875% Sr. Nts., 2/1/10  400,000           378,000
- --------------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc., 7.875% Nts., 5/1/12 4  1,500,000         1,492,500
- --------------------------------------------------------------------
Sun International Hotels Ltd., 8.875%
Sr. Unsec. Sub. Nts., 8/15/11           1,000,000         1,025,000
- --------------------------------------------------------------------
Vail Resorts, Inc., 8.75% Sr. Unsec. Sub.
Nts., 5/15/09                             700,000           721,000
- --------------------------------------------------------------------
Venetian Casino Resort LLC/Las Vegas
Sands, Inc., 11% Bonds, 6/15/10 4         550,000           577,500
- --------------------------------------------------------------------
Yum! Brands, Inc., 7.70% Sr. Nts.,
7/1/12                                    600,000           627,000
                                                      --------------
                                                         25,574,227


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Household Durables--2.3%
Beazer Homes USA, Inc., 8.375% Sr.
Nts., 4/15/12                          $  500,000       $   517,500
- --------------------------------------------------------------------
D.R. Horton, Inc.:
7.875% Sr. Nts., 8/15/11                  200,000           196,000
9.75% Sr. Sub. Nts., 9/15/10              300,000           309,000
- --------------------------------------------------------------------
Del Webb Corp., 10.25% Sr. Unsec.
Sub. Debs., 2/15/10                       600,000           657,000
- --------------------------------------------------------------------
Interface, Inc., 10.375% Sr. Nts., 2/1/10 500,000           487,500
- --------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.,
8.875% Sr. Sub. Nts., 4/1/12            1,000,000           960,000
- --------------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08            150,000           156,000
9.50% Sr. Unsec. Sub. Nts., 2/15/11       350,000           372,750
- --------------------------------------------------------------------
Meritage Corp., 9.75% Sr. Unsec. Nts.,
6/1/11                                    500,000           525,000
- --------------------------------------------------------------------
Salton, Inc., 10.75% Sr. Unsec. Sub. Nts.,
12/15/05                                  800,000           781,000
- --------------------------------------------------------------------
Standard Pacific Corp., 9.25% Sr. Sub.
Nts., 4/15/12                             700,000           679,000
- --------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11  500,000           505,000
- --------------------------------------------------------------------
WCI Communities, Inc.:
9.125% Sr. Sub. Nts., 5/1/12              800,000           724,000
10.625% Sr. Unsec. Sub. Nts., 2/15/11     600,000           582,000
- --------------------------------------------------------------------
Williams Scotsman, Inc., 9.875% Sr.
Unsec. Nts., 6/1/07                     1,000,000           930,000
                                                      --------------
                                                          8,381,750

- --------------------------------------------------------------------
Internet & Catalog Retail--0.4%
Amazon.com, Inc., 0%/10% Sr. Unsec.
Disc. Nts., 5/1/08 7                    1,300,000         1,306,500
- --------------------------------------------------------------------
Media--10.1%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 2          360,000           135,000
8.125% Sr. Nts., Series B, 7/15/03 2    1,000,000           375,000
8.375% Sr. Nts., Series B, 2/1/08 2     1,000,000           375,000
10.25% Sr. Unsec. Nts., 11/1/06 2         200,000            76,000
- --------------------------------------------------------------------
Allbritton Communications Co.,
7.75% Sr. Sub Nts., 12/15/12 4          1,500,000         1,509,375
- --------------------------------------------------------------------
AMC Entertainment, Inc., 9.50%
Sr. Unsec. Sub. Nts., 2/1/11            1,200,000         1,188,000
- --------------------------------------------------------------------
AOL Time Warner, Inc., 6.875% Nts.,
5/1/12                                    850,000           899,548
- --------------------------------------------------------------------
Block Communications, Inc., 9.25%
Sr. Sub. Nts., 4/15/09                    600,000           622,500
- --------------------------------------------------------------------
British Sky Broadcasting Group plc:
6.875% Nts., 2/23/09                      800,000           819,224
8.20% Sr. Unsec. Nts., 7/15/09            800,000           865,322
- --------------------------------------------------------------------
Carmike Cinemas, Inc., 10.375% Gtd.
Sr. Sub. Nts., Series B, 2/1/09         1,250,000         1,139,062


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Media Continued
Chancellor Media Corp.:
8.125% Sr. Sub. Nts., Series B,
12/15/07                              $   300,000       $   313,875
8.75% Sr. Unsec. Sub. Nts.,
Series B, 6/15/07 1,6                     400,000           419,500
- --------------------------------------------------------------------
Charter Communications
Holdings LLC/Charter
Communications Holdings Capital Corp.:
0%/9.92% Sr. Unsec. Disc. Nts.,
4/1/11 7                                  600,000           213,000
0%/11.75% Sr. Unsec. Sub. Disc. Nts.,
5/15/11 7                               1,500,000           382,500
8.625% Sr. Unsec. Nts., 4/1/09          1,200,000           540,000
10% Sr. Nts., 4/1/09                      500,000           225,000
11.125% Sr. Unsec. Nts., 1/15/11          600,000           274,500
- --------------------------------------------------------------------
Cinemark USA, Inc., 9.625% Sr. Sub.
Nts., Series B, 8/1/08                    250,000           251,250
- --------------------------------------------------------------------
Classic Cable, Inc., 10.50% Sr. Sub. Nts.,
3/1/10 1,2,3                            1,000,000           125,000
- --------------------------------------------------------------------
Comcast Cable Communications, Inc.,
6.75% Sr. Unsub. Nts., 1/30/11          1,100,000         1,146,665
- --------------------------------------------------------------------
Corus Entertainment, Inc., 8.75% Sr.
Sub. Nts., 3/1/12                         800,000           851,000
- --------------------------------------------------------------------
Cox Communications, Inc.:
7.125% Nts., 10/1/12                    1,000,000         1,112,718
7.75% Sr. Nts., 11/1/10                 1,000,000         1,140,658
- --------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec.
Unsub. Nts., Series B, 4/1/11           3,100,000         2,925,625
- --------------------------------------------------------------------
Cumulus Media, Inc., 10.375% Sr.
Unsec. Sub. Nts., 7/1/08                  400,000           432,500
- --------------------------------------------------------------------
Diva Systems Corp., 0%/12.625% Sr.
Disc. Nts., Series B, 3/1/08 1,2,3,7      500,000            12,500
- --------------------------------------------------------------------
EchoStar DBS Corp.:
9.125% Sr. Nts., 1/15/09                  300,000           317,250
9.375% Sr. Unsec. Nts., 2/1/09            650,000           690,625
10.375% Sr. Unsec. Nts., 10/1/07        1,800,000         1,957,500
- --------------------------------------------------------------------
Emmis Communications Corp.,
8.125% Sr. Unsec. Sub. Nts., Series B,
3/15/09                                   800,000           832,000
- --------------------------------------------------------------------
Entravision Communications Corp.,
8.125% Sr. Sub. Nts., 3/15/09             600,000           627,000
- --------------------------------------------------------------------
Garden State Newspapers, Inc.,
8.75% Sr. Sub. Nts., 10/1/09              500,000           510,000
- --------------------------------------------------------------------
Gray Television, Inc., 9.25% Sr. Sub.
Nts., 12/15/11                            500,000           540,625
- --------------------------------------------------------------------
Hollinger International Publishing, Inc.,
9% Sr. Nts., 12/15/10 4                   600,000           608,250
- --------------------------------------------------------------------
Lamar Media Corp.:
7.25% Sr. Sub. Nts., 1/1/13 4             200,000           204,250
9.625% Sr. Unsec. Sub. Nts., 12/1/06      500,000           517,500
- --------------------------------------------------------------------
Liberty Media Corp., 7.875% Sr. Nts.,
7/15/09                                 1,750,000         1,900,822
- --------------------------------------------------------------------
Mediacom LLC/Mediacom Capital Corp.,
9.50% Sr. Unsec. Nts., 1/15/13            300,000           271,500


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Media Continued
News America Holdings, Inc.,
8.875% Sr. Debs., 4/26/23              $  625,000        $  695,196
- --------------------------------------------------------------------
PanAmSat Corp., 8.50% Sr. Nts.,
2/1/12 4                                1,200,000         1,152,000
- --------------------------------------------------------------------
R.H. Donnelley Financial Corp. I:
8.875% Sr. Nts., 12/15/10 4               700,000           752,500
10.875% Sr. Sub. Nts., 12/15/12 4       1,000,000         1,095,000
- --------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec. Sub.
Nts., Series B, 7/1/11                    300,000           322,500
- --------------------------------------------------------------------
Regal Cinemas, Inc., 9.375% Sr. Sub. Nts.,
Series B, 2/1/12                        1,500,000         1,605,000
- --------------------------------------------------------------------
Rogers Communications, Inc., 8.75%
Sr. Nts., 7/15/07 [CAD]                   500,000           301,462
- --------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Sub. Nts., 3/15/12                 900,000           942,750
8% Sr. Sub. Nts., 3/15/12 4               700,000           733,250
- --------------------------------------------------------------------
Spanish Broadcasting System, Inc.,
9.625% Sr. Unsec. Sub. Nts., 11/1/09      600,000           624,000
- --------------------------------------------------------------------
United Pan-Europe Communications NV:
0%/13.375% Sr. Unsec. Disc. Nts.,
Series B, 11/1/09 2,3,7                 1,000,000            65,000
10.875% Sr. Unsec. Nts., Series B,
8/1/09 2,3                                600,000            48,000
11.25% Sr. Nts., Series B,
11/1/09 2,3 [EUR]                         500,000            31,482
- --------------------------------------------------------------------
Vertis, Inc., 10.875% Sr. Nts.,
6/15/09 4                                 400,000           418,000
- --------------------------------------------------------------------
WRC Media, Inc./Weekly Reader
Corp./Compass Learning Corp.,
12.75% Sr. Sub. Nts., 11/15/09            600,000           591,000
                                                      --------------
                                                         36,724,784
- --------------------------------------------------------------------
Multiline Retail--0.5%
J. C. Penney Co., Inc., 7.60% Nts.,
4/1/07                                  1,000,000         1,017,500
- --------------------------------------------------------------------
Saks, Inc.:
8.25% Sr. Unsec. Nts., 11/15/08           250,000           250,000
9.875% Nts., 10/1/11                      600,000           630,000
                                                      --------------
                                                          1,897,500
- --------------------------------------------------------------------
Specialty Retail--2.4%
Asbury Automotive Group, Inc.,
9% Sr. Sub. Nts., 6/15/12                 600,000           525,000
- --------------------------------------------------------------------
AutoNation, Inc., 9% Sr. Unsec. Nts.,
8/1/08                                  1,200,000         1,218,000
- --------------------------------------------------------------------
Building Materials Corp., 8% Sr. Nts.,
12/1/08                                   300,000           241,500
- --------------------------------------------------------------------
CSK Auto, Inc., 12% Sr. Unsec. Nts.,
6/15/06                                   900,000           967,500
- --------------------------------------------------------------------
Finlay Enterprises, Inc., 9% Debs.,
5/1/08                                    900,000           796,500
- --------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375% Sr. Nts.,
5/1/08                                    600,000           567,000

STATEMENT OF INVESTMENTS  Continued
- --------------------------------------------------------------------------------

                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Specialty Retail Continued
Gap, Inc. (The): 6.90% Nts., 9/15/07   $  650,000  $        637,000
10.55% Unsub. Nts., 12/15/08              200,000           219,000
- --------------------------------------------------------------------
Hollywood Entertainment Corp.,
9.625% Sr. Sub. Nts., 3/15/11             800,000           820,000
- --------------------------------------------------------------------
Petco Animal Supplies, Inc.,
10.75% Sr. Sub. Nts., 11/1/11             750,000           829,688
- --------------------------------------------------------------------
United Auto Group, Inc., 9.625% Sr.
Sub. Nts., 3/15/12 4                      200,000           195,000
- --------------------------------------------------------------------
United Rentals (North America), Inc.:
10.75% Sr. Nts., 4/15/08 4                500,000           495,000
10.75% Sr. Unsec. Nts., 4/15/08           600,000           600,000
- --------------------------------------------------------------------
United Rentals, Inc.:
9% Sr. Unsec. Sub. Nts., Series B,
4/1/09                                    200,000           160,500
9.25% Sr. Unsec. Sub. Nts.,
Series B, 1/15/09                         400,000           329,000
                                                      --------------
                                                          8,600,688

- --------------------------------------------------------------------
Textiles & Apparel--0.7%
Galey & Lord, Inc., 9.125% Sr. Unsec.
Sub. Nts., 3/1/08 1,2,3                   700,000            73,500
- --------------------------------------------------------------------
Levi Strauss & Co.:
6.80% Nts., 11/1/03                       855,000           846,450
11.625% Sr. Unsec. Nts., 1/15/08          200,000           196,500
12.25% Sr. Nts., 12/15/12 4               600,000           591,000
- --------------------------------------------------------------------
Polymer Group, Inc., 8.75% Sr. Sub. Nts.,
3/1/08 1,2,3                            1,500,000           307,500
- --------------------------------------------------------------------
Russell Corp., 9.25% Sr. Nts., 5/1/10     600,000           645,000
                                                      --------------
                                                          2,659,950

- --------------------------------------------------------------------
Consumer Staples--4.9%
- --------------------------------------------------------------------
Beverages--0.3%
Constellation Brands, Inc.,
8.125% Sr. Sub. Nts., 1/15/12             500,000           520,000
- --------------------------------------------------------------------
Packaged Ice, Inc., 9.75% Sr. Unsec. Nts.,
Series B, 2/1/05                          800,000           629,000
                                                      --------------
                                                          1,149,000

- --------------------------------------------------------------------
Food & Drug Retailing--0.8%
Delhaize America, Inc.,
8.125% Unsub. Debs., 4/15/11            1,000,000           968,925
- --------------------------------------------------------------------
Fleming Cos., Inc., 10.125% Sr. Unsec.
Nts., 4/1/08                              700,000           605,500
- --------------------------------------------------------------------
Great Atlantic & Pacific Tea Co., Inc. (The):
7.75% Nts., 4/15/07                       200,000           145,000
9.125% Sr. Nts., 12/15/11                 400,000           294,000
- --------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub. Nts.,
10/15/07                                  325,000           293,312
- --------------------------------------------------------------------
Pathmark Stores, Inc., 8.75% Sr. Sub. Nts.,
2/1/12                                    300,000           277,500
- --------------------------------------------------------------------
Real Time Data Co., 13% Disc. Nts.,
5/31/09 1,2,3,8                           476,601            85,788


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Food & Drug Retailing Continued
Winn-Dixie Stores, Inc., 8.875% Sr. Nts.,
4/1/08                               $    300,000     $     308,250
                                                      --------------
                                                          2,978,275
- --------------------------------------------------------------------
Food Products--2.5%
American Seafood Group LLC,
10.125% Sr. Sub. Nts., 4/15/10            500,000           512,500
- --------------------------------------------------------------------
Aurora Foods, Inc., 8.75% Sr. Sub. Nts.,
Series B, 7/1/08                          500,000           245,000
- --------------------------------------------------------------------
Burns Philp Capital Pty Ltd.,
9.75% Sr. Sub. Nts., 7/15/12 4            400,000           386,000
- --------------------------------------------------------------------
Del Monte Corp.:
8.625% Sr. Sub. Nts., 12/15/12 4        1,000,000         1,025,000
9.25% Sr. Unsec. Sub. Nts., 5/15/11       100,000           104,625
- --------------------------------------------------------------------
Doane Pet Care Co., 9.75% Sr. Unsec.
Sub. Nts., 5/15/07                        490,000           387,100
- --------------------------------------------------------------------
Dole Food Co., Inc.:
6.375% Nts., 10/1/05                      400,000           425,475
7.25% Sr. Nts., 5/1/09                    900,000           872,708
- --------------------------------------------------------------------
Michael Foods, Inc., 11.75% Sr. Unsec.
Sub. Nts., 4/1/11                         400,000           450,000
- --------------------------------------------------------------------
New World Pasta Co., 9.25% Sr. Nts.,
2/15/09 1                                 200,000           110,000
- --------------------------------------------------------------------
Smithfield Foods, Inc.:
7.625% Sr. Unsec. Sub. Nts., 2/15/08      925,000           906,500
 8% Sr. Nts., Series B, 10/15/09          900,000           922,500
- --------------------------------------------------------------------
Sparkling Spring Water Group Ltd.,
11.50% Sr. Sec. Sub. Nts., 11/15/07 1     600,000           636,000
- --------------------------------------------------------------------
Swift & Co., 10.125% Sr. Nts.,
10/1/09 4                               1,000,000           950,000
- --------------------------------------------------------------------
United Biscuits Finance plc, 10.625%
Sr. Sub. Nts., 4/15/11 1 [EUR]          1,000,000         1,183,854
                                                      --------------
                                                          9,117,262

- --------------------------------------------------------------------
Household Products--1.3%
AKI Holdings Corp., 0%/13.50% Sr.
Disc. Debs., 7/1/09 7                     580,000           496,625
- --------------------------------------------------------------------
AKI, Inc., 10.50% Sr. Unsec.
Nts., 7/1/08                            1,000,000           976,250
- --------------------------------------------------------------------
Armkel LLC/Armkel Finance, Inc.,
9.50% Sr. Sub. Nts., 8/15/09              600,000           654,000
- --------------------------------------------------------------------
Holmes Products Corp., 9.875% Sr.
Unsec. Sub. Nts., Series B, 11/15/07      300,000           201,000
- --------------------------------------------------------------------
Playtex Products, Inc., 9.375% Sr. Unsec.
Sub. Nts., 6/1/11                       1,000,000         1,110,000
- --------------------------------------------------------------------
Revlon Consumer Products Corp.,
12% Sr. Sec. Nts., 12/1/05              1,200,000         1,164,000
- --------------------------------------------------------------------
Styling Technology Corp., 10.875% Sr.
Unsec. Sub. Nts., 7/1/08 1,2,3            600,000                --
                                                      --------------
                                                          4,601,875

                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Energy--5.7%
- --------------------------------------------------------------------
Energy Equipment & Services--2.1%
BRL Universal Equipment Corp.,
8.875% Sr. Sec. Nts., 2/15/08          $  750,000        $  783,750
- --------------------------------------------------------------------
Dresser, Inc., 9.375% Sr. Sub. Nts.,
4/15/11                                   400,000           404,000
- --------------------------------------------------------------------
Grant Geophysical, Inc., 9.75% Sr.
Unsec. Nts., Series B, 2/15/08 1        1,025,000           258,812
- --------------------------------------------------------------------
Grant Prideco, Inc., 9% Sr. Nts.,
12/15/09 4                                300,000           313,500
- --------------------------------------------------------------------
Hanover Equipment Trust, 8.50% Sr.
Sec. Nts., Trust 2001, Cl. A, 9/1/08 4    500,000           490,000
- --------------------------------------------------------------------
Hornbeck-Leevac Marine Services, Inc.,
10.625% Sr. Nts., 8/1/08                1,500,000         1,590,000
- --------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr. Sec.
Nts., 6/1/08                            1,600,000         1,448,000
- --------------------------------------------------------------------
Petroleum Helicopters, Inc., 9.375% Sr.
Nts., 5/1/09                              600,000           633,750
- --------------------------------------------------------------------
Universal Compression Holdings, Inc.,
0%/9.875% Sr. Disc. Nts., 2/15/08 1,7   1,700,000         1,759,500
                                                       -------------
                                                          7,681,312

- --------------------------------------------------------------------
Oil & Gas--3.6%
- --------------------------------------------------------------------
Belden & Blake Corp., 9.875% Sr. Sub.
Nts., 6/15/07                             500,000           427,500
- --------------------------------------------------------------------
Chesapeake Energy Corp.:
8.125% Sr. Unsec. Nts., 4/1/11          1,000,000         1,035,000
8.375% Sr. Unsec. Nts., 11/1/08         1,000,000         1,040,000
9% Sr. Unsec. Nts., 8/15/12 4             300,000           316,500
- --------------------------------------------------------------------
Forest Oil Corp.:
7.75% Sr. Nts., 5/1/14                  1,000,000         1,025,000
10.50% Sr. Unsec. Sub. Nts., 1/15/06      250,000           265,000
- --------------------------------------------------------------------
Frontier Oil Corp., 11.75% Sr. Nts.,
11/15/09                                  800,000           828,000
- --------------------------------------------------------------------
Newfield Exploration Co., 8.375% Sr.
Sub. Nts., 8/15/12                        600,000           641,094
- --------------------------------------------------------------------
Pioneer Natural Resources Co., 7.50%
Sr. Nts., 4/15/12                       1,000,000         1,083,476
- --------------------------------------------------------------------
Pogo Producing Co.,
8.75% Sr. Sub. Nts.,
Series B, 5/15/07 1                       600,000           629,250
- --------------------------------------------------------------------
Stone Energy Corp.:
8.25% Sr. Unsec. Sub. Nts., 12/15/11 1    800,000           836,000
8.75% Sr. Sub. Nts., 9/15/07 1            735,000           768,075
- --------------------------------------------------------------------
Teekay Shipping Corp., 8.875% Sr. Nts.,
7/15/11                                   575,000           592,969
- --------------------------------------------------------------------
Tesoro Petroleum Corp., 9.625% Sr.
Sub. Nts., 4/1/12                         800,000           524,000
- --------------------------------------------------------------------
Transcontinental Gas Pipe Line Corp.:
6.125% Nts., 1/15/05                      200,000           192,000
8.875% Nts., 7/15/12 4                    200,000           201,000
- --------------------------------------------------------------------
Westport Resources Corp.:
8.25% Sr. Sub. Nts., 11/1/11 4            800,000           844,000
8.25% Sr. Unsec. Sub. Nts., 11/1/11       600,000           633,000


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Oil & Gas Continued
XTO Energy, Inc., 7.50% Sr. Nts.,
4/15/12                              $  1,000,000      $  1,067,500
                                                       -------------
                                                         12,949,364

- --------------------------------------------------------------------
Financials--2.9%
- --------------------------------------------------------------------
Banks--0.7%
Bank Plus Corp., 12% Sr. Nts.,
7/18/07 1                                 517,000           556,421
- --------------------------------------------------------------------
Decrane Aircraft Holdings, Inc., 12% Sr.
Unsec. Sub. Nts., Series B, 9/30/08     1,750,000           710,938
- --------------------------------------------------------------------
Local Financial Corp., 11% Sr. Nts.,
9/8/04 1                                  800,000           826,000
- --------------------------------------------------------------------
Western Financial Bank, 9.625% Unsec.
Sub. Debs., 5/15/12 1                     400,000           390,000
                                                       -------------
                                                          2,483,359

- --------------------------------------------------------------------
Diversified Financials--0.6%
AmeriCredit Corp., 9.875% Sr. Nts.,
4/15/06                                   800,000           676,000
- --------------------------------------------------------------------
Berry Plastics Corp., 10.75% Sr. Sub. Nts.,
7/15/12                                   800,000           856,000
- --------------------------------------------------------------------
Finova Group, Inc. (The), 7.50% Nts.,
11/15/09                                  500,000           175,000
- --------------------------------------------------------------------
LaBranche & Co., Inc., 12% Sr. Unsec.
Sub. Nts., 3/2/07                         600,000           672,000
                                                       -------------
                                                          2,379,000

- --------------------------------------------------------------------
Real Estate--1.6%
Capstar Hotel Co., 8.75% Sr. Sub. Nts.,
8/15/07                                   200,000           135,000
- --------------------------------------------------------------------
CB Richard Ellis Services, Inc., 11.25% Sr.
Unsec. Sub. Nts., 6/15/11                 300,000           277,500
- --------------------------------------------------------------------
Corrections Corp. of America,
9.875% Sr. Nts., 5/1/09 4                 500,000           532,500
- --------------------------------------------------------------------
Felcor Lodging LP:
8.50% Sr. Nts., 6/1/11                    780,000           772,200
9.50% Sr. Unsec. Nts., 9/15/08            200,000           205,000
- --------------------------------------------------------------------
HMH Properties, Inc., 7.875% Sr. Nts.,
Series B, 8/1/08                        1,750,000         1,706,250
- --------------------------------------------------------------------
IStar Financial, Inc., 8.75% Sr. Unsec.
Nts.,  8/15/08                            250,000           266,352
- --------------------------------------------------------------------
MeriStar Hospitality Corp., 9.125% Sr.
Unsec. Nts., 1/15/11                      400,000           350,000
- --------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust,
9.75% Sr. Sec. Nts., Series B, 4/1/08 1 1,500,000         1,496,250
                                                       -------------
                                                          5,741,052

- --------------------------------------------------------------------
Health Care--5.3%
- --------------------------------------------------------------------
Health Care Equipment & Supplies--0.5%
Kinetic Concepts, Inc., 9.625% Sr. Unsec.
Sub. Nts., Series B, 11/1/07              400,000           416,000


STATEMENT OF INVESTMENTS  Continued

                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Health Care Equipment & Supplies Continued
Sybron Dental Specialties, Inc., 8.125%
Sr. Sub. Nts., 6/15/12                $   700,000       $   710,500
- --------------------------------------------------------------------
Vanguard Health Systems, Inc., 9.75%
Sr. Unsec. Sub. Nts., 8/1/11              500,000           480,000
                                                      --------------
                                                          1,606,500

- --------------------------------------------------------------------
Health Care Providers & Services--4.8%
Alliance Imaging, Inc., 10.375% Sr.
Unsec. Sub. Nts., 4/15/11               1,000,000           980,000
- --------------------------------------------------------------------
AmerisourceBergen Corp., 7.25% Sr.
Nts., 11/15/12 4                          200,000           206,000
- --------------------------------------------------------------------
Beverly Enterprises, Inc., 9.625% Sr.
Unsec. Nts., 4/15/09                    1,125,000           950,625
- --------------------------------------------------------------------
Extendicare Health Services, Inc.,
9.50% Sr. Nts., 7/1/10 4                  500,000           487,500
- --------------------------------------------------------------------
Fresenius Medical Care Capital Trust II,
7.875% Nts., 2/1/08                     1,600,000         1,580,000
- --------------------------------------------------------------------
Fresenius Medical Care Capital Trust IV,
7.875% Trust Preferred Nts., 6/15/11      100,000            97,500
- --------------------------------------------------------------------
Hanger Orthopedic Group, Inc.,
10.375% Sr. Nts., 2/15/09                 400,000           416,000
- --------------------------------------------------------------------
HCA, Inc.:
6.95% Sr. Nts., 5/1/12                  1,000,000         1,055,628
7.875% Sr. Nts., 2/1/11                   305,000           334,903
- --------------------------------------------------------------------
HCA-Healthcare Co. (The), 8.75% Sr.
Nts., 9/1/10                              400,000           461,016
- --------------------------------------------------------------------
Healthsouth Corp., 7.625% Nts., 6/1/12  1,950,000         1,618,500
- --------------------------------------------------------------------
InSight Health Services Corp., 9.875%
Sr. Sub. Nts., 11/1/11                    500,000           482,500
- --------------------------------------------------------------------
Magellan Health Services, Inc., 9.375%
Sr. Nts., 11/15/07 4                    1,000,000           795,000
- --------------------------------------------------------------------
Medquest, Inc., 11.875% Sr. Sub. Nts.,
8/15/12 4                                 800,000           784,000
- --------------------------------------------------------------------
PacifiCare Health Systems, Inc., 10.75%
Sr. Unsec. Unsub. Nts., 6/1/09            900,000           967,500
- --------------------------------------------------------------------
Rotech Healthcare, Inc., 9.50% Sr. Sub.
Nts., 4/1/12 4                            600,000           603,750
- --------------------------------------------------------------------
Select Medical Corp., 9.50% Sr. Unsec.
Sub. Nts., 6/15/09                        200,000           208,000
- --------------------------------------------------------------------
Stewart Enterprises, Inc., 10.75% Sr.
Unsec. Sub. Nts., 7/1/08                1,800,000         1,998,000
- --------------------------------------------------------------------
Tenet Healthcare Corp.:
6.375% Sr. Nts., 12/1/11                1,460,000         1,316,583
6.50% Sr. Nts., 6/1/12                    400,000           362,738
- --------------------------------------------------------------------
Unilab Corp., 12.75% Sr. Sub. Nts.,
10/1/09 1                                 250,000           292,500
- --------------------------------------------------------------------
US Oncology, Inc., 9.625% Sr. Sub.
Nts., 2/1/12                              300,000           306,000
- --------------------------------------------------------------------
Vicar Operating, Inc., 9.875% Sr. Sub.
Nts., 12/1/09                           1,000,000         1,085,000
                                                      --------------
                                                         17,389,243


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Pharmaceuticals--0.0%
aaiPharma, Inc., 11% Sr. Sub. Nts.,
4/1/10                                 $  100,000        $  100,500
- --------------------------------------------------------------------
Industrials--11.5%
- --------------------------------------------------------------------
Aerospace & Defense--1.0%
Alliant Techsystems, Inc., 8.50% Sr.
Unsec. Sub. Nts., 5/15/11                 900,000           976,500
- --------------------------------------------------------------------
American Plumbing & Mechanical, Inc.,
11.625% Sr. Sub. Nts.,
Series B, 10/15/08 1                      500,000           147,500
- --------------------------------------------------------------------
K&F Industries, Inc., 9.625% Sr. Sub.
Nts., 12/15/10 4                          500,000           511,250
- --------------------------------------------------------------------
L-3 Communications Corp., 7.625% Sr.
Sub. Nts., 6/15/12                        800,000           828,000
- --------------------------------------------------------------------
Rexnord Corp., 10.125% Sr. Sub. Nts.,
12/15/12 4                                700,000           721,000
- --------------------------------------------------------------------
TransDigm, Inc., 10.375% Sr. Sub. Nts.,
12/1/08                                   400,000           416,000
                                                      --------------
                                                          3,600,250

- --------------------------------------------------------------------
Air Freight & Couriers--0.0%
Atlas Air, Inc., 9.25% Sr. Nts., 4/15/08  500,000           106,250
- --------------------------------------------------------------------
Airlines--0.4%
America West Airlines, Inc., 10.75% Sr.
Nts., 9/1/05                            1,000,000           405,000
- --------------------------------------------------------------------
Amtran, Inc.:
9.625% Nts., 12/15/05                     800,000           336,000
10.50% Sr. Nts., 8/1/04                 1,800,000           756,000
                                                      --------------
                                                          1,497,000

- --------------------------------------------------------------------
Building Products--0.5%
Associated Materials, Inc., 9.75% Sr. Sub.
Nts., 4/15/12                             700,000           742,000
- --------------------------------------------------------------------
GSP I Corp., 10.15% First Mtg. Bonds,
6/24/10 4                                 355,902           382,529
- --------------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Unsec. Nts., Series B, 9/1/07  200,000           206,000
9.875% Sr. Unsec. Sub. Nts., 6/15/11      400,000           402,500
                                                      --------------
                                                          1,733,029

- --------------------------------------------------------------------
Commercial Services & Supplies--4.7%
Allied Waste North America, Inc.:
7.875% Sr. Unsec. Nts., Series B,
1/1/09                                    400,000           396,000
8.50% Sr. Sub. Nts., 12/1/08            1,300,000         1,313,000
8.875% Sr. Nts., Series B, 4/1/08         900,000           918,000
9.25% Sr. Nts., 9/1/12 4                2,300,000         2,369,000
10% Sr. Unsec. Sub. Nts.,
Series B, 8/1/09                          700,000           698,250
- --------------------------------------------------------------------
American Pad & Paper Co., 13% Sr. Sub.
Nts., Series B, 11/15/05 1,2,3            200,000             3,000
- --------------------------------------------------------------------
Budget Group, Inc., 9.125% Sr. Unsec.
Nts., 4/1/06 2,3                          900,000           202,500
- --------------------------------------------------------------------
Buhrmann US, Inc., 12.25% Sr. Unsec.
Sub. Nts., 11/1/09                        600,000           561,000


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Commercial Services & Supplies Continued
Coinmach Corp., 9% Sr. Nts., 2/1/10   $   800,000       $   843,000
- --------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts.,
3/1/07 1                                  625,000           650,000
- --------------------------------------------------------------------
Hydrochem Industrial Services, Inc.,
10.375% Sr. Sub. Nts., 8/1/07 1           250,000           189,063
- --------------------------------------------------------------------
Iron Mountain, Inc.:
7.75% Sr. Sub. Nts., 1/15/15              500,000           502,500
8.625% Sr. Unsec. Sub. Nts., 4/1/13     2,100,000         2,205,000
- --------------------------------------------------------------------
IT Group, Inc., 11.25% Sr. Unsec. Sub.
Nts., Series B, 4/1/09 1,2,3              550,000               715
- --------------------------------------------------------------------
Kindercare Learning Centers, Inc.,
9.50% Sr. Sub. Nts., 2/15/09              750,000           731,250
- --------------------------------------------------------------------
Mail-Well I Corp., 9.625% Sr. Nts.,
3/15/12                                   400,000           358,000
- --------------------------------------------------------------------
NDCHealth Corp., 10.50% Sr. Sub. Nts.,
12/1/12 4                                 600,000           603,000
- --------------------------------------------------------------------
Protection One, Inc./Protection One
Alarm Monitoring, Inc.,
7.375% Sr. Unsec. Nts., 8/15/05           900,000           742,500
- --------------------------------------------------------------------
Stericycle, Inc., 12.375% Sr. Unsec. Sub.
Nts., Series B, 11/15/09                  488,000           561,200
- --------------------------------------------------------------------
Synagro Technologies, Inc., 9.50% Sr.
Sub. Nts., 4/1/09                         700,000           733,250
- --------------------------------------------------------------------
Waste Management, Inc.:
6.375% Nts., 11/15/12 4                 1,000,000         1,030,926
7.375% Sr. Unsub. Nts., 8/1/10          1,300,000         1,424,463
                                                      --------------
                                                         17,035,617

- --------------------------------------------------------------------
Construction & Engineering--0.1%
Integrated Electrical Services, Inc.:
9.375% Sr. Sub. Nts., Series B, 2/1/09 1  100,000            92,500
9.375% Sr. Sub. Nts., Series C, 2/1/09 1  100,000            92,500
- --------------------------------------------------------------------
URS Corp., 11.50% Sr. Nts., 9/15/09 4     300,000           268,500
                                                      --------------
                                                            453,500

- --------------------------------------------------------------------
Electrical Equipment--0.0%
Dayton Superior Corp., 13% Sr. Unsec.
Sub. Nts., 6/15/09                        100,000            86,500
- --------------------------------------------------------------------
Industrial Conglomerates--1.5%
Great Lakes Dredge & Dock Corp.,
11.25% Sr. Unsec. Sub. Nts., 8/15/08    1,715,000         1,794,319
- --------------------------------------------------------------------
Norse CBO Ltd., 9.342% Sub. Bonds,
Series 1A, Cl. C2, 8/13/10 1            1,500,000           600,000
- --------------------------------------------------------------------
Tyco International Group SA:
6.25% Unsec. Unsub. Nts., 6/15/03         800,000           794,103
6.375% Nts., 10/15/11                     200,000           187,367
6.375% Nts., 10/15/11                   2,150,000         2,014,197
                                                      --------------
                                                          5,389,986


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Machinery--2.2%
Actuant Corp., 13% Sr. Sub. Nts.,
5/1/09                                $   378,000      $    444,150
- --------------------------------------------------------------------
AGCO Corp., 9.50% Sr. Unsec. Nts.,
5/1/08                                  1,000,000         1,085,000
- --------------------------------------------------------------------
Blount, Inc., 13% Sr. Sub. Nts., 8/1/09   500,000           313,750
- --------------------------------------------------------------------
Cummins, Inc., 9.50% Sr. Nts., 12/1/10    700,000           749,000
- --------------------------------------------------------------------
Eagle-Picher Industries, Inc., 9.375% Sr.
Unsec. Sub. Nts., 3/1/08 1                850,000           603,500
- --------------------------------------------------------------------
Manitowoc Co., Inc. (The), 10.50% Sr.
Sub. Nts., 8/1/12 4                       800,000           834,000
- --------------------------------------------------------------------
NMHG Holding Co., 10% Sr. Nts., 5/15/09   600,000           603,000
- --------------------------------------------------------------------
Roller Bearing Co. of America, Inc.,
9.625% Sr. Sub. Nts., Series B, 6/15/07   560,000           529,900
- --------------------------------------------------------------------
SPX Corp., 7.50% Sr. Nts., 1/1/13       1,600,000         1,630,000
- --------------------------------------------------------------------
Terex Corp.:
8.875% Sr. Unsec. Sub. Nts., 4/1/08       510,000           462,187
9.25% Sr. Unsec. Sub. Nts., 7/15/11       800,000           733,000
                                                      --------------
                                                          7,987,487

- --------------------------------------------------------------------
Marine--0.8%
CP Ships Ltd., 10.375% Sr. Nts.,
7/15/12                                 1,000,000         1,055,000
- --------------------------------------------------------------------
Millenium Seacarriers, Inc., Units (each
unit consists of $1,000 principal amount
of 12% first priority ship mtg. sr. sec.
nts., 7/15/05 and one warrant to purchase
five shares of common stock) 1,2,3,9      700,000           350,000
- --------------------------------------------------------------------
Navigator Gas Transport plc, 10.50%
First Priority Ship Mtg. Nts.,
6/30/07 2,4                             1,000,000           307,500
- --------------------------------------------------------------------
Pacific & Atlantic Holdings, Inc.,
10.50% Sec. Nts., 12/31/07 4              349,808           142,109
- --------------------------------------------------------------------
Sea Containers Ltd., 7.875% Sr. Nts.,
2/15/08                                 1,500,000           982,500
                                                       -------------
                                                          2,837,109

- --------------------------------------------------------------------
Road & Rail--0.3%
Kansas City Southern Railway Co. (The),
7.50% Sr. Nts., 6/15/09                   500,000           530,000
- --------------------------------------------------------------------
Stena AB, 9.625% Sr. Nts., 12/1/12 4      600,000           622,500
                                                       -------------
                                                          1,152,500

- --------------------------------------------------------------------
Information Technology--3.0%
- --------------------------------------------------------------------
Communications Equipment--0.4%
CellNet Data Systems, Inc., 14% Sr.
Unsec. Disc. Nts., 10/1/07 1,2,3        1,834,000                --
- --------------------------------------------------------------------
Motorola, Inc., 7.625% Sr. Nts.,
11/15/10                                1,000,000         1,025,559
- --------------------------------------------------------------------
Orion Network Systems, Inc., 12.50%
Sr. Disc. Nts., 1/15/07 1               1,150,000           301,875
                                                       -------------
                                                          1,327,434

STATEMENT OF INVESTMENTS  Continued

                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Computers & Peripherals--0.3%
Seagate Technology Hdd Holdings,
8% Sr. Nts., 5/15/09 4               $    900,000       $   936,000
- --------------------------------------------------------------------
Electronic Equipment & Instruments--1.4%
ChipPAC International Co. Ltd., 12.75%
Sr. Unsec. Sub. Nts., Series B, 8/1/09    500,000           527,500
- --------------------------------------------------------------------
Fisher Scientific International, Inc.:
8.125% Sr. Sub. Nts., 5/1/12              900,000           936,000
9% Sr. Unsec. Sub. Nts., 2/1/08           750,000           785,625
9% Sr. Unsec. Sub. Nts., 2/1/08 1         365,000           382,337
- --------------------------------------------------------------------
Flextronics International Ltd., 9.875%
Sr. Unsec. Sub. Nts., 7/1/10              700,000           757,750
- --------------------------------------------------------------------
Ingram Micro, Inc., 9.875% Sr. Unsec.
Sub. Nts., 8/15/08                      1,200,000         1,272,000
- --------------------------------------------------------------------
Insilco Corp., 12% Sr. Sub. Nts.,
8/15/07 2,3                             1,200,000            30,000
- --------------------------------------------------------------------
PerkinElmer, Inc., 8.875% Sr. Sub. Nts.,
1/15/13 4                                 600,000           594,000
                                                      --------------
                                                          5,285,212

- --------------------------------------------------------------------
Internet Software & Services--0.1%
Equinix, Inc., 13% Sr. Unsec. Nts.,
12/1/07 1,2                             1,000,000           165,000
- --------------------------------------------------------------------
Exodus Communications, Inc., 10.75%
Sr. Nts., 12/15/09 1,2,3 [EUR]          1,000,000            47,223
- --------------------------------------------------------------------
FirstWorld Communications, Inc.,
0%/13% Sr. Disc. Nts., 4/15/08 1,2,3,7    500,000               625
- --------------------------------------------------------------------
Globix Corp., 9.075% Sr. Nts., 4/26/08     98,360            70,819
- --------------------------------------------------------------------
PSINet, Inc.:
10.50% Sr. Unsec. Nts.,
12/1/06 1,2,3 [EUR]                     1,000,000            69,523
11% Sr. Nts., 8/1/09 1,2,3                919,280            32,175
                                                     --------------
                                                            385,365

- --------------------------------------------------------------------
IT Consulting & Services--0.0%
Comforce Operating, Inc., 12% Sr. Nts.,
Series B, 12/1/07 1                       350,000           159,250
- --------------------------------------------------------------------
Office Electronics--0.1%
ASAT Finance LLC, 12.50% Sr. Unsec.
Nts., 11/1/06                             325,000           245,375
- --------------------------------------------------------------------
Xerox Corp., 7.15% Nts., 8/1/04           200,000           194,000
                                                      --------------
                                                            439,375

- --------------------------------------------------------------------
Semiconductor Equipment & Products--0.7%
Amkor Technology, Inc.:
9.25% Sr. Unsec. Nts., 5/1/06             200,000           172,000
9.25% Sr. Unsec. Sub. Nts., 2/15/08       800,000           680,000
- --------------------------------------------------------------------
Fairchild Semiconductor Corp.:
10.375% Sr. Unsec. Nts., 10/1/07          850,000           896,750
10.50% Sr. Unsec. Sub. Nts., 2/1/09       750,000           813,750
                                                      --------------
                                                          2,562,500

- --------------------------------------------------------------------
Materials--9.5%
- --------------------------------------------------------------------
Chemicals--2.2%
Applied Extrusion Technologies, Inc.,
10.75% Sr. Nts., Series B, 7/1/11     $   450,000      $    292,500
- --------------------------------------------------------------------
ClimaChem, Inc., 10.75% Sr. Unsec. Nts.,
Series B, 12/1/07                         250,000           101,250
- --------------------------------------------------------------------
Compass Minerals Group, Inc., 10% Sr.
Sub. Nts., 8/15/11                      1,200,000         1,320,000
- --------------------------------------------------------------------
Equistar Chemicals LP, 8.75% Sr. Unsec.
Nts., 2/15/09                             600,000           525,712
- --------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc:
10.125% Sr. Unsec. Sub. Nts.,
7/1/09 [EUR]                              100,000            79,755
Zero Coupon Sr. Unsec. Disc. Nts.,
13.09%, 12/31/09 10                       400,000            92,000
- --------------------------------------------------------------------
Huntsman International LLC, 9.875% Sr.
Nts., 3/1/09                              800,000           804,000
- --------------------------------------------------------------------
ISP Chemco, Inc., 10.25% Sr. Unsec. Sub.
Nts., 7/1/11                              500,000           520,000
- --------------------------------------------------------------------
ISP Holdings, Inc., 10.625% Sr. Sec. Nts.,
12/15/09                                  300,000           262,500
- --------------------------------------------------------------------
Lyondell Chemical Co.:
9.50% Sec. Nts., 12/15/08                 600,000           561,000
9.625% Sr. Sec. Nts., Series A, 5/1/07    600,000           579,000
9.875% Sec. Nts., Series B, 5/1/07        800,000           772,000
10.875% Sr. Sub. Nts., 5/1/09             200,000           172,000
- --------------------------------------------------------------------
Noveon, Inc., 11% Sr. Unsec. Sub. Nts.,
Series B, 2/28/11                       1,200,000         1,323,000
- --------------------------------------------------------------------
OM Group, Inc., 9.25% Sr. Sub. Nts.,
12/15/11                                  100,000            54,500
- --------------------------------------------------------------------
PCI Chemicals Canada, 10% Sr. Sec.
Nts., 12/31/08                            319,909           225,536
- --------------------------------------------------------------------
Pioneer Cos., Inc., 4.90% Sr. Sec. Nts.,
12/31/06 5                                106,636            74,245
- --------------------------------------------------------------------
Sterling Chemicals, Inc.:
10% Sr. Sec. Nts., 12/19/07               383,000           248,950
11.25% Sr. Sub. Nts., 8/15/06 2,3         300,000                --
                                                      --------------
                                                          8,007,948

- --------------------------------------------------------------------
Containers & Packaging--3.8%
Ball Corp.:
6.875% Sr. Nts., 12/15/12 4               400,000           404,000
7.75% Sr. Unsec. Nts., 8/1/06 1           700,000           738,500
8.25% Sr. Unsec. Sub. Nts., 8/1/08        800,000           846,000
- --------------------------------------------------------------------
Graphic Packaging Corp., 8.625% Sub.
Nts., 2/15/12                           1,000,000         1,057,500
- --------------------------------------------------------------------
Jefferson Smurfit Corp., 8.25% Sr. Nts.,
10/1/12 4                                 800,000           820,000
- --------------------------------------------------------------------
MDP Acquisitions plc, 9.625% Sr. Nts.,
10/1/12 4                                 800,000           836,000


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Containers & Packaging Continued
Owens-Brockway Glass Container, Inc.:
8.75% Sr. Sec. Nts., 11/15/12 4        $  750,000       $   765,000
8.75% Sr. Sec. Nts., 11/15/12 4           600,000           612,000
8.875% Sr. Sec. Nts., 2/15/09           1,300,000         1,345,500
- --------------------------------------------------------------------
Packaging Corp. of America, 9.625% Sr.
Unsec. Sub. Nts., 4/1/09                  750,000           808,125
- --------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07           500,000           520,000
10.875% Sr. Sub. Nts., 4/1/08             500,000           505,000
- --------------------------------------------------------------------
Silgan Holdings, Inc., 9% Sr. Sub. Debs.,
6/1/09                                    600,000           628,500
- --------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12                   900,000           927,000
9.25% Sr. Unsec. Nts., 2/1/08           1,000,000         1,062,500
9.75% Sr. Unsec. Nts., 2/1/11           1,000,000         1,075,000
- --------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Sub. Nts.,
6/15/12 4                               1,000,000           995,000
                                                      --------------
                                                         13,945,625

- --------------------------------------------------------------------
Metals & Mining--2.3%
AK Steel Corp., 7.75% Sr. Unsec. Nts.,
6/15/12 4                                 900,000           911,250
- --------------------------------------------------------------------
California Steel Industries Corp., 8.50%
Sr. Unsec. Nts., Series B, 4/1/09         300,000           303,750
- --------------------------------------------------------------------
Century Aluminum Co., 11.75% Sr. Sec.
Nts., 4/15/08                             885,000           862,875
- --------------------------------------------------------------------
Great Lakes Carbon Corp., 7.94% Sr.
Sub. Nts., Series B, 5/15/08              847,000           605,605
- --------------------------------------------------------------------
Jorgensen (Earle M.) Co., 9.75% Sr. Sec.
Nts., 6/1/12                              800,000           818,000
- --------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp.:
10.875% Sr. Nts., Series B,
10/15/06 2,3                            1,000,000           675,000
12.75% Sr. Sub. Nts., 2/1/03 2,3        1,200,000            96,000
- --------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07    740,000           532,800
- --------------------------------------------------------------------
National Steel Corp., 9.875% First Mtg.
Bonds, Series D, 3/1/09 2,3             1,300,000           511,875
- --------------------------------------------------------------------
Oregon Steel Mills, Inc., 10% Nts.,
7/15/09 4                                 800,000           816,000
- --------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr.
Sub. Nts., Series B, 5/15/08              645,000           684,506
- --------------------------------------------------------------------
Steel Dynamics, Inc., 9.50% Sr. Nts.,
3/15/09                                   400,000           421,000
- --------------------------------------------------------------------
UCAR Finance, Inc., 10.25% Sr. Nts.,
2/15/12                                   600,000           480,000
- --------------------------------------------------------------------
United States Steel LLC, 10.75% Sr. Nts.,
8/1/08                                    600,000           594,000
                                                      --------------
                                                          8,312,661

- --------------------------------------------------------------------
Paper & Forest Products--1.2%
Abitibi-Consolidated, Inc., 8.55% Nts.,
8/1/10                                    300,000           333,525


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Paper & Forest Products Continued
Ainsworth Lumber Co. Ltd.:
12.50% Sr. Nts., 7/15/07 8            $   400,000      $    418,000
13.875% Sr. Sec. Nts., 7/15/07            550,000           591,250
- --------------------------------------------------------------------
Doman Industries Ltd., 8.75% Sr. Nts.,
3/15/04 2                               2,000,000           260,000
- --------------------------------------------------------------------
Georgia-Pacific Corp., 8.125% Sr. Unsec.
Nts., 5/15/11                           1,500,000         1,432,500
- --------------------------------------------------------------------
Louisiana-Pacific Corp., 10.875% Sr. Sub.
Nts., 11/15/08                            250,000           270,000
- --------------------------------------------------------------------
Tembec Industries, Inc., 7.75% Sr. Nts.,
3/15/12                                   700,000           682,500
- --------------------------------------------------------------------
U.S. Timberlands Co. LP, 9.625% Sr. Nts.,
11/15/07                                  300,000           183,000
                                                      --------------
                                                          4,170,775

- --------------------------------------------------------------------
Telecommunication Services--6.2%
- --------------------------------------------------------------------
Diversified Telecommunication Services--1.9%
360networks, Inc.:
13% Sr. Unsec. Nts., 5/1/08 1,2,3         400,000                40
13% Sr. Unsec. Nts., 5/1/08 1,2,3 [EUR]   500,000                52
- --------------------------------------------------------------------
COLO.com, Inc., 13.875% Sr. Nts.,
3/15/10 1,2,3                             517,087             5,171
- --------------------------------------------------------------------
Concentric Network Corp., 12.75% Sr.
Unsec. Nts., 12/15/07 1,2,3               800,000             5,000
- --------------------------------------------------------------------
Dex Media East LLC, 9.875% Sr. Nts.,
11/15/09 4                                800,000           860,000
- --------------------------------------------------------------------
Diamond Cable Communications plc,
11.75% Sr. Disc. Nts., 12/15/05 2,3       600,000            57,000
- --------------------------------------------------------------------
Diamond Holdings plc, 9.125% Sr. Nts.,
2/1/08 1                                  200,000           125,000
- --------------------------------------------------------------------
Focal Communications Corp., 11.875%
Sr. Unsec. Nts., Series B, 1/15/10 1,2    100,000             2,500
- --------------------------------------------------------------------
Intermedia Communications, Inc.,
0%/12.25% Sr. Disc. Nts.,
Series B, 3/1/09 1,2,3,7                  200,000            27,000
- --------------------------------------------------------------------
IPC Acquisition Corp., 11.50% Sr. Sub.
Nts., 12/15/09                            550,000           475,750
- --------------------------------------------------------------------
KMC Telecom Holdings, Inc.,
0%/12.50% Sr. Unsec. Disc. Nts.,
2/15/08 1,2,7                           1,700,000            25,500
- --------------------------------------------------------------------
Level 3 Communications, Inc.:
0%/10.50% Sr. Disc. Nts., 12/1/08 7       800,000           382,000
0%/12.875% Sr. Unsec. Disc. Nts.,
3/15/10 7                                 800,000           286,000
9.125% Sr. Unsec. Nts., 5/1/08          1,700,000         1,096,500
- --------------------------------------------------------------------
Metromedia Fiber Network, Inc., 10%
Sr. Unsec. Nts., Series B,
11/15/08 1,2,3                            600,000            10,500
- --------------------------------------------------------------------
NorthPoint Communications Group, Inc.,
12.875% Nts., 2/15/10 2,3                 300,000            46,500


STATEMENT OF INVESTMENTS  Continued

                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Diversified Telecommunication Services Continued
NTL Communications Corp.:
0%/9.75% Sr. Unsec. Nts., Series B,
4/15/09 2,3,7 [GBP]                     2,050,000      $    264,023
0%/11.50% Sr. Nts.,
11/15/09 2,3,7 [EUR]                      500,000            38,041
- --------------------------------------------------------------------
NTL, Inc., 0%/10.75% Sr. Unsec. Unsub.
Nts., Series B, 4/1/08 1,2,3,7 [GBP]       50,000             7,446
- --------------------------------------------------------------------
Qwest Corp., 8.875% Nts., 3/15/12 4     1,200,000         1,170,000
- --------------------------------------------------------------------
Sprint Capital Corp., 8.375% Nts.,
3/15/12                                 1,450,000         1,445,495
- --------------------------------------------------------------------
Telewest Communications plc:
0%/9.25% Sr. Disc. Nts., 4/15/09 2,7    1,000,000           145,000
0%/9.875% Sr. Disc. Nts.,
4/15/09 1,2,7 [GBP]                       500,000           124,767
11.25% Sr. Nts., 11/1/08 2                800,000           148,000
- --------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts.,
12/1/07 1,2,3                             400,000                40
- --------------------------------------------------------------------
Viatel, Inc., 11.25% Sr. Sec. Nts.,
4/15/08 1,2,3                             600,000                --
- --------------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 1,2,3          1,000,000               100
- --------------------------------------------------------------------
XO Communications, Inc.:
0%/12.25% Sr. Unsec. Disc. Nts.,
6/1/09 1,2,3,7                            500,000             3,125
9% Sr. Unsec. Nts., 3/15/08 1,2,3         800,000             5,000
9.625% Sr. Nts., 10/1/07 1,2,3            500,000             3,125
10.75% Sr. Unsec. Nts., 11/15/08 1,2,3    200,000             1,250
                                                      --------------
                                                          6,759,925

- --------------------------------------------------------------------
Wireless Telecommunication Services--4.3%
Alamosa Delaware, Inc., 12.50% Sr.
Unsec. Nts., 2/1/11                       400,000           122,000
- --------------------------------------------------------------------
American Cellular Corp., 9.50% Sr. Sub.
Nts., 10/15/09 2                        1,500,000           292,500
- --------------------------------------------------------------------
AT&T Corp.:
7.80% Sr. Nts., 11/15/11 5              1,000,000         1,095,129
8.50% Sr. Nts., 11/15/31 5                500,000           553,010
- --------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.875% Sr.
Unsec. Nts., 3/1/11                     1,300,000         1,308,832
- --------------------------------------------------------------------
Crown Castle International Corp.:
10.625% Sr. Unsec. Disc. Nts., 11/15/07   940,000           850,700
10.75% Sr. Nts., 8/1/11                   200,000           176,000
- --------------------------------------------------------------------
CTI Holdings SA, 0%/11.50% Sr.
Deferred Coupon Nts., 4/15/08 1,2,3,7   1,000,000            55,000
- --------------------------------------------------------------------
Dobson Communications Corp.,
10.875% Sr. Unsec. Nts., 7/1/10           500,000           425,000
- --------------------------------------------------------------------
IPCS, Inc., 0%/14% Sr. Unsec. Disc. Nts.,
7/15/10 7                                 350,000            15,750
- --------------------------------------------------------------------
Leap Wireless International, Inc.:
0%/14.50% Sr. Unsec. Disc. Nts.,
4/15/10 2,7                               400,000            38,000
12.50% Sr. Nts., 4/15/10 1,2              400,000            58,000


                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Wireless Telecommunication Services Continued
Microcell Telecommunications, Inc.,
0%/12% Sr. Unsec. Disc. Nts.,
6/1/09 2,7                            $   600,000        $   21,000
- --------------------------------------------------------------------
Nextel Communications, Inc.:
9.375% Sr. Unsec. Nts., 11/15/09        3,950,000         3,594,500
10.65% Sr. Disc. Nts., 9/15/07            500,000           480,000
12% Sr. Unsec. Nts., 11/1/08              250,000           247,500
- --------------------------------------------------------------------
Nextel Partners, Inc.:
0%/14% Sr. Disc. Nts., 2/1/09 7           300,000           226,500
11% Sr. Unsec. Nts., 3/15/10              100,000            85,500
12.50% Sr. Nts., 11/15/09                 900,000           814,500
- --------------------------------------------------------------------
Omnipoint Corp., 11.50% Sr. Nts.,
9/15/09 4                               1,500,000         1,597,500
- --------------------------------------------------------------------
Orbcomm Global LP (Escrow),
8/15/04 2,3                               600,000                --
- --------------------------------------------------------------------
Rural Cellular Corp.:
9.625% Sr. Sub. Nts., Series B, 5/15/08   650,000           393,250
9.75% Sr. Sub. Nts., 1/15/10              400,000           242,000
- --------------------------------------------------------------------
SBA Communications Corp., 0%/12%
Sr. Unsec. Disc. Nts., 3/1/08 7           900,000           481,500
- --------------------------------------------------------------------
TeleCorp PCS, Inc.:
0%/11.625% Sr. Unsec. Sub. Disc. Nts.,
4/15/09 7                                 490,000           464,275
10.625% Sr. Unsec. Sub. Nts., 7/15/10     358,000           386,640
- --------------------------------------------------------------------
Tritel PCS, Inc.:
0%/12.75% Sr. Unsec. Sub. Disc. Nts.,
5/15/09 7                                 224,000           209,440
10.375% Sr. Sub. Nts., 1/15/11            345,000           370,875
- --------------------------------------------------------------------
Triton PCS, Inc.:
8.75% Sr. Unsec. Sub. Nts., 11/15/11      800,000           652,000
9.375% Sr. Unsec. Sub. Nts., 2/1/11       600,000           501,000
- --------------------------------------------------------------------
US Unwired, Inc., 0%/13.375% Sr. Unsec.
Sub. Disc. Nts., Series B, 11/1/09 7      800,000            52,000
                                                      --------------
                                                         15,809,901

- --------------------------------------------------------------------
Utilities--4.5%
- --------------------------------------------------------------------
Electric Utilities--1.9%
AES Drax Holdings Ltd., 10.41% Sr. Sec.
Sub. Nts., Series B, 12/31/20             300,000           163,500
- --------------------------------------------------------------------
Caithness Coso Funding Corp., 9.05%
Sr. Sec. Nts., Series B, 12/15/09         464,074           457,113
- --------------------------------------------------------------------
Calpine Corp., 8.50% Sr. Unsec. Nts.,
2/15/11                                 1,900,000           836,000
- --------------------------------------------------------------------
CMS Energy Corp., 9.875% Sr. Unsec.
Nts., 10/15/07                          1,000,000           951,053
- --------------------------------------------------------------------
CMS Panhandle Holding Co.:
6.125% Sr. Nts., 3/15/04                1,325,000         1,316,138
7% Sr. Nts., 7/15/29                      985,000           875,744
- --------------------------------------------------------------------
Edison Mission Energy, 10% Sr. Unsec.
Nts., 8/15/08                             400,000           194,000
- --------------------------------------------------------------------
ESI Tractebel Acquisition Corp., 7.99%
Sec. Bonds, Series B, 12/30/11            982,000           886,009

                                        Principal      Market Value
                                           Amount        See Note 1
- --------------------------------------------------------------------
Electric Utilities Continued
FirstEnergy Corp., 7.375% Sr. Unsub.
Nts., Series C, 11/15/31             $  1,000,000        $  972,785
- --------------------------------------------------------------------
Mirant Americas Generation LLC,
8.30% Sr. Unsec. Nts., 5/1/11             300,000           144,000
- --------------------------------------------------------------------
Panhandle Eastern Pipe Line Co.,
8.25% Sr. Nts., Series B, 4/1/10          200,000           200,713
                                                      --------------
                                                          6,997,055

- --------------------------------------------------------------------
Gas Utilities--2.2%
AmeriGas Partners LP/AmeriGas Eagle
Finance Corp.:
8.875% Sr. Nts., 5/20/11 4                400,000           418,000
8.875% Sr. Unsec. Nts., 5/20/11         1,000,000         1,045,000
- --------------------------------------------------------------------
El Paso Energy Corp., 7.625% Nts.,
7/15/11                                   500,000           335,553
- --------------------------------------------------------------------
El Paso Energy Partners LP:
8.50% Sr. Sub. Nts., 6/1/11 4             300,000          279,750
8.50% Sr. Unsec. Sub. Nts.,
Series B, 6/1/11 1                        400,000           373,000
10.625% Sr. Sub. Nts., 12/1/12 4        1,100,000         1,130,250
- --------------------------------------------------------------------
Leviathan Gas Pipeline Partners
LP/Leviathan Finance Corp., 10.375% Sr.
Unsec. Sub. Nts., Series B, 6/1/09 1      500,000           510,000
- --------------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31                       600,000           505,601
8% Sr. Unsub. Nts., 3/1/32                900,000           794,451
- --------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50%
Bonds, 4/1/17                             750,000           627,769
- --------------------------------------------------------------------
Williams Cos., Inc. (The), 7.125% Nts.,
9/1/11                                  2,750,000         1,815,000
                                                     --------------
                                                          7,834,374

- --------------------------------------------------------------------
Multi-Utilities--0.3%
Consumers Energy Co.:
6.25% Nts., 9/15/06                       300,000           295,306
6.375% Sr. Sec. Nts., 2/1/08              450,000           436,672
7.375% Nts., 9/15/23                      350,000           339,835
                                                      --------------
                                                          1,071,813

- --------------------------------------------------------------------
Water Utilities--0.1%
National Waterworks, Inc., 10.50% Sr.
Sub. Nts., 12/1/12 4                      300,000           314,625
                                                      --------------

Total Corporate Bonds and Notes
(Cost $325,226,240)                                     291,336,117

                                                       Market Value
                                           Shares        See Note 1
- --------------------------------------------------------------------
Preferred Stocks--0.5%
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 1,8                 13,764         $     138
- --------------------------------------------------------------------
e.spire Communications, Inc., 12.75% Jr.
Redeemable, Non-Vtg. 1,8                      498                50
- --------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum.
Exchangeable, Series B, Non-Vtg.            8,000           162,000
- --------------------------------------------------------------------
Global Crossing Holdings Ltd., 10.50%
Sr. Exchangeable, Non-Vtg. 1,3,8            7,893                --
- --------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable,
Non-Vtg. 1,8                                  342                 5
- --------------------------------------------------------------------
McLeodUSA, Inc., 2.50% Cv., Series A 3      3,258            13,390
- --------------------------------------------------------------------
Nebco Evans Holdings, Inc., 11.25% Sr.
Redeemable Exchangeable, Non-Vtg. 1,8       7,274                --
- --------------------------------------------------------------------
Nextel Communications, Inc., 13% Cum.,
Series D, Non-Vtg. 8                            2               184
- --------------------------------------------------------------------
Pacific & Atlantic Holdings, Inc., 7.50%
Cum. Cv., Series A 1,3,8                   18,905            37,810
- --------------------------------------------------------------------
Paxson Communications Corp., 13.25%
Cum. Jr. Exchangeable, Non-Vtg. 8              70           365,750
- --------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum.,
Series B, Non-Vtg. 8                        1,114           281,285
- --------------------------------------------------------------------
Sovereign Real Estate Investment Trust,
12% Non-Cum., Series A 1                   10,000         1,112,500
- --------------------------------------------------------------------
XO Communications, Inc., 13.50% Sr.,
Series E, Non-Vtg. 3,8                          1                --
                                                      --------------
Total Preferred Stocks (Cost $5,577,695)                  1,973,112

- --------------------------------------------------------------------
Common Stocks--0.3%
Celcaribe SA 1                            121,950             1,219
- --------------------------------------------------------------------
Chesapeake Energy Corp.                   100,000           774,000
- --------------------------------------------------------------------
Covad Communications Group, Inc. 3         20,660            19,420
- --------------------------------------------------------------------
Geotek Communications, Inc. 1,3               226                --
- --------------------------------------------------------------------
Globix Corp. 3                             11,467            22,934
- --------------------------------------------------------------------
Gulfstream Holding, Inc. 1,3                   56                --
- --------------------------------------------------------------------
Horizon Natural Resources Co. 1,3          20,000               200
- --------------------------------------------------------------------
ICO Global Communication Holdings Ltd. 3   42,107            53,476
- --------------------------------------------------------------------
Manitowoc Co., Inc. (The)                   1,039            26,495
- --------------------------------------------------------------------
Orbital Sciences Corp. 3                    1,370             5,781
- --------------------------------------------------------------------
Pioneer Cos., Inc. 1,3                     20,688            36,204
- --------------------------------------------------------------------
Prandium, Inc. 3                           62,829            18,849


STATEMENT OF INVESTMENTS  Continued

                                                       Market Value
                                           Shares        See Note 1
- --------------------------------------------------------------------
Common Stocks Continued
Southern Pacific Funding Corp.,
Liquidating Trust 1,3                     251,604         $      --
- --------------------------------------------------------------------
Sterling Chemicals, Inc. 3                    359            12,565
- --------------------------------------------------------------------
TVMAX Holdings, Inc. 1,3                    7,500                75
- --------------------------------------------------------------------
Viatel Holding Ltd. (Bermuda) 1,3           2,349             1,198
- --------------------------------------------------------------------
WRC Media Corp. 1,3                         1,353                14
                                                      --------------
Total Common Stocks (Cost $3,933,939)                       972,430

                                            Units
- --------------------------------------------------------------------
Rights, Warrants and Certificates--0.1%
ASAT Finance LLC Wts., Exp. 11/1/06 1,3       500               625
- --------------------------------------------------------------------
Charles River Laboratories International,
Inc. Wts., Exp. 10/1/09 1,3                 1,100           203,500
- --------------------------------------------------------------------
Chesapeake Energy Corp. Wts.:
Exp. 1/23/03 1,3                            8,351                --
Exp. 1/23/03 1,3                            4,767                --
Exp. 9/1/04 3                               2,671                --
- --------------------------------------------------------------------
Citigroup, Inc. Wts., Exp. 12/31/50 3      15,626            16,407
- --------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 1,3         600                 6
- --------------------------------------------------------------------
Concentric Network Corp. Wts., Exp.
12/15/07 1,3                                  750                 7
- --------------------------------------------------------------------
Covergent Communications, Inc. Wts.,
Exp. 4/1/08 1,3                             2,000                20
- --------------------------------------------------------------------
Decrane Aircraft Holdings, Inc. Wts.,
Exp. 9/30/08 1,3                            1,750                --
- --------------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08 1,3    1,500                15
- --------------------------------------------------------------------
e.spire Communications, Inc. Wts., Exp.
11/1/05 1,3                                   475                 5
- --------------------------------------------------------------------
Equinix, Inc. Wts., Exp. 12/1/07 1,3        1,000                10
- --------------------------------------------------------------------
Horizon PCS, Inc. Wts., Exp. 10/1/10 1,3    1,300                65
- --------------------------------------------------------------------
ICG Communications, Inc. Wts.,
Exp. 9/15/05 1,3,9                          5,940                59
- --------------------------------------------------------------------
ICO Global Communication Holdings
Ltd. Wts.: Exp. 5/16/06 1,3                10,561                11
Exp. 5/16/06 1,3                               16                --
- --------------------------------------------------------------------
Imperial Credit Industries, Inc. Wts.,
Exp. 1/31/08 1,3                            5,148                --
- --------------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/15/07 1,3          765                 8
- --------------------------------------------------------------------
IPCS, Inc. Wts., Exp. 6/15/10 1,3             750               281
- --------------------------------------------------------------------
KMC Telecom Holdings, Inc. Wts.,
Exp. 4/15/08 1,3                            2,455                25
- --------------------------------------------------------------------
Leap Wireless International, Inc. Wts.,
Exp. 4/15/10 1,3                              550                 5
- --------------------------------------------------------------------
Long Distance International, Inc. Wts.,
Exp. 4/13/08 1,3                              800                --
- --------------------------------------------------------------------
Loral Space & Communications Ltd. Wts.,
Exp. 1/15/07 1,3                              800                 8


                                                       Market Value
                                            Units        See Note 1
- --------------------------------------------------------------------
Rights, Warrants and Certificates Continued
McLeodUSA, Inc. Wts., Exp. 4/16/07 1,3      7,220       $        72
- --------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts.,
Exp. 6/1/06 3,4                             3,200               778
- --------------------------------------------------------------------
Millenium Seacarriers, Inc. Wts.,
Exp. 7/15/05 1,3                            1,500                15
- --------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 1,3         1,000             1,625
- --------------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 3                             20,000            15,400
- --------------------------------------------------------------------
PLD Telekom, Inc., 9% Cv. Sub. Nts. Wts.,
Exp. 3/31/03 (cv. into Metromedia
International Group, Inc.) 1,3                170                 2
- --------------------------------------------------------------------
Protection One, Inc. Wts.:
Exp. 11/1/03 1,3                           28,000                --
Exp. 6/30/05 1,3                            1,600                --
- --------------------------------------------------------------------
Transocean, Inc. Wts., Exp. 5/1/09 3,4      1,000            67,500
- --------------------------------------------------------------------
Real Time Data Co. Wts.,
Exp. 5/31/04 1,3                          121,440                --
- --------------------------------------------------------------------
Republic Technologies International
LLC Wts., Exp. 7/15/09 1,3                    500                 5
- --------------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/31/07 3                               583                --
- --------------------------------------------------------------------
Telergy, Inc. Wts., Exp. 9/25/10 1,3        2,019                20
- --------------------------------------------------------------------
Telus Corp. Wts., Exp. 9/15/05 1,3          1,079               540
                                                      --------------
Total Rights, Warrants and Certificates
(Cost $237,019)                                             307,014

                                        Principal
                                           Amount
- --------------------------------------------------------------------
Structured Notes--3.8%
JPMorgan Chase Bank, High Yield
Index Credit-Linked Trust Nts.,
9.70%, 11/15/07  (Cost $13,367,651)   $14,200,000        13,987,000
- --------------------------------------------------------------------
Joint Repurchase Agreements--10.4% 11
Undivided interest of 5.44% in joint repurchase agreement
(Market Value $694,610,000) with Banc One Capital Markets,
Inc., 1.07%, dated 12/31/02, to be repurchased at
$37,771,245 on 1/2/03, collateralized by U.S. Treasury Nts.,
3%--6.50%, 2/15/03--2/15/12, with a value of $311,989,144
and U.S. Treasury Bonds, 1.75%--9.375%, 4/30/04--2/15/23,
with a value of $397,082,690
(Cost $37,769,000)                     37,769,000        37,769,000

- --------------------------------------------------------------------
Total Investments, at Value
(Cost $397,094,426)                          98.2%      356,918,163
- --------------------------------------------------------------------
Other Assets Net of Liabilities               1.8         6,456,550
                                        ----------------------------
Net Assets                                  100.0%     $363,374,713
                                        ============================


Footnotes to Statement of Investments
Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
CAD      Canadian Dollar
EUR      Euro
GBP      British Pound Sterling

1. Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
2. Issuer is in default.
3. Non-income producing 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 $42,633,011 or 11.73% of the Fund's net
assets as of December 31, 2002.
5. Represents the current interest rate for a variable or increasing rate
security.
6. Securities with an aggregate market value of $1,231,423 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
7. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
8. Interest or dividend is paid-in-kind.
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. Zero coupon bond reflects effective yield on the date of purchase.
11. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.

See accompanying Notes to Financial Statements.

STATEMENT OF ASSETS AND LIABILITIES  December 31, 2002



- ---------------------------------------------------------------------------------------
Assets

Investments, at value (including $37,769,000 in repurchase agreements)
(cost $397,094,426)--see accompanying statement
$356,918,163
- ---------------------------------------------------------------------------------------
Cash
177,740
- ---------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns
7,156,350
Shares of beneficial interest sold
360,153
Daily variation on futures contracts
26,156
Other
5,849

- -------------
Total assets
364,644,411

- ---------------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed
789,251
Investments purchased
421,422
Shareholder reports
18,002
Distribution and service plan
fees                                               8,737
Trustees'
compensation                                                             547
Transfer and shareholder servicing agent
fees                                      449
Other
31,290

- -------------
Total liabilities
1,269,698

- ---------------------------------------------------------------------------------------
Net Assets
$363,374,713

=============

- ---------------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of beneficial interest                                $
48,418
- ---------------------------------------------------------------------------------------
Additional paid-in capital
484,117,192
- ---------------------------------------------------------------------------------------
Undistributed net investment income
25,973,552
- ---------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions
(106,479,450)
- ---------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies
(40,284,999)

- -------------
Net Assets
$363,374,713

=============

- ---------------------------------------------------------------------------------------
Net Asset Value Per Share
Non-Service shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $345,669,870 and 46,055,028 shares of beneficial
interest
outstanding)                                                            $7.51
- ---------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $17,704,843 and 2,363,163 shares of beneficial
interest
outstanding)                                                            $7.49

See accompanying Notes to Financial Statements.

STATEMENT OF OPERATIONS  For the Year Ended December 31, 2002

- ---------------------------------------------------------------------------------------------------------
Investment Income

Interest
$30,380,433
- ---------------------------------------------------------------------------------------------------------
Dividends
593,549

- ------------
Total investment
income
30,973,982

- ---------------------------------------------------------------------------------------------------------
Expenses
Management
fees
2,518,441
- ---------------------------------------------------------------------------------------------------------
Distribution and service plan fees-Service
shares                                                 13,856
- ---------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service
shares
10,500
Service
shares
476
- ---------------------------------------------------------------------------------------------------------
Shareholder
reports
24,829
- ---------------------------------------------------------------------------------------------------------
Trustees'
compensation
12,240
- ---------------------------------------------------------------------------------------------------------
Custodian fees and
expenses
8,490
- ---------------------------------------------------------------------------------------------------------
Other
                                                   56,735

- ------------
Total
expenses
   2,645,567
Less reduction to custodian
expenses                                                              (2,557)
Less voluntary waiver of transfer and shareholder servicing agent fees--Service
shares              (433)

                                                              ------------
Net
expenses
2,642,577

- ---------------------------------------------------------------------------------------------------------
Net Investment
Income
28,331,405

- ---------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments
(54,459,346)
Closing of futures
contracts
250,722
Foreign currency
transactions
(674,257)

- ------------
Net realized loss

(54,882,881)
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments
                                                                    16,834,269
Translation of assets and liabilities denominated in foreign
currencies                        1,818,912

                     ------------
Net
change
18,653,181

- ------------
Net realized and unrealized
loss                                                             (36,229,700)

- ---------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations
                                       $(7,898,295)


See accompanying Notes to Financial Statements.

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December
31,
2002             2001
- ----------------------------------------------------------------------------------------------------------
Operations

Net investment income                                                       $
28,331,405     $ 34,546,979
- ----------------------------------------------------------------------------------------------------------
Net realized loss
(54,882,881)     (28,960,743)
- ----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
18,653,181        1,095,345

- ------------------------------
Net increase (decrease) in net assets resulting from operations
(7,898,295)       6,681,581

- ----------------------------------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares
(35,408,403)     (34,924,849)
Service shares
             (306)              --

- ----------------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest
transactions:
Non-Service shares
44,572,082       39,498,599
Service shares
17,318,687            3,076

- ----------------------------------------------------------------------------------------------------------
Net Assets
Total increase
18,583,765       11,258,407
- ----------------------------------------------------------------------------------------------------------
Beginning of period
344,790,948      333,532,541

- ------------------------------
End of period [including undistributed net investment income of
$25,973,552 and $33,752,821, respectively]
$363,374,713     $344,790,948

==============================
See accompanying Notes to Financial Statements.

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Non-Service shares  Year Ended December 31,    2002      2001      2000
1999      1998
- ---------------------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of period          $8.54     $9.27    $10.72
$11.02    $11.52
- ---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                           .58       .84      1.00
1.01       .95
Net realized and unrealized loss               (.76)     (.62)    (1.36)
(.55)     (.90)

- ------------------------------------------------
Total from investment operations               (.18)      .22      (.36)
..46       .05
- ---------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income           (.85)     (.95)    (1.09)
(.76)     (.25)
Distributions from net realized gain             --        --        --
- --      (.30)

- ------------------------------------------------
Total dividends and/or distributions
to shareholders                                (.85)     (.95)    (1.09)
(.76)     (.55)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period                $7.51     $8.54     $9.27
$10.72    $11.02

================================================

- ---------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1            (2.40)%    1.97%    (3.74)%
4.29%     0.31%

- ---------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)   $345,670  $344,788  $333,533
$340,829  $328,563
- ---------------------------------------------------------------------------------------------
Average net assets (in thousands)          $335,894  $347,723  $329,260
$340,519  $322,748
- ---------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                          8.29%     9.94%    10.47%
9.61%     8.65%
Expenses                                       0.77%     0.79%     0.79%
0.75%     0.78% 3
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate                          75%       46%       31%
33%      161%

1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.


See accompanying Notes to Financial Statements.

FINANCIAL HIGHLIGHTS  Continued
- --------------------------------------------------------------------------------


Service shares  Year Ended December 31,                     2002     2001 1
- ---------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period                       $8.54    $8.40
- ---------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                        .88      .20
Net realized and unrealized loss                           (1.08)    (.06)
                                                          -----------------
Total from investment operations                            (.20)     .14
- ---------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                        (.85)      --
Distributions from net realized gain                          --       --
                                                          -----------------
Total dividends and/or distributions to shareholders        (.85)      --
- ---------------------------------------------------------------------------
Net asset value, end of period                             $7.49    $8.54
                                                          =================
- ---------------------------------------------------------------------------
Total Return, at Net Asset Value 2                         (2.67)%   1.67%

- ---------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                 $17,705       $3
- ---------------------------------------------------------------------------
Average net assets (in thousands)                        $ 5,602       $2
- ---------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                       8.91%   12.51%
Expenses                                                    1.02%    0.96%
Expenses, net of reduction to custodian expenses and/or
voluntary waiver of transfer agent fees                     1.02% 4  0.96%
- ---------------------------------------------------------------------------
Portfolio turnover rate                                       75%      46%



1. For the period from September 18, 2001 (inception of offering) to December
31, 2001.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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 of less than one full year.
4. Less than 0.01%.

See accompanying Notes to Financial Statements.

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), an 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 Trust's investment advisor is
OppenheimerFunds, Inc. (the Manager).
   The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. All classes of shares have identical rights and
voting privileges. Earnings, net assets and net asset value per share may differ
by minor amounts due to each class having its own expenses directly attributable
to that class.
   The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. In the absence of a sale, the security is valued at the last sale
price on the prior trading day, if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Trustees, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
Structured Notes. The Fund invests in index-linked structured notes whose
principal and/or interest and redemption depend on the performance of an
underlying index. The structured notes are leveraged, which increases the
volatility of each note's market value relative to the change in the underlying
index. Fluctuations in value of these securities are recorded as unrealized
gains and losses in the accompanying financial statements. The Fund records a
realized gain or loss when a structured note is sold or matures. As of December
31, 2002, the market value of these securities comprised 3.8% of the Fund's net
assets and resulted in unrealized gains in the current period of $619,349.
- --------------------------------------------------------------------------------
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, 2002, securities with an
aggregate market value of $5,996,518, representing 1.65% 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.
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint repurchase
agreement accounts. These balances are invested in one or more

NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
repurchase agreements, secured by U.S. government securities. Securities pledged
as collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal; however,
in the event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
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 capital loss carryforwards, if any, to shareholders.

As of December 31, 2002, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:

                              Expiring
                              -------------------
                              2006    $ 3,401,577
                              2007      4,933,260
                              2008     11,572,833
                              2009     22,696,701
                              2010     56,061,391
                                      -----------
                              Total   $98,665,762
                                      ===========

During the fiscal year ended December 31, 2002, the Fund did not utilize any
capital loss carryforward.
  As of December 31, 2002, the Fund had approximately $3,940,000 of post-October
losses available to offset future capital gains, if any. Such losses, if
unutilized, will expire in 2011.
- --------------------------------------------------------------------------------
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 Dividends and 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 dividends and distributions made during the
fiscal year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also, due to
timing of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net 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, 2002, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $701,965. Accumulated net
realized loss on investments was decreased by the same amount. Net assets of the
Fund were unaffected by the reclassifications.


The tax character of distributions paid during the years ended December 31, 2002
and December 31, 2001 was as follows:

                                         Year Ended        Year Ended
                                  December 31, 2002 December 31, 2001
              -------------------------------------------------------
              Distributions paid from:
              Ordinary income           $35,408,709       $34,924,849
              Long-term capital gain             --                --
              Return of capital                  --                --
                                        -----------------------------
              Total                     $35,408,709       $34,924,849
                                        =============================

As of December 31, 2002, the components of distributable earnings on a tax basis
were as follows:

                 Undistributed net investment income   $  25,973,552
                 Accumulated net realized loss          (106,479,450)
                 Net unrealized depreciation             (40,284,999)
                                                       -------------
                 Total                                 $(120,790,897)
                                                       =============

- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:

                                            Year Ended December 31, 2002
Year Ended December 31, 2001 1
                                               Shares
Amount          Shares            Amount
- -------------------------------------------------------------------------------------------------------------
Non-Service shares
Sold                                       22,935,486      $ 176,263,288
16,771,940      $148,496,080
Dividends and/or distributions reinvested   4,568,826         35,408,403
3,924,140        34,924,849
Redeemed                                  (21,816,082)      (167,099,609)
(16,326,208)     (143,922,330)

- -------------------------------------------------------------------
Net increase                                5,688,230      $  44,572,082
4,369,872      $ 39,498,599

===================================================================

- -------------------------------------------------------------------------------------------------------------
Service shares
Sold                                        2,741,181      $
20,012,961             362      $      3,083
Dividends and/or distributions reinvested          39
306              --                --
Redeemed                                     (378,418)
(2,694,580)             (1)               (7)

- -------------------------------------------------------------------
Net increase                                2,362,802      $
17,318,687             361      $      3,076

===================================================================

1. For the year ended December 31, 2001, for Non-Service shares and for the
period from September 18, 2001 (inception of offering) to December 31, 2001, for
Service shares.

NOTES TO FINANCIAL STATEMENTS  Continued


- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2002, were
$260,090,620 and $214,009,003, respectively.

As of December 31, 2002, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $401,078,301 was composed of:

          Gross unrealized appreciation      $ 14,449,054
          Gross unrealized depreciation       (58,609,192)
                                             ------------
          Net unrealized depreciation        $(44,160,138)
                                             ============

The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts, investments
in passive foreign investment companies, and forward foreign currency exchange
contracts.


- --------------------------------------------------------------------------------
4. 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% on the
next $200 million and 0.50% of average annual net assets over $1 billion.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a $22.50 per account fee.
   Additionally, funds offered in variable annuity separate accounts are subject
to minimum fees of $5,000 for assets of less than $10 million and $10,000 for
assets of $10 million or more. The Fund is subject to the minimum fee in the
event that the per account fee does not equal or exceed the applicable minimum
fee.
   OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average net assets of the Fund. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc., the Distributor, for distribution-related services for the
Fund's Service shares. Under the Plan, payments are made quarterly at an annual
rate of up to 0.25% of the average annual net assets of the Service shares of
the Fund. For the year ended December 31, 2002, payments under the Service Plan
totaled $13,856.


- --------------------------------------------------------------------------------
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 as a receivable or payable and in the Statement of
Operations with the change in unrealized appreciation or depreciation.
   The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Such realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.

- --------------------------------------------------------------------------------
6. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a particular price on a stipulated future
date at a negotiated price. Futures contracts are traded on a commodity
exchange. The Fund may buy and sell futures contracts that relate to broadly
based securities indices "financial futures" or debt securities "interest rate
futures" in order to gain exposure to or to seek to protect against changes in
market value of stock and bonds or 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 decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes 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 recognizes 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. Realized gains
and losses are reported in the Statement of Operations as closing and expiration
of futures contracts.
   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, 2002, the Fund had outstanding futures contracts as follows:

                        Expiration   Number of     Valuation as of    Unrealized
Contract Description         Dates   Contracts   December 31, 2002  Depreciation
- --------------------------------------------------------------------------------
Contracts to Purchase
Standard & Poor's 500      3/20/03          15          $3,295,875       $68,438
                                                                        --------
Contracts to Sell
U.S. Treasury Nts., 10 yr. 3/20/03          30           3,451,406        41,719
                                                                        --------
                                                                        $110,157
                                                                        ========

- --------------------------------------------------------------------------------
7. Illiquid or Restricted Securities
As of December 31, 2002, 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, 2002 was $22,635,840,
which represents 6.23% of the Fund's net assets, of which zero is considered
restricted. Information concerning restricted securities is as follows:


                         Acquisition              Valuation as of     Unrealized
Security                       Dates    Cost    December 31, 2002   Depreciation
- --------------------------------------------------------------------------------
Stocks and/or Warrants
Geotek Communications, Inc    4/6/00  $   --                  $--         $   --
Real Time Data Co. Wts.      6/30/99   1,214                   --          1,214




- --------------------------------------------------------------------------------

Contracts to Purchase
Norwegian Krone [NOK]                                 1/2/03
1,016NOK       $     146,679   $     2,649      $       --

Contracts to Sell
British Pound Sterling [GBP]                          1/2/03
18GBP              28,733            --             132
Japanese Yen [JPY]                             5/1/03-5/2/03
10,445,772JPY          88,424,892            --       3,424,892
Swiss Franc [CHF]                                     1/3/03
75CHF              53,885            --             479

- -----------------------------
Total Unrealized Appreciation and
Depreciation                                                         $
2,649      $3,425,503

=============================

OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
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 of
Oppenheimer Main Street Growth & Income Fund/VA, which is a series of
Oppenheimer Variable Account Funds, including the statement of investments, as
of December 31, 2002, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated. 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 auditing standards generally
accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Main Street Growth & Income Fund/VA as of December 31, 2002, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for the periods indicated, in conformity with accounting principles generally
accepted in the United States of America.

/s/Deloitte & Touche LLP
Deloitte & Touche LLP


Denver, Colorado
January 23, 2003

OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2002

                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
Common Stocks--97.0%
- --------------------------------------------------------------------------------
Consumer Discretionary--13.8%
- --------------------------------------------------------------------------------
Auto Components--1.0%
Aftermarket Technology Corp. 1                          14,800      $   214,600
- --------------------------------------------------------------------------------
American Axle & Manufacturing Holdings, Inc.        18,100          423,902
- --------------------------------------------------------------------------------
ArvinMeritor, Inc.                                      13,700          228,379
- --------------------------------------------------------------------------------
Borg-Warner Automotive, Inc.                            20,900        1,053,778
- --------------------------------------------------------------------------------
Cooper Tire & Rubber Co.                            13,000          199,420
- --------------------------------------------------------------------------------
Dana Corp.                                              93,900        1,104,264
- --------------------------------------------------------------------------------
Delphi Corp.                                           298,200        2,400,510
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber Co.                         114,500          779,745
- --------------------------------------------------------------------------------
Johnson Controls, Inc.                                  21,500        1,723,655
- --------------------------------------------------------------------------------
Lear Corp. 1                                            44,700        1,487,616
- --------------------------------------------------------------------------------
Superior Industries International, Inc.                  1,100           45,496
- --------------------------------------------------------------------------------
Tower Automotive, Inc. 1                                 5,800           26,100
                                                                    ------------
                                                                      9,687,465

- --------------------------------------------------------------------------------
Automobiles--1.3%
Ford Motor Co.                                         586,615        5,455,520
- --------------------------------------------------------------------------------
General Motors Corp.                                   163,500        6,026,610
- --------------------------------------------------------------------------------
Winnebago Industries, Inc.                               7,800          305,994
                                                                    ------------
                                                                     11,788,124

- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure--0.6%
AFC Enterprises, Inc. 1                                    600           12,606
- --------------------------------------------------------------------------------
Alliance Gaming Corp. 1                                  1,100           18,733
- --------------------------------------------------------------------------------
Boyd Gaming Corp. 1                                      5,400           75,870
- --------------------------------------------------------------------------------
CEC Entertainment, Inc. 1                               17,600          540,320
- --------------------------------------------------------------------------------
Choice Hotels International, Inc. 1                      2,800           63,560
- --------------------------------------------------------------------------------
GTech Holdings Corp. 1                                  53,900        1,501,654
- --------------------------------------------------------------------------------
Mandalay Resort Group 1                                 25,600          783,616
- --------------------------------------------------------------------------------
McDonald's Corp.                                        81,800        1,315,344
- --------------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc. 1                       12,400          450,120
- --------------------------------------------------------------------------------
Papa John's International, Inc. 1                        1,100           30,668
- --------------------------------------------------------------------------------
Rare Hospitality International, Inc. 1                     400           11,048
- --------------------------------------------------------------------------------
Ruby Tuesday, Inc.                                      39,600          684,684
- --------------------------------------------------------------------------------
Ryan's Family Steak Houses, Inc. 1                      12,450          141,308
                                                                    ------------
                                                                      5,629,531

- --------------------------------------------------------------------------------
Household Durables--1.8%
American Greetings Corp., Cl. A 1                       49,300          778,940
- --------------------------------------------------------------------------------
Beazer Homes USA, Inc. 1                                 6,700          406,020
- --------------------------------------------------------------------------------
Black & Decker Corp.                                34,200        1,466,838
- --------------------------------------------------------------------------------
D.R. Horton, Inc.                                       17,800          308,830
- --------------------------------------------------------------------------------
Fortune Brands, Inc.                                    52,700        2,451,077
- --------------------------------------------------------------------------------
Hovnanian Enterprises, Inc., Cl. A 1                    15,700          497,690
- --------------------------------------------------------------------------------
Lennar Corp.                                            45,800        2,363,280

                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
Household Durables Continued
M.D.C. Holdings, Inc.                                    1,300      $    49,738
- --------------------------------------------------------------------------------
Maytag Corp.                                            69,800        1,989,300
- --------------------------------------------------------------------------------
Meritage Corp. 1                                         5,300          178,345
- --------------------------------------------------------------------------------
NVR, Inc. 1                                              8,000        2,604,000
- --------------------------------------------------------------------------------
Pulte Homes, Inc.                                       40,244        1,926,480
- --------------------------------------------------------------------------------
Ryland Group, Inc. (The)                                56,900        1,897,615
- --------------------------------------------------------------------------------
Standard Pacific Corp.                                  11,100          274,725
                                                                    ------------
                                                                     17,192,878

- --------------------------------------------------------------------------------
Internet & Catalog Retail--0.5%
Amazon.com, Inc. 1                                      98,100        1,853,109
- --------------------------------------------------------------------------------
USA Interactive 1                                      118,700        2,720,604
                                                                    ------------
                                                                      4,573,713

- --------------------------------------------------------------------------------
Leisure Equipment & Products--0.8%
Action Performance Cos., Inc.                           29,900          568,100
- --------------------------------------------------------------------------------
Brunswick Corp.                                         68,000        1,350,480
- --------------------------------------------------------------------------------
Eastman Kodak Co.                                      136,300        4,775,952
- --------------------------------------------------------------------------------
Hasbro, Inc.                                            58,300          673,365
- --------------------------------------------------------------------------------
Nautilus Group, Inc. (The) 1                            16,700          223,112
                                                                    ------------
                                                                      7,591,009

- --------------------------------------------------------------------------------
Media--1.2%
AOL Time Warner, Inc. 1                                201,800        2,643,580
- --------------------------------------------------------------------------------
Cablevision Systems
New York Group, Cl. A 1                                 56,000          937,440
- --------------------------------------------------------------------------------
Comcast Corp., Cl. A 1                                 118,415        2,791,041
- --------------------------------------------------------------------------------
Cox Communications, Inc., Cl. A 1                       47,100        1,337,640
- --------------------------------------------------------------------------------
Gannett Co., Inc.                                        4,000          287,200
- --------------------------------------------------------------------------------
Viacom, Inc., Cl. B 1                                   73,330        2,988,931
                                                                    ------------
                                                                     10,985,832

- --------------------------------------------------------------------------------
Multiline Retail--2.9%
Big Lots, Inc. 1                                        47,600          629,748
- --------------------------------------------------------------------------------
BJ's Wholesale Club, Inc. 1                             26,300          481,290
- --------------------------------------------------------------------------------
Costco Wholesale Corp. 1                                   400           11,224
- --------------------------------------------------------------------------------
Federated Department Stores, Inc. 1                     93,100        2,677,556
- --------------------------------------------------------------------------------
May Department Stores Co.                              108,100        2,484,138
- --------------------------------------------------------------------------------
Penney (J.C.) Co., Inc. (Holding Co.)                  124,600        2,867,046
- --------------------------------------------------------------------------------
Sears Roebuck & Co.                                 66,300        1,587,885
- --------------------------------------------------------------------------------
Shopko Stores, Inc. 1                                    6,000           74,700
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc.                                  334,100       16,875,391
                                                                    ------------
                                                                     27,688,978

- --------------------------------------------------------------------------------
Specialty Retail--3.3%
American Eagle Outfitters, Inc. 1                        5,100           70,278
- --------------------------------------------------------------------------------
AnnTaylor Stores Corp. 1                                60,850        1,242,557
- --------------------------------------------------------------------------------
AutoZone, Inc. 1                                        31,900        2,253,735


STATEMENT OF INVESTMENTS  Continued

                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
Specialty Retail Continued
Bed Bath & Beyond, Inc.                             1,700       $    58,701
- --------------------------------------------------------------------------------
Christopher & Banks Corp. 1                        34,800           722,100
- --------------------------------------------------------------------------------
Deb Shops, Inc.                                           700            15,547
- --------------------------------------------------------------------------------
Electronics Boutique Holdings Corp. 1                   8,800           139,128
- --------------------------------------------------------------------------------
Gap, Inc. (The)                                       281,500         4,368,880
- --------------------------------------------------------------------------------
Group 1 Automotive, Inc. 1                                700            16,716
- --------------------------------------------------------------------------------
Hollywood Entertainment Corp. 1                         6,600            99,660
- --------------------------------------------------------------------------------
Home Depot, Inc.                                      391,300         9,375,548
- --------------------------------------------------------------------------------
Hot Topic, Inc. 1                                      16,400           375,232
- --------------------------------------------------------------------------------
Limited Brands, Inc.                                  346,200         4,822,566
- --------------------------------------------------------------------------------
Lowe's Cos., Inc.                                      13,300           498,750
- --------------------------------------------------------------------------------
Movie Gallery, Inc. 1                                   2,300            29,900
- --------------------------------------------------------------------------------
Pacific Sunwear of California, Inc. 1                  16,650           294,538
- --------------------------------------------------------------------------------
Pep Boys-Manny, Moe & Jack                          9,600           111,360
- --------------------------------------------------------------------------------
Pier 1 Imports, Inc.                                   48,918           926,018
- --------------------------------------------------------------------------------
Rent-A-Center, Inc. 1                                  14,700           734,265
- --------------------------------------------------------------------------------
TJX Cos., Inc. (The)                                  215,300         4,202,656
- --------------------------------------------------------------------------------
Too, Inc. 1                                            12,557           295,341
- --------------------------------------------------------------------------------
United Auto Group, Inc. 1                               3,400            42,398
- --------------------------------------------------------------------------------
Urban Outfitters, Inc. 1                                1,400            32,998
                                                                    ------------
                                                                     30,728,872

- --------------------------------------------------------------------------------
Textiles & Apparel--0.4%
Fossil, Inc. 1                                            500            10,170
- --------------------------------------------------------------------------------
Kellwood Co.                                            5,300           137,800
- --------------------------------------------------------------------------------
Nike, Inc., Cl. B                                      88,200         3,922,254
- --------------------------------------------------------------------------------
Quicksilver, Inc. 1                                       200             5,332
- --------------------------------------------------------------------------------
Timberland Co., Cl. A 1                                 3,100           110,391
- --------------------------------------------------------------------------------
Tommy Hilfiger Corp. 1                                  5,900            41,005
                                                                    ------------
                                                                      4,226,952

- --------------------------------------------------------------------------------
Consumer Staples--8.0%
- --------------------------------------------------------------------------------
Beverages--1.4%
Anheuser-Busch Cos., Inc.                              29,200         1,413,280
- --------------------------------------------------------------------------------
Coca-Cola Co. (The)                                   228,800        10,026,016
- --------------------------------------------------------------------------------
PepsiCo, Inc.                                          50,250         2,121,555
                                                                    ------------
                                                                     13,560,851

- --------------------------------------------------------------------------------
Food & Drug Retailing--1.8%
Albertson's, Inc.                                     107,300         2,388,498
- --------------------------------------------------------------------------------
CVS Corp.                                             145,200         3,625,644
- --------------------------------------------------------------------------------
Kroger Co. (The) 1                                    307,700         4,753,965
- --------------------------------------------------------------------------------
Safeway, Inc. 1                                       194,700         4,548,192
- --------------------------------------------------------------------------------
Walgreen Co.                                           28,200           823,158
- --------------------------------------------------------------------------------
Winn-Dixie Stores, Inc.                                31,000           473,680
                                                                    ------------
                                                                     16,613,137

                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
Food Products--1.9%
Campbell Soup Co.                                     193,400       $ 4,539,098
- --------------------------------------------------------------------------------
ConAgra Foods, Inc.                                   179,000         4,476,790
- --------------------------------------------------------------------------------
Dean Foods Co. 1                                       31,700         1,176,070
- --------------------------------------------------------------------------------
Fresh Del Monte Produce, Inc.                           3,900            73,749
- --------------------------------------------------------------------------------
Hershey Foods Corp.                                    30,500         2,056,920
- --------------------------------------------------------------------------------
Interstate Bakeries Corp.                               8,300           126,575
- --------------------------------------------------------------------------------
Kellogg Co.                                            19,400           664,838
- --------------------------------------------------------------------------------
Kraft Foods, Inc., Cl. A                               28,700         1,117,291
- --------------------------------------------------------------------------------
Sara Lee Corp.                                         38,038           856,235
- --------------------------------------------------------------------------------
Wrigley, William Jr. Co.                               56,500         3,100,720
                                                                    ------------
                                                                     18,188,286

- --------------------------------------------------------------------------------
Household Products--1.4%
Clorox Co. (The)                                       87,600         3,613,500
- --------------------------------------------------------------------------------
Procter & Gamble Corp. (The)                      111,900         9,616,686
                                                                    ------------
                                                                     13,230,186

- --------------------------------------------------------------------------------
Personal Products--0.3%
Avon Products, Inc.                                    36,800         1,982,416
- --------------------------------------------------------------------------------
Gillette Co.                                           24,100           731,676
                                                                    ------------
                                                                      2,714,092

- --------------------------------------------------------------------------------
Tobacco--1.2%
Philip Morris Cos., Inc.                              285,200        11,559,156
- --------------------------------------------------------------------------------
Universal Corp.                                         1,400            51,744
                                                                    ------------
                                                                     11,610,900

- --------------------------------------------------------------------------------
Energy--7.1%
- --------------------------------------------------------------------------------
Energy Equipment & Services--0.1%
Diamond Offshore Drilling, Inc.                         5,500           120,175
- --------------------------------------------------------------------------------
Helmerich & Payne, Inc.                             7,600           212,116
                                                                    ------------
                                                                        332,291

- --------------------------------------------------------------------------------
Oil & Gas--7.0%
Amerada Hess Corp.                                     31,900         1,756,095
- --------------------------------------------------------------------------------
Baytex Energy Ltd. 1                                  109,600           588,308
- --------------------------------------------------------------------------------
Brown (Tom), Inc. 1                                    93,200         2,339,320
- --------------------------------------------------------------------------------
Canadian 88 Energy Corp. 1                            445,000           715,470
- --------------------------------------------------------------------------------
Chesapeake Energy Corp.                               113,100           875,394
- --------------------------------------------------------------------------------
ChevronTexaco Corp.                                   117,650         7,821,372
- --------------------------------------------------------------------------------
Cimarex Energy Co. 1                                    4,039            72,298
- --------------------------------------------------------------------------------
Compton Petroleum Corp. 1                             260,000           837,701
- --------------------------------------------------------------------------------
ConocoPhillips                                         41,321         1,999,523
- --------------------------------------------------------------------------------
Devon Energy Corp.                                     37,100         1,702,890
- --------------------------------------------------------------------------------
Enbridge Energy Management LLC                         23,379           876,713
- --------------------------------------------------------------------------------
Exxon Mobil Corp.                                     893,816        31,229,931
- --------------------------------------------------------------------------------
Frontier Oil Corp.                                    142,200         2,448,684


                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
Oil & Gas Continued
Marathon Oil Corp.                                      79,000      $ 1,681,910
- --------------------------------------------------------------------------------
Murphy Oil Corp.                                        60,000        2,571,000
- --------------------------------------------------------------------------------
Noble Energy, Inc.                                      12,200          458,110
- --------------------------------------------------------------------------------
Occidental Petroleum Corp.                              97,200        2,765,340
- --------------------------------------------------------------------------------
Paramount Resources Ltd. 1                             152,700        1,449,867
- --------------------------------------------------------------------------------
Sunoco, Inc.                                            48,100        1,595,958
- --------------------------------------------------------------------------------
Talisman Energy, Inc.                                   69,900        2,515,391
                                                                    ------------
                                                                     66,301,275

- --------------------------------------------------------------------------------
Financials--24.0%
- --------------------------------------------------------------------------------
Banks--9.8%
AmSouth Bancorp                                         85,700        1,645,440
- --------------------------------------------------------------------------------
Astoria Financial Corp.                                 46,200        1,254,330
- --------------------------------------------------------------------------------
Bank of America Corp.                                  247,500       17,218,575
- --------------------------------------------------------------------------------
Bank of New York Co., Inc. (The)                       188,000        4,504,480
- --------------------------------------------------------------------------------
Bank One Corp.                                         208,900        7,635,295
- --------------------------------------------------------------------------------
Comerica, Inc.                                          54,500        2,356,580
- --------------------------------------------------------------------------------
Downey Financial Corp.                                     200            7,800
- --------------------------------------------------------------------------------
FleetBoston Financial Corp.                            329,400        8,004,420
- --------------------------------------------------------------------------------
Golden West Financial Corp.                             75,000        5,385,750
- --------------------------------------------------------------------------------
Independence Community Bank Corp.                       10,300          261,414
- --------------------------------------------------------------------------------
KeyCorp                                                190,700        4,794,198
- --------------------------------------------------------------------------------
National City Corp.                                    111,400        3,043,448
- --------------------------------------------------------------------------------
North Fork Bancorporation, Inc.                         76,500        2,581,110
- --------------------------------------------------------------------------------
PNC Financial Services Group                             4,000          167,600
- --------------------------------------------------------------------------------
Prosperity Bancshares, Inc.                            109,100        2,072,900
- --------------------------------------------------------------------------------
Regions Financial Corp.                                  8,100          270,216
- --------------------------------------------------------------------------------
Roslyn Bancorp, Inc.                                     2,200           39,666
- --------------------------------------------------------------------------------
Sovereign Bancorp, Inc.                                136,800        1,922,040
- --------------------------------------------------------------------------------
SunTrust Banks, Inc.                                    65,400        3,722,568
- --------------------------------------------------------------------------------
U.S. Bancorp                                           346,370        7,349,971
- --------------------------------------------------------------------------------
Union Planters Corp.                                    40,800        1,148,112
- --------------------------------------------------------------------------------
UnionBanCal Corp.                                       28,200        1,107,414
- --------------------------------------------------------------------------------
Wachovia Corp.                                         338,000       12,316,720
- --------------------------------------------------------------------------------
Wells Fargo Co.                                         73,200        3,430,884
                                                                    ------------
                                                                     92,240,931

- --------------------------------------------------------------------------------
Diversified Financials--8.6%
American Express Co.                                   164,400        5,811,540
- --------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The)                           32,000        1,900,800
- --------------------------------------------------------------------------------
CIT Group, Inc.                                         18,100          354,760
- --------------------------------------------------------------------------------
Citigroup, Inc.                                        778,788       27,405,550
- --------------------------------------------------------------------------------
Doral Financial Corp.                                    3,750          107,250
- --------------------------------------------------------------------------------
E*TRADE Group, Inc. 1                                  144,000          699,840
- --------------------------------------------------------------------------------
Fannie Mae                                             151,500        9,745,995
- --------------------------------------------------------------------------------
Freddie Mac                                            107,800        6,365,590


                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
Diversified Financials Continued
Goldman Sachs Group, Inc. (The)                         22,500      $ 1,532,250
- --------------------------------------------------------------------------------
Household International, Inc.                          116,900        3,250,989
- --------------------------------------------------------------------------------
J.P. Morgan Chase & Co.                            399,400        9,585,600
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.                          24,000        1,278,960
- --------------------------------------------------------------------------------
MBNA Corp.                                             206,700        3,931,434
- --------------------------------------------------------------------------------
Morgan Stanley                                         196,400        7,840,288
- --------------------------------------------------------------------------------
New Century Financial Corp.                             21,600          548,424
- --------------------------------------------------------------------------------
Providian Financial Corp. 1                             25,000          162,250
- --------------------------------------------------------------------------------
Stilwell Financial, Inc.                                75,300          984,171
                                                                    ------------
                                                                     81,505,691

- --------------------------------------------------------------------------------
Insurance--5.5%
ACE Ltd.                                               102,900        3,019,086
- --------------------------------------------------------------------------------
AFLAC, Inc.                                             68,200        2,054,184
- --------------------------------------------------------------------------------
Allstate Corp.                                         106,800        3,950,532
- --------------------------------------------------------------------------------
American International Group, Inc.                     207,140       11,983,049
- --------------------------------------------------------------------------------
Berkley (W.R.) Corp.                                    10,400          411,944
- --------------------------------------------------------------------------------
Chubb Corp.                                             83,900        4,379,580
- --------------------------------------------------------------------------------
CNA Financial Corp. 1                                    3,300           84,480
- --------------------------------------------------------------------------------
Fidelity National Financial, Inc.                       82,438        2,706,440
- --------------------------------------------------------------------------------
Loews Corp.                                            109,600        4,872,816
- --------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc.                          2,100           97,041
- --------------------------------------------------------------------------------
MBIA, Inc.                                              46,550        2,041,683
- --------------------------------------------------------------------------------
MetLife, Inc.                                          172,600        4,667,104
- --------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl. A              22,800          653,220
- --------------------------------------------------------------------------------
Partnerre Holdings Ltd.                                  6,800          352,376
- --------------------------------------------------------------------------------
Progressive Corp.                                       85,300        4,233,439
- --------------------------------------------------------------------------------
RenaissanceRe Holdings Ltd.                             33,500        1,326,600
- --------------------------------------------------------------------------------
Safeco Corp.                                            32,900        1,140,643
- --------------------------------------------------------------------------------
St. Paul Cos., Inc.                                     58,550        1,993,627
- --------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl. B 1              44,441          651,061
- --------------------------------------------------------------------------------
XL Capital Ltd., Cl. A                                  11,800          911,550
                                                                    ------------
                                                                     51,530,455

- --------------------------------------------------------------------------------
Real Estate--0.1%
Equity Office Properties Trust                          43,100        1,076,638
- --------------------------------------------------------------------------------
FBR Asset Investment Corp.                               2,900           98,310
                                                                    ------------
                                                                      1,174,948

- --------------------------------------------------------------------------------
Health Care--11.3%
- --------------------------------------------------------------------------------
Biotechnology--0.5%
Affymetrix, Inc. 1                                      18,800          430,332
- --------------------------------------------------------------------------------
Amgen, Inc. 1                                           30,000        1,450,200
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1                                 70,800        2,407,200
- --------------------------------------------------------------------------------
Myriad Genetics, Inc. 1                                 22,000          321,200
                                                                    ------------
                                                                      4,608,932


STATEMENT OF INVESTMENTS  Continued

                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
Health Care Equipment & Supplies--1.0%
Advanced Medical Optics, Inc. 1                           188       $     2,250
- --------------------------------------------------------------------------------
Baxter International, Inc.                            165,300         4,628,400
- --------------------------------------------------------------------------------
Bio-Rad Laboratories, Inc., Cl. A 1                     2,800           108,360
- --------------------------------------------------------------------------------
Cooper Cos., Inc. (The)                                22,700           567,954
- --------------------------------------------------------------------------------
Guidant Corp. 1                                       120,600         3,720,510
- --------------------------------------------------------------------------------
Medtronic, Inc.                                        13,100           597,360
                                                                    ------------
                                                                      9,624,834

- --------------------------------------------------------------------------------
Health Care Providers & Services--1.5%
Aetna, Inc.                                            69,200         2,845,504
- --------------------------------------------------------------------------------
Apria Healthcare Group, Inc. 1                         19,500           433,680
- --------------------------------------------------------------------------------
Cigna Corp.                                            51,500         2,117,680
- --------------------------------------------------------------------------------
Covance, Inc. 1                                        13,100           322,129
- --------------------------------------------------------------------------------
HCA, Inc.                                              77,900         3,232,850
- --------------------------------------------------------------------------------
Healthsouth Corp. 1                                    93,000           390,600
- --------------------------------------------------------------------------------
LifePoint Hospitals, Inc. 1                             2,200            65,848
- --------------------------------------------------------------------------------
Option Care, Inc. 1                                     3,325            26,467
- --------------------------------------------------------------------------------
Oxford Health Plans, Inc. 1                            82,700         3,014,415
- --------------------------------------------------------------------------------
Pediatrix Medical Group, Inc. 1                        24,500           981,470
- --------------------------------------------------------------------------------
Per-Se Technologies, Inc. 1                             8,600            77,134
- --------------------------------------------------------------------------------
Sierra Health Services, Inc. 1                         12,700           152,527
                                                                    ------------
                                                                     13,660,304

- --------------------------------------------------------------------------------
Pharmaceuticals--8.3%
Abbott Laboratories                                   127,000         5,080,000
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co.                               50,300         1,164,445
- --------------------------------------------------------------------------------
Eli Lilly & Co.                                    70,900         4,502,150
- --------------------------------------------------------------------------------
Forest Laboratories, Inc. 1                             6,700           658,074
- --------------------------------------------------------------------------------
Johnson & Johnson                                 264,406        14,201,246
- --------------------------------------------------------------------------------
Merck & Co., Inc.                                 279,300        15,811,173
- --------------------------------------------------------------------------------
Pfizer, Inc.                                          869,300        26,574,501
- --------------------------------------------------------------------------------
Pharmaceutical Resources, Inc. 1                        8,000           238,400
- --------------------------------------------------------------------------------
Pharmacia Corp.                                       171,500         7,168,700
- --------------------------------------------------------------------------------
Schering-Plough Corp.                                 106,900         2,373,180
- --------------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd. 1                  18,300           688,080
                                                                    ------------
                                                                     78,459,949

- --------------------------------------------------------------------------------
Industrials--8.7%
- --------------------------------------------------------------------------------
Aerospace & Defense--1.7%
Boeing Co.                                            209,600         6,914,704
- --------------------------------------------------------------------------------
Goodrich Corp.                                        103,200         1,890,624
- --------------------------------------------------------------------------------
Honeywell International, Inc.                         246,000         5,904,000
- --------------------------------------------------------------------------------
InVision Technologies, Inc. 1                          24,700           651,092
- --------------------------------------------------------------------------------
Precision Castparts Corp.                               5,300           128,525
- --------------------------------------------------------------------------------
Raytheon Co.                                            5,100           156,825
                                                                    ------------
                                                                     15,645,770

                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
Air Freight & Couriers--0.9%
FedEx Corp.                                           126,800       $ 6,875,096
- --------------------------------------------------------------------------------
United Parcel Service, Inc., Cl. B                     23,400         1,476,072
                                                                    ------------
                                                                      8,351,168

- --------------------------------------------------------------------------------
Airlines--0.1%
AMR Corp. 1                                            75,900           500,940
- --------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B                      33,300           241,425
                                                                     -----------
                                                                        742,365

- --------------------------------------------------------------------------------
Building Products--0.4%
ElkCorp                                                 2,400            41,520
- --------------------------------------------------------------------------------
Lennox International, Inc.                              1,700            21,335
- --------------------------------------------------------------------------------
Masco Corp.                                           176,600         3,717,430
                                                                    ------------
                                                                      3,780,285

- --------------------------------------------------------------------------------
Commercial Services & Supplies--1.4%
Arbitron, Inc. 1                                        2,400            80,400
- --------------------------------------------------------------------------------
Convergys Corp. 1                                      48,200           730,230
- --------------------------------------------------------------------------------
Deluxe Corp.                                           23,600           993,560
- --------------------------------------------------------------------------------
First Data Corp.                                      147,800         5,233,598
- --------------------------------------------------------------------------------
H&R Block, Inc.                                    96,400         3,875,280
- --------------------------------------------------------------------------------
Harland (John H.) Co.                                   9,100           201,383
- --------------------------------------------------------------------------------
Iron Mountain, Inc. 1                                   6,400           211,264
- --------------------------------------------------------------------------------
ITT Educational Services, Inc. 1                        7,300           171,915
- --------------------------------------------------------------------------------
Pittston Brink's Group                                  2,500            46,200
- --------------------------------------------------------------------------------
Regis Corp.                                             3,700            96,163
- --------------------------------------------------------------------------------
Right Management Consultants, Inc. 1                    2,475            32,794
- --------------------------------------------------------------------------------
Waste Management, Inc.                                 53,800         1,233,096
                                                                    ------------
                                                                     12,905,883

- --------------------------------------------------------------------------------
Construction & Engineering--0.0%
EMCOR Group, Inc. 1                                     5,100           270,351
- --------------------------------------------------------------------------------
Electrical Equipment--0.2%
Emerson Electric Co.                                   25,400         1,291,590
- --------------------------------------------------------------------------------
Molex, Inc., Cl. A                                     20,750           412,717
- --------------------------------------------------------------------------------
Rockwell Automation, Inc.                                 500            10,355
                                                                    ------------
                                                                      1,714,662

- --------------------------------------------------------------------------------
Industrial Conglomerates--2.9%
3M Co.                                                 36,500         4,500,450
- --------------------------------------------------------------------------------
Carlisle Cos., Inc.                                     4,800           198,624
- --------------------------------------------------------------------------------
General Electric Co.                                  952,700        23,198,245
                                                                    ------------
                                                                     27,897,319

- --------------------------------------------------------------------------------
Machinery--0.4%
Cummins, Inc.                                          23,500           661,055
- --------------------------------------------------------------------------------
Deere & Co.                                         1,700            77,945
- --------------------------------------------------------------------------------
EnPro Industries, Inc. 1                                5,180            20,720
- --------------------------------------------------------------------------------
Ingersoll-Rand Co., Cl. A                              67,300         2,897,938


                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
Machinery Continued
Navistar International Corp. 1                           7,300      $   177,463
- --------------------------------------------------------------------------------
Oshkosh Truck Corp.                                        700           43,050
- --------------------------------------------------------------------------------
Timken Co.                                               8,200          156,620
                                                                    ------------
                                                                      4,034,791

- --------------------------------------------------------------------------------
Road & Rail--0.7%
Burlington Northern Santa Fe Corp.                      43,100        1,121,031
- --------------------------------------------------------------------------------
CNF Transportation, Inc.                                 2,300           76,452
- --------------------------------------------------------------------------------
CSX Corp.                                               59,000        1,670,290
- --------------------------------------------------------------------------------
Hunt (J.B.) Transport Services, Inc. 1                   4,700          137,710
- --------------------------------------------------------------------------------
Norfolk Southern Corp.                                 126,300        2,524,737
- --------------------------------------------------------------------------------
Roadway Corp.                                            9,400          346,014
- --------------------------------------------------------------------------------
Union Pacific Corp.                                     11,900          712,453
                                                                    ------------
                                                                      6,588,687

- --------------------------------------------------------------------------------
Information Technology--12.6%
- --------------------------------------------------------------------------------
Communications Equipment--1.3%
Brocade Communications Systems, Inc.                   160,700          665,298
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 1                                  338,300        4,431,730
- --------------------------------------------------------------------------------
McData Corp., Cl. A 1                                    4,887           34,698
- --------------------------------------------------------------------------------
Motorola, Inc.                                         743,900        6,434,735
- --------------------------------------------------------------------------------
Scientific-Atlanta, Inc.                                61,400          728,204
- --------------------------------------------------------------------------------
UTStarcom, Inc. 1                                       16,400          325,212
                                                                    ------------
                                                                     12,619,877

- --------------------------------------------------------------------------------
Computers & Peripherals--3.8%
Dell Computer Corp. 1                                  350,900        9,383,066
- --------------------------------------------------------------------------------
EMC Corp. 1                                            643,400        3,950,476
- --------------------------------------------------------------------------------
International Business Machines Corp.                  199,200       15,438,000
- --------------------------------------------------------------------------------
Lexmark International, Inc., Cl. A 1                    44,200        2,674,100
- --------------------------------------------------------------------------------
Maxtor Corp. 1                                          15,700           79,442
- --------------------------------------------------------------------------------
Presstek, Inc. 1                                         7,200           33,192
- --------------------------------------------------------------------------------
SanDisk Corp. 1                                         31,900          647,570
- --------------------------------------------------------------------------------
Seagate Technology
International, Inc. Escrow Shares 1,2                   31,000               --
- --------------------------------------------------------------------------------
StorageNetworks, Inc. 1                                    400              464
- --------------------------------------------------------------------------------
Sun Microsystems, Inc. 1                             1,124,700        3,497,817
                                                                    ------------
                                                                     35,704,127

- --------------------------------------------------------------------------------
Electronic Equipment & Instruments--0.5%
Agilent Technologies, Inc. 1                            91,600        1,645,136
- --------------------------------------------------------------------------------
Avnet, Inc. 1                                           55,100          596,733
- --------------------------------------------------------------------------------
Benchmark Electronics, Inc. 1                           28,000          802,480
- --------------------------------------------------------------------------------
Photon Dynamics, Inc. 1                                 16,200          369,360
- --------------------------------------------------------------------------------
Solectron Corp. 1                                      278,700          989,385
                                                                    ------------
                                                                      4,403,094

                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
Internet Software & Services--0.1%
Check Point Software  Technologies Ltd. 1               66,600      $   863,802
- --------------------------------------------------------------------------------
Websense, Inc. 1                                         4,500           96,124
                                                                    ------------
                                                                        959,926

- --------------------------------------------------------------------------------
Office Electronics--0.3%
Ikon Office Solutions, Inc.                             14,900          106,535
- --------------------------------------------------------------------------------
Xerox Corp. 1                                          301,800        2,429,490
                                                                    ------------
                                                                      2,536,025

- --------------------------------------------------------------------------------
Semiconductor Equipment & Products--2.3%
Atmel Corp. 1                                          236,000          526,280
- --------------------------------------------------------------------------------
Cypress Semiconductor Corp. 1                           59,000          337,480
- --------------------------------------------------------------------------------
ESS Technology, Inc. 1                                  37,200          233,988
- --------------------------------------------------------------------------------
Integrated Device Technology, Inc. 1                    53,200          445,284
- --------------------------------------------------------------------------------
Intel Corp.                                          1,020,200       15,884,514
- --------------------------------------------------------------------------------
National Semiconductor Corp. 1                          89,200        1,338,892
- --------------------------------------------------------------------------------
Rambus, Inc. 1                                          22,700          152,317
- --------------------------------------------------------------------------------
RF Micro Devices, Inc. 1                                77,400          567,342
- --------------------------------------------------------------------------------
Silicon Laboratories, Inc. 1                            34,600          660,168
- --------------------------------------------------------------------------------
Skyworks Solutions, Inc. 1                              77,500          668,050
- --------------------------------------------------------------------------------
Teradyne, Inc. 1                                        94,200        1,225,542
                                                                    ------------
                                                                     22,039,857

- --------------------------------------------------------------------------------
Software--4.3%
Amdocs Ltd. 1                                           55,300          543,046
- --------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1                          66,200          780,498
- --------------------------------------------------------------------------------
Citrix Systems, Inc. 1                                  69,600          857,472
- --------------------------------------------------------------------------------
Documentum, Inc. 1                                       3,400           53,244
- --------------------------------------------------------------------------------
Electronic Arts, Inc. 1                                 62,100        3,090,717
- --------------------------------------------------------------------------------
FactSet Research Systems, Inc.                          11,100          313,797
- --------------------------------------------------------------------------------
Microsoft Corp. 1                                      508,300       26,279,110
- --------------------------------------------------------------------------------
Oracle Corp. 1                                         674,300        7,282,440
- --------------------------------------------------------------------------------
Take-Two Interactive Software, Inc. 1                   43,700        1,026,513
                                                                    ------------
                                                                     40,226,837

- --------------------------------------------------------------------------------
Materials--3.6%
- --------------------------------------------------------------------------------
Chemicals--1.2%
Air Products & Chemicals, Inc.                         900           38,475
- --------------------------------------------------------------------------------
Cytec Industries, Inc. 1                                 2,400           65,472
- --------------------------------------------------------------------------------
Dow Chemical Co.                                       123,100        3,656,070
- --------------------------------------------------------------------------------
Du Pont (E.I.) de Nemours & Co.                    109,800        4,655,520
- --------------------------------------------------------------------------------
Georgia Gulf Corp.                                         900           20,826
- --------------------------------------------------------------------------------
IMC Global, Inc.                                        36,800          392,656
- --------------------------------------------------------------------------------
OM Group, Inc.                                          47,600          327,488
- --------------------------------------------------------------------------------
Praxair, Inc.                                            3,300          190,641
- --------------------------------------------------------------------------------
Rohm & Haas Co.                                     40,200        1,305,696
                                                                    ------------
                                                                     10,652,844


STATEMENT OF INVESTMENTS  Continued

                                                                  Market Value
                                                       Shares       See Note 1
- --------------------------------------------------------------------------------
Containers & Packaging--0.3%
Ball Corp.                                             42,600    $   2,180,694
- --------------------------------------------------------------------------------
Crown Cork & Seal Co., Inc. 1                      44,800          356,160
- --------------------------------------------------------------------------------
Owens-Illinois, Inc. 1                                 18,000          262,440
                                                                 ---------------
                                                                     2,799,294

- --------------------------------------------------------------------------------
Metals & Mining--1.1%
AK Steel Holding Corp. 1                                4,700           37,600
- --------------------------------------------------------------------------------
Alcan, Inc.                                           159,300        4,702,536
- --------------------------------------------------------------------------------
Alcoa, Inc.                                           204,300        4,653,954
- --------------------------------------------------------------------------------
Meridian Gold, Inc. 1                                  21,500          379,045
- --------------------------------------------------------------------------------
Phelps Dodge Corp. 1                                    2,900           91,785
- --------------------------------------------------------------------------------
Quanex Corp.                                            1,500           50,250
- --------------------------------------------------------------------------------
United States Steel Corp.                              54,600          716,352
                                                                 ---------------
                                                                    10,631,522

- --------------------------------------------------------------------------------
Paper & Forest Products--1.0%
Boise Cascade Corp.                                     7,500          189,150
- --------------------------------------------------------------------------------
International Paper Co.                               127,700        4,465,669
- --------------------------------------------------------------------------------
Weyerhaeuser Co.                                       96,800        4,763,528
                                                                 ---------------
                                                                     9,418,347

- --------------------------------------------------------------------------------
Telecommunication Services--5.0%
- --------------------------------------------------------------------------------
Diversified Telecommunication Services--4.7%
BellSouth Corp.                                       356,100        9,212,307
- --------------------------------------------------------------------------------
Citizens Communications Co. 1                          12,600          132,930
- --------------------------------------------------------------------------------
Qwest Communications  International, Inc. 1           226,400        1,132,000
- --------------------------------------------------------------------------------
SBC Communications, Inc.                              597,000       16,184,670
- --------------------------------------------------------------------------------
Sprint Corp. (Fon Group)                              103,000        1,491,440
- --------------------------------------------------------------------------------
Verizon Communications, Inc.                          412,856       15,998,170
                                                                 ---------------
                                                                    44,151,517

- --------------------------------------------------------------------------------
Wireless Telecommunication Services--0.3%
AT&T Corp.                                         91,600        2,391,676
- --------------------------------------------------------------------------------
Sprint Corp. (PCS Group) 1                            125,100          547,938
- --------------------------------------------------------------------------------
Telephone & Data Systems, Inc.                      1,700           79,934
                                                                 ---------------
                                                                     3,019,548

- --------------------------------------------------------------------------------
Utilities--2.9%
- --------------------------------------------------------------------------------
Electric Utilities--2.8%
CenterPoint Energy, Inc.                               62,600          532,100
- --------------------------------------------------------------------------------
Consolidated Edison Co.
of New York, Inc.                                      17,900          766,478
- --------------------------------------------------------------------------------
Constellation Energy Group, Inc.                       80,100        2,228,382
- --------------------------------------------------------------------------------
Entergy Corp.                                          86,400        3,938,976
- --------------------------------------------------------------------------------
Exelon Corp.                                          155,224        8,191,171
- --------------------------------------------------------------------------------
FirstEnergy Corp.                                     151,300        4,988,361
- --------------------------------------------------------------------------------
FPL Group, Inc.                                        50,100        3,012,513


                                                                  Market Value
                                                       Shares       See Note 1
- --------------------------------------------------------------------------------
Electric Utilities Continued
PG&E Corp. 1                                       52,500    $     729,750
- --------------------------------------------------------------------------------
Progress Energy, Inc.                                  31,100        1,348,185
- --------------------------------------------------------------------------------
Progress Energy, Inc., Contingent
Value Obligation 1,2                                   32,000            4,480
- --------------------------------------------------------------------------------
Wisconsin Energy Corp.                                 21,300          536,760
                                                                 ---------------
                                                                    26,277,156

- --------------------------------------------------------------------------------
Gas Utilities--0.1%
Kinder Morgan Management LLC                           24,310          767,953
- --------------------------------------------------------------------------------
Nicor, Inc.                                             8,200          279,046
- --------------------------------------------------------------------------------
Peoples Energy Corp.                                    4,400          170,060
                                                                 ---------------
                                                                     1,217,059
                                                                 ---------------
Total Common Stocks
(Cost $985,667,651)                                                914,038,727

- --------------------------------------------------------------------------------
Preferred Stocks--0.0%
Wachovia Corp., Dividend Equalization
Preferred Shares 2 (Cost $0)                            6,000              750

                                                        Units
- --------------------------------------------------------------------------------
Rights, Warrants and Certificates--0.0%
Dime Bancorp, Inc. Wts., Exp. 1/2/10 1
(Cost $0)                                              31,900            3,860


                                                    Principal
                                                       Amount
- --------------------------------------------------------------------------------
Joint Repurchase Agreements--3.2%
Undivided interest of 4.43% in joint repurchase
agreement (Market Value $694,610,000) with
Banc One Capital Markets, Inc., 1.07%, dated
12/31/02, to be repurchased at $30,754,828 on
1/2/03, collateralized by U.S. Treasury Nts.,
3%--6.50%, 2/15/03--2/15/12, with a value
of $311,989,144 and U.S. Treasury Bonds,
1.75%--9.375%, 4/30/04--2/15/23, with a
value of $397,082,690
(Cost $30,753,000)                                $30,753,000       30,753,000

- --------------------------------------------------------------------------------
Total Investments, at Value
(Cost $1,016,420,651)                                   100.2%     944,796,337
- -------------------------------------------------------------------------------
Liabilities in Excess
of Other Assets                                          (0.2)      (2,127,439)
                                                  ------------------------------
Net Assets                                              100.0%   $ 942,668,898
                                                  ==============================


Footnotes to Statement of Investments
1. Non-income producing security.
2. Identifies issues considered to be illiquid--See Note 7 of Notes to Financial
Statements.

See accompanying Notes to Financial Statements.



STATEMENT OF ASSETS AND LIABILITIES  December 31, 2002
- --------------------------------------------------------------------------------------------------------------------

Assets
Investments, at value (cost $1,016,420,651)--see accompanying
statement                             $   944,796,337
- --------------------------------------------------------------------------------------------------------------------
Cash
5,129
- --------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and
dividends
1,420,363
Shares of beneficial interest
sold
857,643
Investments
sold
684,357
Other
                                                              9,101

- ----------------
Total assets
                                 947,772,930

- --------------------------------------------------------------------------------------------------------------------
Liabilities
Payables and other
liabilities:
Investments
purchased
4,649,159
Shares of beneficial interest
redeemed
389,844
Shareholder reports

28,221
Distribution and service plan
fees
3,767
Transfer and shareholder servicing agent fees
                                                              1,878
Trustees'
compensation
857
Other
                                     30,306

- ----------------
Total
liabilities
           5,104,032

- --------------------------------------------------------------------------------------------------------------------
Net
Assets
$   942,668,898


================

- --------------------------------------------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of beneficial
interest                                                          $
61,529
- --------------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
1,313,100,883
- --------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
                                                                9,701,404
- --------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment and foreign currency
transactions                          (308,570,482)
- --------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of assets and
liabilities
denominated in foreign
currencies
(71,624,436)
- --------------------------------------------------------------------------------------------------------------------

Net Assets

$   942,668,898

- ----------------

- --------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share
Non-Service shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $890,740,383 and 58,126,139 shares of beneficial
interest outstanding)               $15.32
- --------------------------------------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share
(based on net assets of $51,928,515 and 3,402,612 shares of beneficial interest
outstanding)                 $15.26


See accompanying Notes to Financial Statements



STATEMENT OF OPERATIONS  For the Year Ended December 31, 2002
- -----------------------------------------------------------------------------------------

Investment Income
Dividends (net of foreign withholding taxes of $75,840)                   $
16,256,469
- ----------------------------------------------------------------------------------------
Interest
658,191

- --------------
Total investment income
16,914,660

- ----------------------------------------------------------------------------------------
Expenses
Management fees
7,045,796
- ----------------------------------------------------------------------------------------
Distribution and service plan fees--Service
shares                               53,627
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees
                               21,739
- ----------------------------------------------------------------------------------------
Trustees'
compensation                                                           19,884
- ----------------------------------------------------------------------------------------
Custodian fees and
expenses                                                      11,515
- ----------------------------------------------------------------------------------------
Shareholder reports
                                                  10,551
- ----------------------------------------------------------------------------------------
Other
17,732

- --------------
Total expenses
7,180,844
Less reduction to custodian
expenses                                              (659)

- --------------
Net expenses
7,180,185

- ----------------------------------------------------------------------------------------
Net Investment Income
9,734,475

- ----------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized loss on:
Investments
(118,262,443)
Closing of futures contracts
(8,508,514)
Foreign currency transactions
(266,659)

- --------------
Net realized loss
(127,037,616)
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments
(102,118,446)
Translation of assets and liabilities denominated in foreign currencies
449,592

- --------------
Net change
(101,668,854)

- --------------
Net realized and unrealized loss
(228,706,470)

- ----------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations
$(218,971,995)

==============

See accompanying Notes to Financial Statements.

STATEMENTS OF CHANGES IN NET ASSETS


Year Ended December
31,
2002                      2001
- ----------------------------------------------------------------------------------------------------------------------
Operations
Net investment income
$    9,734,475            $    7,607,459
- ----------------------------------------------------------------------------------------------------------------------
Net realized loss
(127,037,616)             (146,466,223)
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
(101,668,854)               27,081,515

- ------------------------------------------
Net decrease in net assets resulting from operations
(218,971,995)             (111,777,249)

- ----------------------------------------------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares
(7,425,251)               (5,518,418)
Service
shares
(162,528)                  (19,362)

- ----------------------------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions:
Non-Service shares
34,464,855               181,776,278
Service shares
38,273,092                20,508,172

- ----------------------------------------------------------------------------------------------------------------------
Net Assets
Total increase (decrease)
(153,821,827)               84,969,421
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period
1,096,490,725             1,011,521,304

- ------------------------------------------
End of period [including undistributed net investment income
  of $9,701,404 and $7,557,571, respectively]                               $
942,668,898            $1,096,490,725

==========================================
See accompanying Notes to Financial Statements.



FINANCIAL HIGHLIGHTS


Non-Service shares  Year Ended December 31,                     2002
2001          2000          1999          1998
- -------------------------------------------------------------------------------------------------------------------------------

Per Share Operating Data
Net asset value, beginning of period                          $18.99
$21.26        $24.63        $20.48        $20.58
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                            .16
..13           .10           .11           .13
Net realized and unrealized gain (loss)                        (3.70)
(2.29)        (2.14)         4.29           .92

- --------------------------------------------------------------------
Total from investment operations                               (3.54)
(2.16)        (2.04)         4.40          1.05
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                            (.13)
(.11)         (.09)         (.09)         (.05)
Distributions from net realized gain                              --
- --         (1.24)         (.16)        (1.10)

- --------------------------------------------------------------------
Total dividends and/or distributions to shareholders            (.13)
(.11)        (1.33)         (.25)        (1.15)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                $15.32
$18.99        $21.26        $24.63        $20.48

====================================================================

- -------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                            (18.80)%
(10.16)%       (8.78)%       21.71%         4.70%

- -------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                    $890,740
$1,074,945    $1,009,823      $555,311      $308,353
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                           $999,275
$1,028,913    $  809,662      $391,063      $234,306
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                           0.94%
0.73%         0.69%         0.63%         0.74%
Expenses                                                        0.69%
0.73%         0.73%         0.78%         0.79% 3
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                           98%
69%           63%          118%           86%


1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.


Service shares  Year Ended December 31,
2002          2001        2000 1
- ----------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period                             $18.95
$21.24        $24.04
- ----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
..13           .14           .02
Net realized and unrealized loss                                  (3.70)
(2.32)        (2.82)

- -------------------------------------
Total investment operations                                       (3.57)
(2.18)        (2.80)
- ----------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.12)         (.11)           --
Distributions from net realized gain                                 --
         --            --

- -------------------------------------
Total dividends and/or distributions to shareholders
(.12)         (.11)           --
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period                                   $15.26
$18.95        $21.24

=====================================

- ----------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 2                               (18.99)%
(10.27)%      (11.61)%

- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                        $51,929
$21,545        $1,698
- ----------------------------------------------------------------------------------------------------
Average net assets (in thousands)                               $34,604
$10,306        $  543
- ----------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income
0.87%         0.66%         0.50%
Expenses
0.84%         0.88%         0.88%
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate
98%           69%           63%

1. For the period from July 13, 2000 (inception of offering) to December 31,
2000.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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 of less than one full year.

See accompanying Notes to Financial Statements.


NOTES TO FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Main Street Growth & Income Fund/VA (the Fund) is a separate series
of Oppenheimer Variable Account Funds (the Trust), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's objective is to seek high total return (which includes
growth in the value of its shares as well as current income) from equity and
debt securities. The Trust's investment advisor is OppenheimerFunds, Inc. (the
Manager).
     The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. All classes of shares have identical rights and
voting privileges. Earnings, net assets and net asset value per share may differ
by minor amounts due to each class having its own expenses directly attributable
to that class.
     The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. In the absence of a sale, the security is valued at the last sale
price on the prior trading day, if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Trustees, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint repurchase
agreement accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities pledged as
collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal; however,
in the event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
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 capital loss carryforwards, if any, to shareholders.


As of December 31, 2002, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:

                              Expiring
                              ---------------------
                              2008     $ 28,801,633
                              2009      140,898,750
                              2010      126,747,906
                                       ------------
                              Total    $296,448,289
                                       ============

During the fiscal year ended December 31, 2002, the Fund did not utilize any
capital loss carryforward.
     As of December 31, 2002, the Fund had approximately $1,028,000 of
post-October losses available to offset future capital gains, if any. Such
losses, if unutilized, will expire in 2011. Additionally, the Fund had
approximately $49,000 of post-October foreign currency losses which were
deferred. If unutilized by the Fund in the following fiscal year, such losses
will expire.
- --------------------------------------------------------------------------------
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 Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during the
fiscal year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also, due to
timing of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net 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, 2002, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $2,863. Accumulated net
realized loss on investments was decreased by the same amount. Net assets of the
Fund were unaffected by the reclassifications.

The tax character of distributions paid during the years ended December 31, 2002
and December 31, 2001 was as follows:


                                           Year Ended         Year Ended
                                    December 31, 2002  December 31, 2001
         ---------------------------------------------------------------
         Distributions paid from:
         Ordinary income                 $  7,587,779       $  5,537,780
         Long-term capital gain                    --                 --
         Return of capital                         --                 --
                                         -------------------------------
         Total                           $  7,587,779       $  5,537,780
                                         ===============================

As of December 31, 2002, the components of distributable earnings on a tax basis
were as follows:

         Undistributed net investment income    $    9,701,404
         Accumulated net realized loss            (308,570,482)
         Net unrealized depreciation               (71,624,436)
                                                ---------------
         Total                                  $ (370,493,514)
                                                ===============

- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.



NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:

                                            Year Ended December 31,
2002              Year Ended December 31, 2001
                                                Shares
Amount                Shares              Amount
- ---------------------------------------------------------------------------------------------------------------------
Non-Service shares
Sold                                        11,919,835     $
204,743,555            14,383,759       $ 283,714,091
Dividends and/or distributions reinvested      383,139
7,425,251               289,225           5,518,418
Redeemed                                   (10,772,337)
(177,703,951)           (5,577,498)       (107,456,231)

- --------------------------------------------------------------------------
Net increase                                 1,530,637     $
34,464,855             9,095,486       $ 181,776,278

==========================================================================

- ---------------------------------------------------------------------------------------------------------------------
Service shares
Sold                                         2,415,625     $
40,562,767             1,070,886       $  20,739,629
Dividends and/or distributions reinvested        8,403
162,528                 1,016              19,362
Redeemed                                      (158,496)
(2,452,203)              (14,766)           (250,819)

- --------------------------------------------------------------------------
Net increase                                 2,265,532     $
38,273,092             1,057,136       $  20,508,172

==========================================================================
- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2002, were
$1,054,643,977 and $980,134,297, respectively.

As of December 31, 2002, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $1,027,505,247 was composed of:


               Gross unrealized appreciation   $   36,395,883
               Gross unrealized depreciation     (119,104,793)
                                               ---------------
               Net unrealized depreciation     $  (82,708,910)
                                               ===============
The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts, investments
in passive foreign investment companies, and forward foreign currency exchange
contracts.

- --------------------------------------------------------------------------------
4. 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.
- --------------------------------------------------------------------------------
Tranfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a $19.75 per account fee.


     Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $5,000 for assets of less than $10 million and
$10,000 for assets of $10 million or more. The Fund is subject to the minimum
fee in the event that the per account fee does not equal or exceed the
applicable minimum fee.
     OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees up to an annual rate of 0.35% of average net assets of the Fund. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc., the Distributor, for distribution-related services for the
Fund's Service shares. Under the Plan, payments are made quarterly at an annual
rate of up to 0.25% of the average annual net assets of the Service shares of
the Fund. For the year ended December 31, 2002, payments under the Service Plan
totaled $53,627.

- --------------------------------------------------------------------------------
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 to settle specific purchases or sales of securities
denominated in a foreign currency and to seek to protect against adverse
exchange rate fluctuation. Risks to the Fund include the potential inability of
the counterparty to meet the terms of the contract.
     The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
     The Fund may realize a gain or loss upon the closing or settlement of the
forward transaction. Such realized gains and losses are reported with all other
foreign currency gains and losses in the Statement of Operations.

- --------------------------------------------------------------------------------
6. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a particular price on a stipulated future
date at a negotiated price. Futures contracts are traded on a commodity
exchange. The Fund may buy and sell futures contracts that relate to broadly
based securities indices "financial futures" or debt securities "interest rate
futures" in order to gain exposure to or to seek to protect against changes in
market value of stock and bonds or 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 decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes 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 recognizes 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. Realized gains
and losses are reported on the Statement of Operations as closing and expiration
of futures contracts.
     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.


NOTES TO FINANCIAL STATEMENTS  Continued


- --------------------------------------------------------------------------------
7. Illiquid Securities
As of December 31, 2002, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 15% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of December
31, 2002 was $5,230, which represents less than 0.01% of the Fund's net assets.

EX-99.3

OPPENHEIMER MAIN STREET SMALL CAP FUND/VA
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of Oppenheimer Main Street Small Cap
Fund/VA:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Main Street Small Cap Fund/VA, which is a series of Oppenheimer
Variable Account Funds, including the statement of investments, as of December
31, 2002, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated. 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 auditing standards generally
accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer Main Street Small Cap Fund/VA as of December 31, 2002, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
the periods indicated, in conformity with accounting principles generally
accepted in the United States of America.

/s/Deloitte & Touche LLP
Deloitte & Touche LLP

Denver, Colorado
January 23, 2003



OPPENHEIMER MAIN STREET SMALL CAP FUND/VA

STATEMENT OF INVESTMENTS  December 31, 2002


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Common Stocks--98.3%
- ----------------------------------------------------------------
 Consumer Discretionary--18.8%
- ----------------------------------------------------------------
 Auto Components--1.5%
 Aftermarket Technology Corp. 1           1,400    $     20,300
- ----------------------------------------------------------------
 American Axle & Manufacturing
 Holdings, Inc.                           2,100          49,182
- ----------------------------------------------------------------
 ArvinMeritor, Inc.                       3,400          56,678
- ----------------------------------------------------------------
 Autoliv, Inc.                              400           8,372
- ----------------------------------------------------------------
 Borg-Warner Automotive, Inc.               700          35,294
- ----------------------------------------------------------------
 Collins & Aikman Corp. 1                   700           3,115
- ----------------------------------------------------------------
 Cooper Tire & Rubber Co.                 1,100          16,874
- ----------------------------------------------------------------
 Dana Corp.                               1,200          14,112
- ----------------------------------------------------------------
 Dura Automotive Systems, Inc. 1          2,800          28,112
- ----------------------------------------------------------------
 Goodyear Tire & Rubber Co.               4,100          27,921
- ----------------------------------------------------------------
 Intermet Corp.                             700           2,940
- ----------------------------------------------------------------
 Keystone Automotive Industries, Inc. 1   1,100          16,522
- ----------------------------------------------------------------
 Lear Corp. 1                               500          16,640
- ----------------------------------------------------------------
 Raytech Corp. 1                          1,700           9,690
- ----------------------------------------------------------------
 Spartan Motors, Inc.                     2,300          26,174
- ----------------------------------------------------------------
 Stoneridge, Inc. 1                         800           9,520
- ----------------------------------------------------------------
 Strattec Security Corp. 1                  600          28,764
- ----------------------------------------------------------------
 Tenneco Automotive, Inc. 1               1,800           7,272
- ----------------------------------------------------------------
 Tower Automotive, Inc. 1                 1,900           8,550
                                                     -----------
                                                        386,032

- ----------------------------------------------------------------
 Automobiles--0.4%
 Coachmen Industries, Inc.                  600           9,480
- ----------------------------------------------------------------
 Monaco Coach Corp. 1                     2,000          33,100
- ----------------------------------------------------------------
 Thor Industries, Inc.                      800          27,544
- ----------------------------------------------------------------
 Winnebago Industries, Inc.               1,000          39,230
                                                     -----------
                                                        109,354

- ----------------------------------------------------------------
 Distributors--0.0%
 Brightpoint, Inc. 1                        600           4,741
- ----------------------------------------------------------------
 Hotels, Restaurants & Leisure--3.0%
 Alliance Gaming Corp. 1                  3,500          59,605
- ----------------------------------------------------------------
 Ameristar Casinos, Inc. 1                1,500          21,150
- ----------------------------------------------------------------
 Applebee's International, Inc.             450          10,436
- ----------------------------------------------------------------
 Aztar Corp. 1                            2,900          41,412
- ----------------------------------------------------------------
 Bob Evans Farms, Inc.                      200           4,670
- ----------------------------------------------------------------
 Boyd Gaming Corp. 1                      2,400          33,720
- ----------------------------------------------------------------
 CBRL Group, Inc.                           200           6,026
- ----------------------------------------------------------------
 Checkers Drive-In Restaurants, Inc. 1    1,000           6,260
- ----------------------------------------------------------------
 Chicago Pizza & Brewery, Inc. 1          1,700          11,730
- ----------------------------------------------------------------
 Choice Hotels International, Inc. 1        900          20,430
- ----------------------------------------------------------------
 Churchill Downs, Inc.                      100           3,818
- ----------------------------------------------------------------
 CKE Restaurants, Inc. 1                  3,300          14,190


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Hotels, Restaurants & Leisure Continued
 Dave & Buster's, Inc. 1                    600    $      5,190
- ----------------------------------------------------------------
 Dover Downs Gaming &
 Entertainment, Inc.                      1,000           9,090
- ----------------------------------------------------------------
 Gaylord Entertainment Co., Cl. A 1         200           4,120
- ----------------------------------------------------------------
 GTech Holdings Corp. 1                   2,100          58,506
- ----------------------------------------------------------------
 Hollywood Casino Corp., Cl. A 1            400           4,912
- ----------------------------------------------------------------
 Isle of Capri Casinos, Inc. 1              400           5,296
- ----------------------------------------------------------------
 Lone Star Steakhouse & Saloon, Inc.      2,400          46,416
- ----------------------------------------------------------------
 Mandalay Resort Group 1                    700          21,427
- ----------------------------------------------------------------
 Marcus Corp. (The)                         800          11,360
- ----------------------------------------------------------------
 Multimedia Games, Inc. 1                   900          24,714
- ----------------------------------------------------------------
 Navigant International, Inc. 1             700           8,631
- ----------------------------------------------------------------
 P.F. Chang's China Bistro, Inc. 1        1,600          58,080
- ----------------------------------------------------------------
 Panera Bread Co., Cl. A 1                  200           6,962
- ----------------------------------------------------------------
 Penn National Gaming, Inc. 1             1,800          28,548
- ----------------------------------------------------------------
 Pinnacle Entertainment, Inc. 1             100             693
- ----------------------------------------------------------------
 Rare Hospitality International, Inc. 1     600          16,572
- ----------------------------------------------------------------
 Ruby Tuesday, Inc.                       1,700          29,393
- ----------------------------------------------------------------
 Ryan's Family Steak Houses, Inc. 1       2,500          28,375
- ----------------------------------------------------------------
 Scientific Games Corp., Cl. A 1          5,200          37,752
- ----------------------------------------------------------------
 Shuffle Master, Inc. 1                   2,100          40,131
- ----------------------------------------------------------------
 Six Flags, Inc. 1                        7,400          42,254
- ----------------------------------------------------------------
 Sonic Corp. 1                              200           4,098
- ----------------------------------------------------------------
 Steak n Shake Co. (The) 1                2,000          20,000
- ----------------------------------------------------------------
 Total Entertainment Restaurant Corp. 1   1,300          10,920
                                                     -----------
                                                        756,887

- ----------------------------------------------------------------
 Household Durables--2.5%
 American Greetings Corp., Cl. A 1        4,100          64,780
- ----------------------------------------------------------------
 Applica, Inc. 1                            500           2,500
- ----------------------------------------------------------------
 Beazer Homes USA, Inc. 1                   200          12,120
- ----------------------------------------------------------------
 CSS Industries, Inc. 1                     700          23,170
- ----------------------------------------------------------------
 Department 56, Inc. 1                    2,900          37,410
- ----------------------------------------------------------------
 Dominion Homes, Inc. 1                     500           7,125
- ----------------------------------------------------------------
 Foamex International, Inc. 1             1,661           5,249
- ----------------------------------------------------------------
 Harman International Industries, Inc.    1,100          65,450
- ----------------------------------------------------------------
 Helen of Troy Ltd. 1                     3,100          36,084
- ----------------------------------------------------------------
 Hovnanian Enterprises, Inc., Cl. A 1     1,600          50,720
- ----------------------------------------------------------------
 Kimball International, Inc., Cl. B       1,600          22,800
- ----------------------------------------------------------------
 Libbey, Inc.                               100           2,600
- ----------------------------------------------------------------
 M.D.C. Holdings, Inc.                      190           7,269
- ----------------------------------------------------------------
 M/I Schottenstein Homes, Inc.              500          13,900
- ----------------------------------------------------------------
 Maytag Corp.                             1,300          37,050
- ----------------------------------------------------------------
 Meritage Corp. 1                         1,300          43,745
- ----------------------------------------------------------------
 Movado Group, Inc.                         500           9,405
- ----------------------------------------------------------------
 Oneida Ltd.                              1,400          15,442
- ----------------------------------------------------------------

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Household Durables Continued
 Ryland Group, Inc. (The)                 1,100    $     36,685
- ----------------------------------------------------------------
 Salton, Inc. 1                             100             962
- ----------------------------------------------------------------
 Skyline Corp.                              300           8,850
- ----------------------------------------------------------------
 Stanley Furniture Co., Inc. 1              400           9,300
- ----------------------------------------------------------------
 Toll Brothers, Inc. 1                      300           6,060
- ----------------------------------------------------------------
 Toro Co. (The)                           1,200          76,680
- ----------------------------------------------------------------
 WCI Communities, Inc. 1                    400           4,080
- ----------------------------------------------------------------
 William Lyon Homes, Inc. 1                 300           6,549
- ----------------------------------------------------------------
 Yankee Candle, Inc. (The) 1              1,900          30,400
                                                     -----------
                                                        636,385
- ----------------------------------------------------------------
 Internet & Catalog Retail--0.4%
 1-800-FLOWERS.com, Inc. 1                3,200          20,000
- ----------------------------------------------------------------
 FTD, Inc., Cl. A 1                         100           1,593
- ----------------------------------------------------------------
 GSI Commerce, Inc. 1                       200             730
- ----------------------------------------------------------------
 J. Jill Group, Inc. 1                    2,400          33,552
- ----------------------------------------------------------------
 Stamps.com, Inc. 1                       1,600           7,472
- ----------------------------------------------------------------
 ValueVision Media, Inc., Cl. A 1         2,500          37,450
                                                     -----------
                                                        100,797

- ----------------------------------------------------------------
 Leisure Equipment & Products--1.1%
 Action Performance Cos., Inc.              600          11,400
- ----------------------------------------------------------------
 Brunswick Corp.                          1,900          37,734
- ----------------------------------------------------------------
 Callaway Golf Co.                        4,500          59,625
- ----------------------------------------------------------------
 Concord Camera Corp. 1                   2,300          12,489
- ----------------------------------------------------------------
 MarineMax, Inc. 1                        1,100          12,991
- ----------------------------------------------------------------
 Marvel Enterprises, Inc. 1               6,400          57,472
- ----------------------------------------------------------------
 Racing Champions Ertl Corp. 1            2,200          30,030
- ----------------------------------------------------------------
 SCP Pool Corp. 1                         1,050          30,660
- ----------------------------------------------------------------
 Singing Machine Co., Inc. (The) 1          100             900
- ----------------------------------------------------------------
 Sturm, Ruger & Co., Inc.                 1,800          17,226
                                                     -----------
                                                        270,527

- ----------------------------------------------------------------
 Media--2.4%
 4Kids Entertainment, Inc. 1              1,600          35,328
- ----------------------------------------------------------------
 Acme Communications, Inc. 1                100             797
- ----------------------------------------------------------------
 AMC Entertainment, Inc. 1                1,600          14,160
- ----------------------------------------------------------------
 APAC Teleservices, Inc. 1                4,900          11,466
- ----------------------------------------------------------------
 Belo Corp., Cl. A                          200           4,264
- ----------------------------------------------------------------
 Emmis Communications Corp., Cl. A 1        600          12,498
- ----------------------------------------------------------------
 Grey Global Group, Inc.                    100          61,110
- ----------------------------------------------------------------
 Hearst-Argyle Television, Inc. 1         1,100          26,521
- ----------------------------------------------------------------
 Hollinger International, Inc.            1,300          13,208
- ----------------------------------------------------------------
 Insight Communications Co., Inc. 1       4,200          51,996
- ----------------------------------------------------------------
 Journal Register Co. 1                   1,900          33,782
- ----------------------------------------------------------------
 Lin TV Corp. 1                             300           7,305
- ----------------------------------------------------------------
 LodgeNet Entertainment Corp. 1             100           1,068


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Media Continued
 McClatchy Co., Cl. A                       200    $     11,346
- ----------------------------------------------------------------
 Mediacom Communications Corp. 1          5,100          44,931
- ----------------------------------------------------------------
 Paxson Communications Corp., Cl. A 1       100             206
- ----------------------------------------------------------------
 Pixar, Inc. 1                            1,000          52,990
- ----------------------------------------------------------------
 PRIMEDIA, Inc. 1                         8,300          17,098
- ----------------------------------------------------------------
 Radio One, Inc., Cl. D 1                 1,800          25,974
- ----------------------------------------------------------------
 Saga Communications, Inc., Cl. A 1       1,500          28,500
- ----------------------------------------------------------------
 Sinclair Broadcast Group, Inc., Cl. A 1  3,700          43,031
- ----------------------------------------------------------------
 Sonic Solutions, Inc. 1                  3,100          15,500
- ----------------------------------------------------------------
 Spanish Broadcasting
 System, Inc., Cl. A 1                    5,000          36,000
- ----------------------------------------------------------------
 Thomas Nelson, Inc.                      2,300          23,046
- ----------------------------------------------------------------
 TiVo, Inc. 1                             5,600          29,176
- ----------------------------------------------------------------
 UnitedGlobalCom, Inc., Cl. A 1             600           1,440
- ----------------------------------------------------------------
 Young Broadcasting, Inc., Cl. A 1        1,600          21,072
                                                     -----------
                                                        623,813

- ----------------------------------------------------------------
 Multiline Retail--0.6%
 Big Lots, Inc. 1                         3,200          42,336
- ----------------------------------------------------------------
 BJ's Wholesale Club, Inc. 1              3,100          56,730
- ----------------------------------------------------------------
 Factory 2-U Stores, Inc. 1               5,300          18,078
- ----------------------------------------------------------------
 Saks, Inc. 1                             3,000          35,220
- ----------------------------------------------------------------
 Shopko Stores, Inc. 1                      700           8,715
- ----------------------------------------------------------------
 Stein Mart, Inc. 1                         200           1,220
                                                     -----------
                                                        162,299

- ----------------------------------------------------------------
 Specialty Retail--5.2%
 Aaron Rents, Inc.                          900          19,692
- ----------------------------------------------------------------
 American Eagle Outfitters, Inc. 1        1,200          16,536
- ----------------------------------------------------------------
 Asbury Automotive Group, Inc. 1            400           3,364
- ----------------------------------------------------------------
 bebe stores, inc. 1                        600           8,040
- ----------------------------------------------------------------
 Big 5 Sporting Goods Corp. 1             1,600          17,264
- ----------------------------------------------------------------
 Blair Corp.                                500          11,660
- ----------------------------------------------------------------
 Blue Rhino Corp.                         2,400          41,736
- ----------------------------------------------------------------
 Building Materials Holding Corp.         1,600          22,880
- ----------------------------------------------------------------
 Cache, Inc. 1                              500           6,900
- ----------------------------------------------------------------
 Charming Shoppes, Inc. 1                 1,300           5,434
- ----------------------------------------------------------------
 Chico's FAS, Inc. 1                        400           7,564
- ----------------------------------------------------------------
 Claire's Stores, Inc.                    2,200          48,554
- ----------------------------------------------------------------
 CompuCom Systems, Inc. 1                 2,600          14,586
- ----------------------------------------------------------------
 Cost Plus, Inc. 1                        1,500          43,005
- ----------------------------------------------------------------
 CSK Auto Corp. 1                           100           1,100
- ----------------------------------------------------------------
 Deb Shops, Inc.                          1,000          22,210
- ----------------------------------------------------------------
 Dress Barn, Inc. (The) 1                 2,100          27,930
- ----------------------------------------------------------------
 Finlay Enterprises, Inc. 1               1,500          18,090
- ----------------------------------------------------------------
 Friedman's, Inc., Cl. A                  1,700          14,756

STATEMENT OF INVESTMENTS  Continued

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Specialty Retail Continued
 Goody's Family Clothing, Inc. 1            800    $      3,552
- ----------------------------------------------------------------
 Guitar Center, Inc. 1                    1,300          21,528
- ----------------------------------------------------------------
 Gymboree Corp. 1                         3,500          55,510
- ----------------------------------------------------------------
 Hancock Fabrics, Inc.                    3,000          45,750
- ----------------------------------------------------------------
 Hibbett Sporting Goods, Inc.               800          19,136
- ----------------------------------------------------------------
 Hollywood Entertainment Corp. 1          1,000          15,100
- ----------------------------------------------------------------
 Jo-Ann Stores, Inc., Cl. A 1             1,400          32,158
- ----------------------------------------------------------------
 Jos. A. Banks Clothiers, Inc. 1            600          12,792
- ----------------------------------------------------------------
 Lithia Motors, Inc., Cl. A 1             1,300          20,397
- ----------------------------------------------------------------
 Michaels Stores, Inc. 1                    600          18,780
- ----------------------------------------------------------------
 Mothers Work, Inc. 1                     1,000          35,230
- ----------------------------------------------------------------
 Movie Gallery, Inc. 1                    3,325          43,225
- ----------------------------------------------------------------
 OfficeMax, Inc. 1                       10,700          53,500
- ----------------------------------------------------------------
 Pacific Sunwear of California, Inc. 1      450           7,960
- ----------------------------------------------------------------
 Party City Corp. 1                       1,100          13,200
- ----------------------------------------------------------------
 Pep Boys-Manny, Moe & Jack               2,300          26,680
- ----------------------------------------------------------------
 PetsMart, Inc. 1                         1,600          27,408
- ----------------------------------------------------------------
 Pier 1 Imports, Inc.                     2,200          41,646
- ----------------------------------------------------------------
 Rent-A-Center, Inc. 1                      900          44,955
- ----------------------------------------------------------------
 Restoration Hardware, Inc. 1             4,400          22,044
- ----------------------------------------------------------------
 Ross Stores, Inc.                        1,300          55,107
- ----------------------------------------------------------------
 Select Comfort Corp. 1                   3,600          33,840
- ----------------------------------------------------------------
 Sharper Image Corp. 1                    1,900          33,117
- ----------------------------------------------------------------
 Shoe Carnival, Inc. 1                    1,000          14,011
- ----------------------------------------------------------------
 Sonic Automotive, Inc. 1                 2,400          35,688
- ----------------------------------------------------------------
 Sports Authority, Inc. (The) 1           2,800          19,600
- ----------------------------------------------------------------
 TBC Corp. 1                              1,200          14,412
- ----------------------------------------------------------------
 Too, Inc. 1                              1,800          42,336
- ----------------------------------------------------------------
 Tractor Supply Co. 1                       800          30,080
- ----------------------------------------------------------------
 Tuesday Morning Corp. 1                  2,700          46,170
- ----------------------------------------------------------------
 United Auto Group, Inc. 1                2,600          32,422
- ----------------------------------------------------------------
 Urban Outfitters, Inc. 1                   800          18,856
- ----------------------------------------------------------------
 West Marine, Inc. 1                      1,600          21,904
- ----------------------------------------------------------------
 Zale Corp. 1                             1,000          31,900
                                                     -----------
                                                      1,341,295

- ----------------------------------------------------------------
 Textiles & Apparel--1.7%
 Cherokee, Inc.                             900          13,140
- ----------------------------------------------------------------
 Coach, Inc. 1                              300           9,876
- ----------------------------------------------------------------
 Columbia Sportswear Co. 1                  300          13,326
- ----------------------------------------------------------------
 Culp, Inc. 1                             1,200          10,200
- ----------------------------------------------------------------
 DHB Industries, Inc. 1                   1,100           1,826
- ----------------------------------------------------------------
 Fossil, Inc. 1                           1,850          37,629
- ----------------------------------------------------------------
 Gildan Activewear, Inc., Cl. A 1           200           4,682
- ----------------------------------------------------------------
 K-Swiss, Inc., Cl. A                     2,600          56,446


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Textiles & Apparel Continued
 Kellwood Co.                             2,000    $     52,000
- ----------------------------------------------------------------
 Kenneth Cole Productions, Inc., Cl. A 1  1,000          20,300
- ----------------------------------------------------------------
 OshKosh B'Gosh, Inc., Cl. A                900          25,245
- ----------------------------------------------------------------
 Phillips-Van Heusen Corp.                  200           2,312
- ----------------------------------------------------------------
 Quaker Fabric Corp. 1                    1,600          11,120
- ----------------------------------------------------------------
 Quicksilver, Inc. 1                      1,800          47,988
- ----------------------------------------------------------------
 Russell Corp.                            1,700          28,458
- ----------------------------------------------------------------
 Skechers U.S.A., Inc., Cl. A 1             800           6,792
- ----------------------------------------------------------------
 Steven Madden Ltd. 1                       100           1,807
- ----------------------------------------------------------------
 Tommy Hilfiger Corp. 1                   5,600          38,920
- ----------------------------------------------------------------
 Tropical Sportswear
 International Corp. 1                      200           1,794
- ----------------------------------------------------------------
 Unifi, Inc. 1                            1,100           5,775
- ----------------------------------------------------------------
 UniFirst Corp.                           2,100          42,420
                                                     -----------
                                                        432,056

- ----------------------------------------------------------------
 Consumer Staples--3.9%
- ----------------------------------------------------------------
 Beverages--0.2%
 Boston Beer Co., Inc., Cl. A 1             800          11,440
- ----------------------------------------------------------------
 Coca-Cola Bottling Co.                     400          25,804
- ----------------------------------------------------------------
 Cott Corp.                                 600          10,692
                                                     -----------
                                                         47,936

- ----------------------------------------------------------------
 Food & Drug Retailing--0.7%
 Great Atlantic & Pacific Tea Co.,
 Inc. (The) 1                             3,300          26,598
- ----------------------------------------------------------------
 Pathmark Stores, Inc. 1                  5,000          25,350
- ----------------------------------------------------------------
 Rite Aid Corp. 1                        19,000          46,550
- ----------------------------------------------------------------
 Ruddick Corp.                            1,800          24,642
- ----------------------------------------------------------------
 Weis Markets, Inc.                         500          15,525
- ----------------------------------------------------------------
 Wild Oats Markets, Inc. 1                2,300          23,736
- ----------------------------------------------------------------
 Winn-Dixie Stores, Inc.                  1,500          22,920
                                                     -----------
                                                        185,321

- ----------------------------------------------------------------
 Food Products--1.7%
 Bunge Ltd.                               2,500          60,150
- ----------------------------------------------------------------
 Central Garden & Pet Co. 1               3,700          68,487
- ----------------------------------------------------------------
 Del Monte Foods Co. 1                    3,300          25,410
- ----------------------------------------------------------------
 Dole Food Co., Inc.                      1,500          48,870
- ----------------------------------------------------------------
 Flowers Foods, Inc.                        100           1,951
- ----------------------------------------------------------------
 Fresh Del Monte Produce, Inc.            2,900          54,839
- ----------------------------------------------------------------
 Horizon Organic Holding Corp. 1            400           6,476
- ----------------------------------------------------------------
 Interstate Bakeries Corp.                  900          13,725
- ----------------------------------------------------------------
 J & J Snack Foods Corp. 1                  800          28,568
- ----------------------------------------------------------------
 Lancaster Colony Corp.                     200           7,816
- ----------------------------------------------------------------
 Lance, Inc.                              1,500          17,759
- ----------------------------------------------------------------
 MGP Ingredients, Inc.                      300           2,340
- ----------------------------------------------------------------
 Peet's Coffee & Tea, Inc. 1              2,400          33,912

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Food Products Continued
 Ralcorp Holdings, Inc. 1                 1,800      $   45,252
- ----------------------------------------------------------------
 Sanderson Farms, Inc.                      300           6,273
- ----------------------------------------------------------------
 Sensient Technologies Corp.                300           6,741
- ----------------------------------------------------------------
 Smucker Co., J.M. (The)                    183           7,285
                                                     -----------
                                                        435,854

- ----------------------------------------------------------------
 Household Products--0.8%
 Chattem, Inc. 1                          3,300          67,815
- ----------------------------------------------------------------
 Dial Corp. (The)                         1,200          24,444
- ----------------------------------------------------------------
 Nu Skin Asia Pacific, Inc., Cl. A        3,700          44,289
- ----------------------------------------------------------------
 Playtex Products, Inc. 1                 2,200          21,736
- ----------------------------------------------------------------
 Revlon, Inc., Cl. A 1                      100             306
- ----------------------------------------------------------------
 WD-40 Co.                                2,200          58,124
                                                     -----------
                                                        216,714

- ----------------------------------------------------------------
 Personal Products--0.3%
 Del Laboratories, Inc.                   1,145          23,129
- ----------------------------------------------------------------
 Elizabeth Arden, Inc. 1                    900          13,320
- ----------------------------------------------------------------
 NBTY, Inc. 1                             2,200          38,676
                                                     -----------
                                                         75,125

- ----------------------------------------------------------------
 Tobacco--0.2%
- ----------------------------------------------------------------
 Schweitzer-Mauduit International, Inc.     600          14,700
- ----------------------------------------------------------------
 Standard Commercial Corp.                1,400          25,340
- ----------------------------------------------------------------
 Vector Group Ltd.                        1,100          12,782
                                                     -----------
                                                         52,822

- ----------------------------------------------------------------
 Energy--4. 1%
- ----------------------------------------------------------------
 Energy Equipment & Services--1.3%
 CHC Helicopter Corp., Cl. A                700          12,597
- ----------------------------------------------------------------
 Ensign Resource Service Group, Inc.      2,900          30,582
- ----------------------------------------------------------------
 Grey Wolf, Inc. 1                        4,500          17,955
- ----------------------------------------------------------------
 Gulfmark Offshore, Inc. 1                1,400          20,650
- ----------------------------------------------------------------
 Helmerich & Payne, Inc.                  1,300          36,283
- ----------------------------------------------------------------
 Hydril Co. 1                               700          16,499
- ----------------------------------------------------------------
 NS Group, Inc. 1                           300           1,956
- ----------------------------------------------------------------
 Oceaneering International, Inc. 1        1,700          42,058
- ----------------------------------------------------------------
 Offshore Logistics, Inc. 1                 600          13,152
- ----------------------------------------------------------------
 Oil States International, Inc. 1         1,500          19,350
- ----------------------------------------------------------------
 Parker Drilling Co. 1                      600           1,332
- ----------------------------------------------------------------
 Patterson-UTI Energy, Inc. 1               300           9,051
- ----------------------------------------------------------------
 Pride International, Inc. 1                700          10,430
- ----------------------------------------------------------------
 Tesco Corp. 1                              400           4,740
- ----------------------------------------------------------------
 Trican Well Service Ltd. 1               4,100          52,425
- ----------------------------------------------------------------
 Trico Marine Services, Inc. 1              700           2,331
- ----------------------------------------------------------------
 Unit Corp. 1                             1,700          31,535
- ----------------------------------------------------------------
 Willbros Group, Inc. 1                   2,900          23,838
                                                     -----------
                                                        346,764


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Oil & Gas--2.8%
 Baytex Energy Ltd. 1                     3,500    $     18,787
- ----------------------------------------------------------------
 Berry Petroleum Co., Cl. A                 100           1,705
- ----------------------------------------------------------------
 BlackRock Ventures, Inc. 1               7,000          10,457
- ----------------------------------------------------------------
 Brown (Tom), Inc. 1                      1,600          40,160
- ----------------------------------------------------------------
 Callon Petroleum Co. 1                   2,100           7,035
- ----------------------------------------------------------------
 Canadian 88 Energy Corp. 1,2            10,600          17,043
- ----------------------------------------------------------------
 Canadian 88 Energy Corp. 1               9,700          15,596
- ----------------------------------------------------------------
 Chesapeake Energy Corp.                  7,000          54,180
- ----------------------------------------------------------------
 Cimarex Energy Co. 1                     1,590          28,461
- ----------------------------------------------------------------
 Compton Petroleum Corp. 1               10,700          34,474
- ----------------------------------------------------------------
 Denbury Resources, Inc. 1                3,700          41,810
- ----------------------------------------------------------------
 Frontier Oil Corp.                       3,100          53,382
- ----------------------------------------------------------------
 Holly Corp.                              1,100          24,035
- ----------------------------------------------------------------
 Impact Energy, Inc. 1                    4,200           4,626
- ----------------------------------------------------------------
 Paramount Resources Ltd. 1               5,400          51,272
- ----------------------------------------------------------------
 Patina Oil & Gas Corp.                   1,325          41,936
- ----------------------------------------------------------------
 Peyto Exploration &
 Development Corp. 1                      7,600          53,640
- ----------------------------------------------------------------
 Pogo Producing Co.                         500          18,625
- ----------------------------------------------------------------
 Premcor, Inc. 1                          1,500          33,345
- ----------------------------------------------------------------
 Purcell Energy Ltd. 1                   15,300          28,183
- ----------------------------------------------------------------
 Quicksilver Resources, Inc. 1              900          20,187
- ----------------------------------------------------------------
 Rio Alto Resources International,
 Inc. 1                                  12,600           5,742
- ----------------------------------------------------------------
 St. Mary Land & Exploration Co.            200           5,000
- ----------------------------------------------------------------
 Stelmar Shipping Ltd. 1                    100           1,506
- ----------------------------------------------------------------
 Upton Resources, Inc. 1                  3,600           9,457
- ----------------------------------------------------------------
 Vermilion Resources Ltd. 1               6,400          45,373
- ----------------------------------------------------------------
 Western Gas Resources, Inc.              1,200          44,220
                                                     -----------
                                                        710,237

- ----------------------------------------------------------------
 Financials--13.4%
- ----------------------------------------------------------------
 Banks--10.1%
 1st Source Corp.                           500           8,375
- ----------------------------------------------------------------
 Allegiant Bancorp, Inc.                    400           7,292
- ----------------------------------------------------------------
 American Financial Holdings, Inc.          900          26,892
- ----------------------------------------------------------------
 Anchor BanCorp Wisconsin, Inc.           1,000          20,750
- ----------------------------------------------------------------
 Arrow Financial Corp.                      441          13,570
- ----------------------------------------------------------------
 Astoria Financial Corp.                    600          16,290
- ----------------------------------------------------------------
 BancFirst Corp.                            300          14,100
- ----------------------------------------------------------------
 Bank Mutual Corp.                        1,000          23,130
- ----------------------------------------------------------------
 Bank of Hawaii Corp.                       700          21,273
- ----------------------------------------------------------------
 Bank of the Ozarks, Inc.                   500          11,720
- ----------------------------------------------------------------
 BankUnited Financial Corp., Cl. A 1      2,100          33,978
- ----------------------------------------------------------------
 Bay View Capital Corp. 1                 2,000          11,500
- ----------------------------------------------------------------
 Berkshire Hills Bancorp, Inc.              300           7,065
- ----------------------------------------------------------------
 Brookline Bancorp, Inc.                  2,660          31,654
- ----------------------------------------------------------------
 Capital City Bank Group, Inc.              100           3,919

STATEMENT OF INVESTMENTS  Continued

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Banks Continued
 Capitol Bancorp Ltd.                       400    $      9,280
- ----------------------------------------------------------------
 Cascade Bancorp                            300           4,146
- ----------------------------------------------------------------
 Cathay Bancorp, Inc.                       200           7,598
- ----------------------------------------------------------------
 CB Bancshares, Inc.                        450          19,134
- ----------------------------------------------------------------
 CFS Bancorp, Inc.                        1,000          14,300
- ----------------------------------------------------------------
 Chemical Financial Corp.                   100           3,215
- ----------------------------------------------------------------
 Citizens First Bancorp, Inc.               400           8,424
- ----------------------------------------------------------------
 Citizens South Banking Corp.               400           4,080
- ----------------------------------------------------------------
 City Holding Co.                           500          14,130
- ----------------------------------------------------------------
 Coastal Bancorp, Inc.                      300           9,705
- ----------------------------------------------------------------
 Commercial Bankshares, Inc.                100           3,460
- ----------------------------------------------------------------
 Commonwealth Bancorp, Inc.               1,400          64,918
- ----------------------------------------------------------------
 Community First Bankshares, Inc.         1,200          31,752
- ----------------------------------------------------------------
 Connecticut Bancshares, Inc.             1,500          57,675
- ----------------------------------------------------------------
 CPB, Inc.                                  600          16,470
- ----------------------------------------------------------------
 CVB Financial Corp.                      1,175          29,880
- ----------------------------------------------------------------
 Dime Community Bancshares, Inc.          2,175          41,651
- ----------------------------------------------------------------
 East West Bancorp, Inc.                  1,000          36,080
- ----------------------------------------------------------------
 F&M Bancorp                                200           6,400
- ----------------------------------------------------------------
 F.N.B. Corp.                               735          20,227
- ----------------------------------------------------------------
 Fidelity Bankshares, Inc.                2,416          43,246
- ----------------------------------------------------------------
 First BanCorp, Puerto Rico                 950          21,470
- ----------------------------------------------------------------
 First Busey Corp.                          100           2,306
- ----------------------------------------------------------------
 First Charter Corp.                        200           3,602
- ----------------------------------------------------------------
 First Commonwealth Financial Corp.         100           1,150
- ----------------------------------------------------------------
 First Community Bancshares, Inc.         1,000          30,760
- ----------------------------------------------------------------
 First Essex Bancorp, Inc.                  200           6,680
- ----------------------------------------------------------------
 First Federal Capital Corp.              2,100          40,549
- ----------------------------------------------------------------
 First Financial Bankshares, Inc.           200           7,600
- ----------------------------------------------------------------
 First Financial Holdings, Inc.           1,100          27,236
- ----------------------------------------------------------------
 First Indiana Corp.                        475           8,792
- ----------------------------------------------------------------
 First Midwest Bancorp, Inc.                650          17,361
- ----------------------------------------------------------------
 First Niagara Financial Group, Inc.        900          23,508
- ----------------------------------------------------------------
 First Place Financial Corp.                800          13,304
- ----------------------------------------------------------------
 First State Bancorporation                 500          12,400
- ----------------------------------------------------------------
 FirstFed America Bancorp, Inc.             300           7,455
- ----------------------------------------------------------------
 Flagstar Bancorp, Inc.                   2,475          53,460
- ----------------------------------------------------------------
 Flushing Financial Corp.                 1,050          17,197
- ----------------------------------------------------------------
 Frontier Financial Corp.                   400          10,232
- ----------------------------------------------------------------
 Glacier Bancorp, Inc.                    1,300          30,628
- ----------------------------------------------------------------
 Granite State Bankshares, Inc.             500          21,845
- ----------------------------------------------------------------
 Hanmi Financial Corp.                      300           4,998
- ----------------------------------------------------------------
 Harbor Florida Bancshares, Inc.          2,500          56,300
- ----------------------------------------------------------------
 Harleysville National Corp.                300           7,959
- ----------------------------------------------------------------
 Hawthorne Financial Corp. 1                800          22,832



                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Banks Continued
 Hibernia Corp., Cl. A                      500    $      9,630
- ----------------------------------------------------------------
 Hudson River Bancorp, Inc.                 800          19,800
- ----------------------------------------------------------------
 Hudson United Bancorp                      700          21,770
- ----------------------------------------------------------------
 IBERIABANK Corp.                           900          36,144
- ----------------------------------------------------------------
 Independence Community Bank Corp.        2,100          53,298
- ----------------------------------------------------------------
 Independent Bank Corp.-
 Massachusetts                              800          18,240
- ----------------------------------------------------------------
 Independent Bank Corp.-Michigan          1,669          50,504
- ----------------------------------------------------------------
 International Bancshares Corp.             725          28,601
- ----------------------------------------------------------------
 ITLA Capital Corp. 1                     1,400          46,522
- ----------------------------------------------------------------
 Local Financial Corp. 1                  2,200          32,230
- ----------------------------------------------------------------
 LSB Bancshares, Inc.                       100           1,620
- ----------------------------------------------------------------
 MAF Bancorp, Inc.                        1,600          54,400
- ----------------------------------------------------------------
 Main Street Banks, Inc.                    400           7,680
- ----------------------------------------------------------------
 MB Financial, Inc.                         800          27,832
- ----------------------------------------------------------------
 Midwest Banc Holdings, Inc.              1,400          26,530
- ----------------------------------------------------------------
 National Penn Bancshares, Inc.             210           5,576
- ----------------------------------------------------------------
 NBT Bancorp, Inc.                        1,100          18,777
- ----------------------------------------------------------------
 OceanFirst Financial Corp.               1,300          29,185
- ----------------------------------------------------------------
 Old National Bancorp                       700          17,010
- ----------------------------------------------------------------
 Old Second Bancorp, Inc.                 1,133          41,921
- ----------------------------------------------------------------
 Oriental Financial Group, Inc.             230           5,653
- ----------------------------------------------------------------
 Pacific Capital Bancorp                  1,633          41,560
- ----------------------------------------------------------------
 Pacific Northwest Bancorp                2,500          62,500
- ----------------------------------------------------------------
 Peapack-Gladstone Financial Corp.          100           3,425
- ----------------------------------------------------------------
 PennFed Financial Services, Inc.           500          13,575
- ----------------------------------------------------------------
 PFF Bancorp, Inc.                          900          28,125
- ----------------------------------------------------------------
 Port Financial Corp.                     1,100          49,082
- ----------------------------------------------------------------
 Prosperity Bancshares, Inc.              4,000          76,000
- ----------------------------------------------------------------
 Provident Bankshares Corp.                 100           2,311
- ----------------------------------------------------------------
 Quaker City Bancorp, Inc. 1              1,100          36,223
- ----------------------------------------------------------------
 R&G Financial Corp., Cl. B               1,800          41,850
- ----------------------------------------------------------------
 Republic Bancorp, Inc.                     131           1,542
- ----------------------------------------------------------------
 Republic Bancorp, Inc., Cl. A            1,600          18,032
- ----------------------------------------------------------------
 Roslyn Bancorp, Inc.                     1,750          31,553
- ----------------------------------------------------------------
 S&T Bancorp, Inc.                        1,300          32,566
- ----------------------------------------------------------------
 Sandy Spring Bancorp, Inc.                 700          22,050
- ----------------------------------------------------------------
 Seacoast Banking Corp. of Florida        1,800          33,912
- ----------------------------------------------------------------
 Second Bancorp, Inc.                       700          18,550
- ----------------------------------------------------------------
 South Financial Group, Inc. (The)          700          14,462
- ----------------------------------------------------------------
 Southern Financial Bancorp, Inc.           200           6,020
- ----------------------------------------------------------------
 Southwest Bancorp, Inc.                    100           2,576
- ----------------------------------------------------------------
 St. Francis Capital Corp.                  600          14,052
- ----------------------------------------------------------------
 State Bancorp, Inc.                        855          15,390
- ----------------------------------------------------------------
 Staten Island Bancorp, Inc.              2,100          42,294

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Banks Continued
 Sterling Bancshares, Inc.                  100    $      1,222
- ----------------------------------------------------------------
 Sun Bancorp, Inc. 1                        300           3,990
- ----------------------------------------------------------------
 Superior Financial Corp.                   800          14,697
- ----------------------------------------------------------------
 Texas Regional Bancshares, Inc., Cl. A     600          21,325
- ----------------------------------------------------------------
 TierOne Corp. 1                          1,800          27,288
- ----------------------------------------------------------------
 TriCo Bancshares                           300           7,380
- ----------------------------------------------------------------
 Troy Financial Corp.                       895          24,147
- ----------------------------------------------------------------
 U.S.B. Holding Co., Inc.                   400           7,080
- ----------------------------------------------------------------
 UCBH Holdings, Inc.                        700          29,715
- ----------------------------------------------------------------
 UMB Financial Corp.                        300          11,478
- ----------------------------------------------------------------
 Unizan Financial Corp.                     965          19,059
- ----------------------------------------------------------------
 Webster Financial Corp.                    800          27,840
- ----------------------------------------------------------------
 WesBanco, Inc.                             400           9,356
- ----------------------------------------------------------------
 Westcorp                                 1,000          21,000
- ----------------------------------------------------------------
 Willow Grove Bancorp, Inc.               1,300          18,070
- ----------------------------------------------------------------
 WSFS Financial Corp.                     1,400          46,158
                                                     -----------
                                                      2,597,281

- ----------------------------------------------------------------
 Diversified Financials--1.3%
 American Home Mortgage
 Holdings, Inc.                             500           5,500
- ----------------------------------------------------------------
 Cash America International, Inc.         3,200          30,464
- ----------------------------------------------------------------
 Credit Acceptance Corp. 1                2,300          14,676
- ----------------------------------------------------------------
 Dominion Resources
 Black Warrior Trust                        300           6,495
- ----------------------------------------------------------------
 Doral Financial Corp.                    1,250          35,750
- ----------------------------------------------------------------
 E*TRADE Group, Inc. 1                    3,300          16,038
- ----------------------------------------------------------------
 Federal Agricultural
 Mortgage Corp., Non-Vtg. 1                 100           3,064
- ----------------------------------------------------------------
 Financial Federal Corp. 1                  400          10,052
- ----------------------------------------------------------------
 Friedman, Billings, Ramsey Group, Inc. 1 4,700          43,992
- ----------------------------------------------------------------
 iDine Rewards Network, Inc. 1            1,700          18,054
- ----------------------------------------------------------------
 Metris Cos., Inc.                        7,500          18,525
- ----------------------------------------------------------------
 New Century Financial Corp.              1,400          35,546
- ----------------------------------------------------------------
 Providian Financial Corp. 1              7,800          50,622
- ----------------------------------------------------------------
 SoundView Technology Group, Inc. 1       1,200           1,800
- ----------------------------------------------------------------
 Student Loan Corp. (The)                   400          39,120
- ----------------------------------------------------------------
 World Acceptance Corp. 1                   300           2,283
                                                     -----------
                                                        331,981

- ----------------------------------------------------------------
 Insurance--1.8%
 Alfa Corp.                               2,000          24,022
- ----------------------------------------------------------------
 American Medical Security
 Group, Inc. 1                            1,300          18,174
- ----------------------------------------------------------------
 AmerUs Group Co.                         1,400          39,578
- ----------------------------------------------------------------
 ANFI, Inc.                               2,125          31,344
- ----------------------------------------------------------------
 Brown & Brown, Inc.                      1,100          35,552



                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Insurance Continued
 Citizens, Inc. 1                           500    $      3,750
- ----------------------------------------------------------------
 CNA Surety Corp.                         1,100           8,635
- ----------------------------------------------------------------
 Commerce Group, Inc. (The)                 400          14,996
- ----------------------------------------------------------------
 Fidelity National Financial, Inc.          660          21,668
- ----------------------------------------------------------------
 Fremont General Corp.                    2,800          12,572
- ----------------------------------------------------------------
 Hub International Ltd.                     800          10,264
- ----------------------------------------------------------------
 IPC Holdings Ltd. 1                        500          15,770
- ----------------------------------------------------------------
 LandAmerica Financial Group, Inc.          100           3,545
- ----------------------------------------------------------------
 Odyssey Re Holdings Corp.                1,600          28,320
- ----------------------------------------------------------------
 Ohio Casualty Corp. 1                      600           7,770
- ----------------------------------------------------------------
 Pico Holdings, Inc. 1                      100           1,324
- ----------------------------------------------------------------
 Reinsurance Group of America, Inc.       1,200          32,496
- ----------------------------------------------------------------
 RenaissanceRe Holdings Ltd.              1,200          47,520
- ----------------------------------------------------------------
 RLI Corp.                                1,400          39,060
- ----------------------------------------------------------------
 StanCorp Financial Group, Inc.             200           9,770
- ----------------------------------------------------------------
 Stewart Information Services Corp. 1       800          17,112
- ----------------------------------------------------------------
 Triad Guaranty, Inc. 1                     800          29,488
- ----------------------------------------------------------------
 Zenith National Insurance Corp.            500          11,760
                                                     -----------
                                                        464,490

- ----------------------------------------------------------------
 Real Estate--0.2%
 Anworth Mortgage Asset Corp.               900          11,313
- ----------------------------------------------------------------
 Apex Mortgage Capital, Inc.                600           3,924
- ----------------------------------------------------------------
 Capital Automotive REIT                    300           7,110
- ----------------------------------------------------------------
 Chelsea Property Group, Inc.               200           6,662
- ----------------------------------------------------------------
 Correctional Properties Trust              200           4,340
- ----------------------------------------------------------------
 Jones Lang LaSalle, Inc. 1                 300           4,614
- ----------------------------------------------------------------
 Pan Pacific Retail Properties, Inc.        200           7,306
- ----------------------------------------------------------------
 Prentiss Properties Trust                  200           5,656
- ----------------------------------------------------------------
 Ramco-Gershenson Properties Trust          400           7,900
- ----------------------------------------------------------------
 Redwood Trust, Inc.                        100           2,770
                                                     -----------
                                                         61,595

 HEALTH CARE--13.9%
- ----------------------------------------------------------------
 Biotechnology--5.2%
 Abgenix, Inc. 1                          2,900          21,373
- ----------------------------------------------------------------
 Adolor Corp. 1                             600           8,346
- ----------------------------------------------------------------
 Alkermes, Inc. 1                           900           5,643
- ----------------------------------------------------------------
 Amylin Pharmaceuticals, Inc. 1           1,800          29,052
- ----------------------------------------------------------------
 Applera Corp./Celera
 Genomics Group 1                         5,800          55,390
- ----------------------------------------------------------------
 Ariad Pharmaceuticals, Inc. 1              500           1,160
- ----------------------------------------------------------------
 ArQule, Inc. 1                             800           2,440
- ----------------------------------------------------------------
 Array BioPharma, Inc. 1                  1,700           9,435
- ----------------------------------------------------------------
 AVI BioPharma, Inc. 1                    1,100           5,500
- ----------------------------------------------------------------
 Bentley Pharmaceuticals, Inc. 1            100             805

STATEMENT OF INVESTMENTS  Continued

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Biotechnology Continued
 BioMarin Pharmaceutical, Inc. 1          1,500    $     10,575
- ----------------------------------------------------------------
 BioReliance Corp. 1                      1,700          39,389
- ----------------------------------------------------------------
 Caliper Technologies Corp. 1               700           2,072
- ----------------------------------------------------------------
 Celgene Corp. 1                          2,300          49,381
- ----------------------------------------------------------------
 Cell Genesys, Inc. 1                       100           1,115
- ----------------------------------------------------------------
 Cephalon, Inc. 1                           600          29,201
- ----------------------------------------------------------------
 Charles River Laboratories
 International, Inc. 1                      800          30,784
- ----------------------------------------------------------------
 Ciphergen Biosystems, Inc. 1               400           1,380
- ----------------------------------------------------------------
 CuraGen Corp. 1                          3,100          14,415
- ----------------------------------------------------------------
 CV Therapeutics, Inc. 1                  1,000          18,220
- ----------------------------------------------------------------
 deCODE genetics, Inc. 1                    500             925
- ----------------------------------------------------------------
 Discovery Partners International, Inc. 1   200             556
- ----------------------------------------------------------------
 Diversa Corp. 1                            800           7,240
- ----------------------------------------------------------------
 Embrex, Inc. 1                           1,200          13,353
- ----------------------------------------------------------------
 Enzo Biochem, Inc. 1                     1,000          14,000
- ----------------------------------------------------------------
 Exact Sciences Corp. 1                   3,900          42,237
- ----------------------------------------------------------------
 Exelixis, Inc. 1                         1,700          13,600
- ----------------------------------------------------------------
 Gen-Probe, Inc. 1                        2,300          54,738
- ----------------------------------------------------------------
 Genta, Inc. 1                            6,200          47,678
- ----------------------------------------------------------------
 ICOS Corp. 1                             1,100          25,751
- ----------------------------------------------------------------
 Idexx Laboratories, Inc. 1               1,800          59,130
- ----------------------------------------------------------------
 ILEX Oncology, Inc. 1                      600           4,236
- ----------------------------------------------------------------
 ImClone Systems, Inc. 1                  2,600          27,615
- ----------------------------------------------------------------
 ImmunoGen, Inc. 1                          700           2,170
- ----------------------------------------------------------------
 Incyte Pharmaceuticals, Inc. 1           1,800           8,208
- ----------------------------------------------------------------
 Ligand Pharmaceuticals, Inc., Cl. B 1    1,900          10,203
- ----------------------------------------------------------------
 Luminex Corp. 1                            700           2,877
- ----------------------------------------------------------------
 Martek Biosciences Corp. 1               2,300          57,592
- ----------------------------------------------------------------
 Medicines Co. (The) 1                    3,600          57,672
- ----------------------------------------------------------------
 Myriad Genetics, Inc. 1                  3,400          49,640
- ----------------------------------------------------------------
 NeoPharm, Inc. 1                           300           3,042
- ----------------------------------------------------------------
 Neose Technologies, Inc. 1                 300           2,592
- ----------------------------------------------------------------
 Nuerocrine Biosciences, Inc. 1             800          36,528
- ----------------------------------------------------------------
 Protein Design Labs, Inc. 1              6,600          56,100
- ----------------------------------------------------------------
 Regeneron Pharmaceuticals, Inc. 1        1,900          35,169
- ----------------------------------------------------------------
 Ribapharm, Inc. 1                        2,200          14,410
- ----------------------------------------------------------------
 SangStat Medical Corp. 1                 2,500          28,250
- ----------------------------------------------------------------
 Sepracor, Inc. 1                         6,600          63,822
- ----------------------------------------------------------------
 Tanox, Inc. 1                              900           8,145
- ----------------------------------------------------------------
 Techne Corp. 1                           1,100          31,425
- ----------------------------------------------------------------
 Telik, Inc. 1                            4,900          57,134
- ----------------------------------------------------------------
 Trimeris, Inc. 1                         1,100          47,487
- ----------------------------------------------------------------
 Tularik, Inc. 1                          3,300          24,618
- ----------------------------------------------------------------
 United Therapeutics Corp. 1              2,100          35,070
- ----------------------------------------------------------------
 V.I. Technologies, Inc. 1                1,800           1,818



                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Biotechnology Continued
 VaxGen, Inc. 1                           1,700      $   32,827
- ----------------------------------------------------------------
 XOMA Ltd. 1                              3,500          14,805
                                                     -----------
                                                      1,328,339

- ----------------------------------------------------------------
 Health Care Equipment & Supplies--3.4%
 ABIOMED, Inc. 1                            400           1,456
- ----------------------------------------------------------------
 Advanced Medical Optics, Inc. 1          2,800          33,516
- ----------------------------------------------------------------
 Advanced Neuromodulation
 Systems, Inc. 1                          1,000          35,100
- ----------------------------------------------------------------
 Alaris Medical, Inc. 1                   2,900          17,690
- ----------------------------------------------------------------
 Arrow International, Inc.                  200           8,134
- ----------------------------------------------------------------
 Bio-Rad Laboratories, Inc., Cl. A 1        500          19,350
- ----------------------------------------------------------------
 Biosite, Inc. 1                          2,200          74,844
- ----------------------------------------------------------------
 Cardiac Science, Inc. 1                  1,200           2,652
- ----------------------------------------------------------------
 CardioDynamics International Corp. 1       400           1,228
- ----------------------------------------------------------------
 Cerus Corp. 1                            1,400          30,100
- ----------------------------------------------------------------
 Conceptus, Inc. 1                        1,400          16,772
- ----------------------------------------------------------------
 Cooper Cos., Inc. (The)                  1,400          35,028
- ----------------------------------------------------------------
 Cyberonics, Inc. 1                         500           9,200
- ----------------------------------------------------------------
 HealthTronics Surgical Services, Inc. 1  1,700          13,619
- ----------------------------------------------------------------
 Hologic, Inc. 1                          4,200          51,282
- ----------------------------------------------------------------
 ICU Medical, Inc. 1                        100           3,730
- ----------------------------------------------------------------
 Immucor, Inc. 1                          3,500          70,875
- ----------------------------------------------------------------
 Intuitive Surgical, Inc. 1               1,300           8,008
- ----------------------------------------------------------------
 Kyphon, Inc. 1                             600           5,124
- ----------------------------------------------------------------
 Lifeline Systems, Inc. 1                   400           8,972
- ----------------------------------------------------------------
 Meridian Medical Technologies, Inc. 1    1,500          66,600
- ----------------------------------------------------------------
 Merit Medical Systems, Inc. 1            3,325          66,234
- ----------------------------------------------------------------
 Mine Safety Applicances Co.                300           9,675
- ----------------------------------------------------------------
 Ocular Sciences, Inc. 1                  1,300          20,176
- ----------------------------------------------------------------
 OrthoLogic Corp. 1                       2,400           8,664
- ----------------------------------------------------------------
 Osteotech, Inc. 1                          700           4,508
- ----------------------------------------------------------------
 PolyMedica Corp. 1                         800          24,672
- ----------------------------------------------------------------
 Possis Medical, Inc. 1                   1,500          27,000
- ----------------------------------------------------------------
 Quidel Corp. 1                           1,400           4,857
- ----------------------------------------------------------------
 Radiologix, Inc. 1                       2,100           4,851
- ----------------------------------------------------------------
 Rita Medical Systems, Inc. 1               200           1,010
- ----------------------------------------------------------------
 Steris Corp. 1                           2,200          53,350
- ----------------------------------------------------------------
 SurModics, Inc. 1                        1,400          40,152
- ----------------------------------------------------------------
 Theragenics Corp. 1                        900           3,627
- ----------------------------------------------------------------
 Vasomedical, Inc. 1                      1,200           1,128
- ----------------------------------------------------------------
 Vital Signs, Inc.                          700          20,916
- ----------------------------------------------------------------
 West Pharmaceutical Services, Inc.         400           9,760
- ----------------------------------------------------------------
 Wright Medical Group, Inc. 1               700          12,221
- ----------------------------------------------------------------
 Young Innovations, Inc. 1                2,250          52,357
                                                     -----------
                                                        878,438

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Health Care Providers & Services--3.4%
 Alliance Imaging, Inc. 1                   500    $      2,650
- ----------------------------------------------------------------
 Allscripts Healthcare Solutions, Inc. 1    100             239
- ----------------------------------------------------------------
 AMERIGROUP Corp. 1                         800          24,248
- ----------------------------------------------------------------
 AMN Healthcare Services, Inc. 1            500           8,455
- ----------------------------------------------------------------
 AmSurg Corp. 1                           1,500          30,645
- ----------------------------------------------------------------
 Apria Healthcare Group, Inc. 1           1,100          24,464
- ----------------------------------------------------------------
 Beverly Enterprises, Inc. 1              6,400          18,240
- ----------------------------------------------------------------
 Centene Corp. 1                            400          13,436
- ----------------------------------------------------------------
 Cobalt Corp. 1                             400           5,520
- ----------------------------------------------------------------
 CorVel Corp. 1                           1,500          53,625
- ----------------------------------------------------------------
 Covance, Inc. 1                          3,100          76,229
- ----------------------------------------------------------------
 Coventry Health Care, Inc. 1             1,100          31,933
- ----------------------------------------------------------------
 CryoLife, Inc. 1                           600           4,098
- ----------------------------------------------------------------
 Curative Health Services, Inc. 1           600          10,350
- ----------------------------------------------------------------
 D&K Healthcare Resources, Inc.           1,000          10,241
- ----------------------------------------------------------------
 DaVita, Inc. 1                           2,000          49,340
- ----------------------------------------------------------------
 Dynacq International, Inc.                 300           4,310
- ----------------------------------------------------------------
 eResearch Technology, Inc. 1             2,350          39,362
- ----------------------------------------------------------------
 Genesis Health Ventures, Inc. 1            900          13,905
- ----------------------------------------------------------------
 Gentiva Health Services, Inc.            1,900          16,739
- ----------------------------------------------------------------
 Hanger Orthopedic Group, Inc. 1          3,400          44,710
- ----------------------------------------------------------------
 IDX Systems Corp. 1                      1,200          20,436
- ----------------------------------------------------------------
 LabOne, Inc. 1                           1,100          19,492
- ----------------------------------------------------------------
 Magellan Health Services, Inc. 1         1,500             240
- ----------------------------------------------------------------
 MedCath Corp. 1                            100           1,000
- ----------------------------------------------------------------
 Mid Atlantic Medical Services, Inc. 1      200           6,480
- ----------------------------------------------------------------
 Odyssey Healthcare, Inc. 1               1,000          34,700
- ----------------------------------------------------------------
 Oxford Health Plans, Inc. 1                500          18,225
- ----------------------------------------------------------------
 PacifiCare Health Systems, Inc. 1          900          25,290
- ----------------------------------------------------------------
 Pediatrix Medical Group, Inc. 1            800          32,048
- ----------------------------------------------------------------
 Per-Se Technologies, Inc. 1              3,000          26,907
- ----------------------------------------------------------------
 PSS World Medical, Inc. 1                1,800          12,312
- ----------------------------------------------------------------
 Schein (Henry), Inc. 1                     600          27,000
- ----------------------------------------------------------------
 Select Medical Corp. 1                   1,200          16,188
- ----------------------------------------------------------------
 Sierra Health Services, Inc. 1           3,200          38,432
- ----------------------------------------------------------------
 U.S. Physical Therapy, Inc. 1            2,400          26,760
- ----------------------------------------------------------------
 United Surgical Partners
 International, Inc. 1                      500           7,811
- ----------------------------------------------------------------
 US Oncology, Inc. 1                      1,700          14,739
- ----------------------------------------------------------------
 VCA Antech, Inc. 1                         400           6,000
- ----------------------------------------------------------------
 VitalWorks, Inc. 1                       8,000          30,800
- ----------------------------------------------------------------
 WellChoice, Inc. 1                       1,200          28,740
                                                     -----------
                                                        876,339



                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Pharmaceuticals--1.9%
 aaiPharma, Inc. 1                        1,600    $     22,432
- ----------------------------------------------------------------
 Able Laboratories, Inc. 1                  100           1,160
- ----------------------------------------------------------------
 Allos Therapeutics, Inc. 1                 500           3,760
- ----------------------------------------------------------------
 American Pharmaceutical
 Partners, Inc. 1                         1,900          33,820
- ----------------------------------------------------------------
 AtheroGenics, Inc. 1                       500           3,705
- ----------------------------------------------------------------
 Bradley Pharmaceuticals, Inc. 1          1,200          15,636
- ----------------------------------------------------------------
 CIMA Labs, Inc. 1                        1,200          29,029
- ----------------------------------------------------------------
 Connetics Corp. 1                          800           9,616
- ----------------------------------------------------------------
 Dendreon Corp. 1                           100             531
- ----------------------------------------------------------------
 Endo Pharmaceuticals Holdings, Inc.      2,100          16,168
- ----------------------------------------------------------------
 Eon Labs, Inc. 1                         1,000          18,910
- ----------------------------------------------------------------
 Guilford Pharmaceuticals, Inc. 1         2,000           7,960
- ----------------------------------------------------------------
 ICN Pharmaceuticals, Inc.                3,200          34,912
- ----------------------------------------------------------------
 Impax Laboratories, Inc. 1                 200             802
- ----------------------------------------------------------------
 Isis Pharmaceuticals, Inc. 1             5,100          33,609
- ----------------------------------------------------------------
 K-V Pharmaceutical Co., Cl. A 1            100           2,320
- ----------------------------------------------------------------
 Kos Pharmaceuticals, Inc. 1              1,100          20,900
- ----------------------------------------------------------------
 La Jolla Pharmaceutical Co. 1              100             650
- ----------------------------------------------------------------
 Lannett Co., Inc. 1                      1,300          21,294
- ----------------------------------------------------------------
 Noven Pharmaceuticals, Inc. 1              600           5,538
- ----------------------------------------------------------------
 Penwest Pharmaceuticals Co. 1            1,100          11,660
- ----------------------------------------------------------------
 Perrigo Co. 1                            2,600          31,590
- ----------------------------------------------------------------
 Pharmaceutical Resources, Inc. 1         1,900          56,620
- ----------------------------------------------------------------
 PRAECIS Pharmaceuticals, Inc. 1            100             325
- ----------------------------------------------------------------
 Salix Pharmaceuticals Ltd. 1               700           4,893
- ----------------------------------------------------------------
 Scios-Nova, Inc. 1                         800          26,064
- ----------------------------------------------------------------
 Taro Pharmaceutical Industries Ltd. 1    1,700          63,920
- ----------------------------------------------------------------
 Versicor, Inc. 1                           100           1,079
                                                     -----------
                                                        478,903

- ----------------------------------------------------------------
 Industrials--14.6%
- ----------------------------------------------------------------
 Aerospace & Defense--1.6%
 AAR Corp.                                  800           4,120
- ----------------------------------------------------------------
 Allied Research Corp. 1                  1,100          20,350
- ----------------------------------------------------------------
 Aviall, Inc. 1                           2,900          23,345
- ----------------------------------------------------------------
 Cubic Corp.                              1,500          27,645
- ----------------------------------------------------------------
 Curtiss-Wright Corp.                       200          12,764
- ----------------------------------------------------------------
 Ducommun, Inc. 1                         1,500          23,775
- ----------------------------------------------------------------
 Engineered Support Systems, Inc.           100           3,666
- ----------------------------------------------------------------
 ESCO Technologies, Inc. 1                  900          33,300
- ----------------------------------------------------------------
 Goodrich Corp.                           1,700          31,144
- ----------------------------------------------------------------
 InVision Technologies, Inc. 1            1,200          31,632
- ----------------------------------------------------------------
 Ladish Co., Inc. 1                         500           4,030

STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Aerospace & Defense Continued
 Mercury Computer Systems, Inc. 1         1,400    $     42,728
- ----------------------------------------------------------------
 MTC Technologies, Inc. 1                   800          20,240
- ----------------------------------------------------------------
 Orbital Sciences Corp. 1                 2,200           9,284
- ----------------------------------------------------------------
 Precision Castparts Corp.                1,400          33,950
- ----------------------------------------------------------------
 Sequa Corp., Cl A 1                        100           3,911
- ----------------------------------------------------------------
 Veridian Corp. 1                         2,100          44,814
- ----------------------------------------------------------------
 World Fuel Services Corp.                2,100          43,050
                                                     -----------
                                                        413,748

- ----------------------------------------------------------------
 Air Freight & Couriers--0.2%
 Airborne, Inc.                           2,400          35,592
- ----------------------------------------------------------------
 EGL, Inc. 1                              1,000          14,250
                                                     -----------
                                                         49,842

- ----------------------------------------------------------------
 Airlines--0.7%
 AMR Corp. 1                              8,500          56,100
- ----------------------------------------------------------------
 Atlantic Coast Airlines Holdings, Inc. 1   400           4,812
- ----------------------------------------------------------------
 Continental Airlines, Inc., Cl. B        7,700          55,825
- ----------------------------------------------------------------
 Delta Air Lines, Inc.                    1,400          16,940
- ----------------------------------------------------------------
 Frontier Airlines, Inc. 1                1,500          10,140
- ----------------------------------------------------------------
 Mesa Air Group, Inc. 1                     600           2,442
- ----------------------------------------------------------------
 Midwest Express Holdings, Inc. 1           500           2,675
- ----------------------------------------------------------------
 Northwest Airlines Corp., Cl. A 1        4,400          32,296
- ----------------------------------------------------------------
 SkyWest, Inc.                              600           7,842
                                                     -----------
                                                        189,072

- ----------------------------------------------------------------
 Building Products--1.5%
 Aaon, Inc. 1                             2,350          43,311
- ----------------------------------------------------------------
 American Woodmark Corp.                    900          42,750
- ----------------------------------------------------------------
 Drew Industries, Inc. 1                  1,500          24,075
- ----------------------------------------------------------------
 ElkCorp                                    500           8,650
- ----------------------------------------------------------------
 Griffon Corp. 1                          3,370          45,899
- ----------------------------------------------------------------
 Lennox International, Inc.               2,900          36,395
- ----------------------------------------------------------------
 NCI Building Systems, Inc. 1               700          15,274
- ----------------------------------------------------------------
 Simpson Manufacturing Co., Inc. 1          600          19,740
- ----------------------------------------------------------------
 Trex Co., Inc. 1                         2,200          77,660
- ----------------------------------------------------------------
 Universal Forest Products, Inc.          1,800          38,378
- ----------------------------------------------------------------
 USG Corp. 1                              2,800          23,660
- ----------------------------------------------------------------
 Watsco, Inc.                               700          11,466
                                                     -----------
                                                        387,258

- ----------------------------------------------------------------
 Commercial Services & Supplies--4.9%
 Angelica Corp.                           1,500          30,975
- ----------------------------------------------------------------
 Arbitron, Inc. 1                           200           6,700
- ----------------------------------------------------------------
 Bowne & Co., Inc.                        1,600          19,120
- ----------------------------------------------------------------
 Bright Horizons Family Solutions, Inc. 1 1,000          28,120
- ----------------------------------------------------------------
 CCC Information Services Group, Inc. 1   2,000          35,458



                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Commercial Services & Supplies Continued
 CDI Corp. 1                                600    $     16,188
- ----------------------------------------------------------------
 Central Parking Corp.                    1,100          20,746
- ----------------------------------------------------------------
 Century Business Services, Inc. 1          700           1,855
- ----------------------------------------------------------------
 Coinstar, Inc. 1                         2,100          47,565
- ----------------------------------------------------------------
 Consolidated Graphics, Inc.                500          11,125
- ----------------------------------------------------------------
 Corinthian Colleges, Inc. 1              1,200          45,432
- ----------------------------------------------------------------
 CSG Systems International, Inc. 1        1,200          16,380
- ----------------------------------------------------------------
 Dun & Bradstreet Corp. 1                   400          13,796
- ----------------------------------------------------------------
 Ennis Business Forms, Inc.               1,800          20,916
- ----------------------------------------------------------------
 eSPEED, Inc., Cl. A 1                    2,900          49,129
- ----------------------------------------------------------------
 G&K Services, Inc., Cl. A                1,400          49,561
- ----------------------------------------------------------------
 General Binding Corp. 1                  1,400          11,872
- ----------------------------------------------------------------
 Global Payments, Inc.                    1,100          35,211
- ----------------------------------------------------------------
 Harland (John H.) Co.                      300           6,639
- ----------------------------------------------------------------
 Headwaters, Inc. 1                       2,700          41,877
- ----------------------------------------------------------------
 Healthcare Services Group, Inc. 1          900          11,736
- ----------------------------------------------------------------
 ICT Group, Inc. 1                        2,600          30,134
- ----------------------------------------------------------------
 Imagistics International, Inc. 1         2,500          50,000
- ----------------------------------------------------------------
 Information Resources, Inc. 1              300             480
- ----------------------------------------------------------------
 infoUSA, Inc. 1                          4,200          20,874
- ----------------------------------------------------------------
 Interpool, Inc.                          1,200          19,272
- ----------------------------------------------------------------
 ITT Educational Services, Inc. 1         2,000          47,100
- ----------------------------------------------------------------
 Korn/Ferry International 1                 300           2,244
- ----------------------------------------------------------------
 Labor Ready, Inc. 1                      7,000          44,940
- ----------------------------------------------------------------
 Landauer, Inc.                             800          27,800
- ----------------------------------------------------------------
 Miller (Herman), Inc.                    1,100          20,240
- ----------------------------------------------------------------
 Moore Corp. Ltd.                         4,800          43,680
- ----------------------------------------------------------------
 National Processing, Inc. 1                400           6,420
- ----------------------------------------------------------------
 New England Business Service, Inc.         500          12,200
- ----------------------------------------------------------------
 Pittston Brink's Group                   1,600          29,568
- ----------------------------------------------------------------
 PRG-Schultz International, Inc. 1        2,500          22,250
- ----------------------------------------------------------------
 Regis Corp.                              1,400          36,386
- ----------------------------------------------------------------
 RemedyTemp, Inc. 1                         100           1,400
- ----------------------------------------------------------------
 Right Management Consultants, Inc. 1     3,375          44,719
- ----------------------------------------------------------------
 RMH Teleservices, Inc. 1                   400           4,200
- ----------------------------------------------------------------
 Rollins, Inc.                            1,700          43,265
- ----------------------------------------------------------------
 Schawk, Inc.                             1,000           9,910
- ----------------------------------------------------------------
 SITEL Corp. 1                              400             480
- ----------------------------------------------------------------
 Sotheby's Holdings, Inc., Cl. A 1          700           6,300
- ----------------------------------------------------------------
 Standard Register Co. (The)                700          12,600
- ----------------------------------------------------------------
 Steelcase, Inc., Cl. A                     300           3,288
- ----------------------------------------------------------------
 Strayer Education, Inc.                    300          17,250
- ----------------------------------------------------------------
 Sylvan Learning Systems, Inc. 1            400           6,560
- ----------------------------------------------------------------
 United Stationers, Inc. 1                  800          23,041
- ----------------------------------------------------------------
 University of Phoenix Online 1           1,200          43,008
- ----------------------------------------------------------------
 Wackenhut Corrections Corp. 1              700           7,777


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
Commercial Services & Supplies Continued
Wallace Computer Services, Inc.           1,900      $   40,869
- ----------------------------------------------------------------
Waste Connections, Inc. 1                 1,700          65,637
                                                     -----------
                                                      1,264,293

- ----------------------------------------------------------------
Construction & Engineering--0.3%
Butler Manufacturing Co.                    200           3,870
- ----------------------------------------------------------------
Comfort Systems USA, Inc. 1               4,200          14,070
- ----------------------------------------------------------------
EMCOR Group, Inc. 1                         500          26,505
- ----------------------------------------------------------------
Integrated Electrical Services, Inc. 1      700           2,695
- ----------------------------------------------------------------
Quanta Services, Inc. 1                     700           2,450
- ----------------------------------------------------------------
Shaw Group, Inc. (The) 1                    800          13,160
- ----------------------------------------------------------------
URS Corp. 1                                 100           1,423
                                                     -----------
                                                         64,173

- ----------------------------------------------------------------
Electrical Equipment--0.6%
Acuity Brands, Inc.                         300           4,062
- ----------------------------------------------------------------
Baldor Electric Co.                         200           3,950
- ----------------------------------------------------------------
Energy Conversion Devices, Inc. 1           100             980
- ----------------------------------------------------------------
Franklin Electric Co., Inc.                 700          33,607
- ----------------------------------------------------------------
FuelCell Energy, Inc. 1                   1,100           7,207
- ----------------------------------------------------------------
Genlyte Group, Inc. (The) 1               1,200          37,392
- ----------------------------------------------------------------
Paxar Corp. 1                             1,400          20,650
- ----------------------------------------------------------------
Plug Power, Inc. 1                          300           1,347
- ----------------------------------------------------------------
Power-One, Inc. 1                           400           2,268
- ----------------------------------------------------------------
Signal Technology Corp. 1                 1,800          19,404
- ----------------------------------------------------------------
Thomas & Betts Corp. 1                      600          10,140
- ----------------------------------------------------------------
Vicor Corp. 1                               200           1,650
                                                     -----------
                                                        142,657

- ----------------------------------------------------------------
Industrial Conglomerates--0.4%
Carlisle Cos., Inc.                         500          20,690
- ----------------------------------------------------------------
Lydall, Inc. 1                              800           9,080
- ----------------------------------------------------------------
Tredegar Corp.                            1,500          22,500
- ----------------------------------------------------------------
United Industrial Corp.                   2,100          33,600
- ----------------------------------------------------------------
Walter Industries, Inc.                   1,300          14,079
                                                     -----------
                                                         99,949

- ----------------------------------------------------------------
Machinery--3.2%
Actuant Corp., Cl. A 1                    1,200          55,740
- ----------------------------------------------------------------
AGCO Corp. 1                                900          19,890
- ----------------------------------------------------------------
Albany International Corp., Cl. A           200           4,132
- ----------------------------------------------------------------
Barnes Group, Inc.                        1,100          22,385
- ----------------------------------------------------------------
Briggs & Stratton Corp.                   1,200          50,964
- ----------------------------------------------------------------
Chicago Bridge & Iron Co. NV              1,700          51,340
- ----------------------------------------------------------------
CIRCOR International, Inc.                1,700          27,030
- ----------------------------------------------------------------
Clarcor, Inc.                               900          29,043
- ----------------------------------------------------------------
Cummins, Inc.                             2,000          56,260


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
Machinery Continued
Cuno, Inc. 1                              1,400      $   46,368
- ----------------------------------------------------------------
Dionex Corp. 1                              900          26,703
- ----------------------------------------------------------------
Donaldson Co., Inc.                         400          14,400
- ----------------------------------------------------------------
Encore Wire Corp. 1                       1,900          17,195
- ----------------------------------------------------------------
Gardner Denver, Inc. 1                      400           8,120
- ----------------------------------------------------------------
Global Power Equipment Group, Inc. 1        700           3,451
- ----------------------------------------------------------------
Graco, Inc.                               1,050          30,083
- ----------------------------------------------------------------
Harsco Corp.                              1,200          38,268
- ----------------------------------------------------------------
JLG Industries, Inc.                        700           5,271
- ----------------------------------------------------------------
Kaydon Corp.                                500          10,605
- ----------------------------------------------------------------
Lindsay Manufacturing Co.                 1,200          25,680
- ----------------------------------------------------------------
Milacron, Inc.                              600           3,570
- ----------------------------------------------------------------
NACCO Industries, Inc., Cl. A               200           8,754
- ----------------------------------------------------------------
Navistar International Corp. 1              600          14,586
- ----------------------------------------------------------------
Oshkosh Truck Corp.                         800          49,200
- ----------------------------------------------------------------
Osmonics, Inc. 1                          1,800          30,492
- ----------------------------------------------------------------
Packaging Dynamics Corp. 1                  360           2,376
- ----------------------------------------------------------------
Regal-Beloit Corp.                          200           4,140
- ----------------------------------------------------------------
Reliance Steel & Aluminum Co.               100           2,084
- ----------------------------------------------------------------
Thomas Industries, Inc.                   1,700          44,302
- ----------------------------------------------------------------
Timken Co.                                2,900          55,390
- ----------------------------------------------------------------
U.S. Industries, Inc. 1                   1,100           2,893
- ----------------------------------------------------------------
UNOVA, Inc. 1                               900           5,400
- ----------------------------------------------------------------
Valmont Industries, Inc.                  1,500          29,100
- ----------------------------------------------------------------
Wabash National Corp. 1                     900           7,542
- ----------------------------------------------------------------
Watts Industries, Inc., Cl. A             1,700          26,758
                                                     -----------
                                                        829,515

- ----------------------------------------------------------------
Marine--0.1%
Alexander & Baldwin, Inc.                   700          18,053
- ----------------------------------------------------------------
Maritrans, Inc.                             400           5,400
                                                     -----------
                                                         23,453

- ----------------------------------------------------------------
Road & Rail--1.1%
CNF Transportation, Inc.                  1,200          39,888
- ----------------------------------------------------------------
Covenant Transport, Inc., Cl. A 1         1,100          20,856
- ----------------------------------------------------------------
Heartland Express, Inc. 1                 1,519          34,802
- ----------------------------------------------------------------
Hunt (J.B.) Transport Services, Inc. 1      400          11,720
- ----------------------------------------------------------------
Knight Transportation, Inc. 1               725          15,225
- ----------------------------------------------------------------
Mullen Transportation, Inc.               1,300          24,687
- ----------------------------------------------------------------
Old Dominion Freight Line, Inc. 1         1,500          42,601
- ----------------------------------------------------------------
P.A.M. Transportation Services, Inc. 1    1,100          27,731
- ----------------------------------------------------------------
SCS Transportation, Inc. 1                1,250          12,388
- ----------------------------------------------------------------
U.S. Xpress Enterprises, Inc., Cl. A 1      400           3,504
- ----------------------------------------------------------------
Werner Enterprises, Inc.                  1,233          26,546
- ----------------------------------------------------------------
Yellow Corp. 1                            1,300          32,748
                                                     -----------
                                                        292,696

STATEMENT OF INVESTMENTS Continued

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Information Technology--22.0%
- ----------------------------------------------------------------
 Communications Equipment--3.3%
 Adaptec, Inc. 1                          8,500    $     48,025
- ----------------------------------------------------------------
 ADTRAN, Inc. 1                           1,500          49,350
- ----------------------------------------------------------------
 Allen Telecom, Inc. 1                    4,800          45,456
- ----------------------------------------------------------------
 Arris Group, Inc. 1                      2,600           9,282
- ----------------------------------------------------------------
 Aspect Communications Corp. 1            2,300           6,532
- ----------------------------------------------------------------
 Audiovox Corp., Cl. A 1                    900           9,307
- ----------------------------------------------------------------
 Avanex Corp. 1                           6,200           6,324
- ----------------------------------------------------------------
 Avaya, Inc. 1                           17,100          41,895
- ----------------------------------------------------------------
 Brocade Communications
 Systems, Inc.                            7,500          31,050
- ----------------------------------------------------------------
 Centillium Communications, Inc. 1        2,500           5,650
- ----------------------------------------------------------------
 Corvis Corp. 1                          30,800          21,868
- ----------------------------------------------------------------
 Enterasys Networks, Inc. 1              11,900          18,564
- ----------------------------------------------------------------
 F5 Networks, Inc. 1                      3,800          40,812
- ----------------------------------------------------------------
 Finisar Corp. 1                         16,700          15,865
- ----------------------------------------------------------------
 Foundry Networks, Inc. 1                 3,100          21,824
- ----------------------------------------------------------------
 Harmonic, Inc. 1                        16,600          38,180
- ----------------------------------------------------------------
 Inter-Tel, Inc.                          2,000          41,820
- ----------------------------------------------------------------
 InterDigital Communications Corp. 1      2,400          34,944
- ----------------------------------------------------------------
 Microtune, Inc. 1                        5,100          15,963
- ----------------------------------------------------------------
 NetScreen Technologies, Inc. 1           4,400          74,096
- ----------------------------------------------------------------
 Netsolve, Inc. 1                         1,400           9,450
- ----------------------------------------------------------------
 New Focus, Inc. 1                        3,000          11,520
- ----------------------------------------------------------------
 Packeteer, Inc. 1                        1,400           9,604
- ----------------------------------------------------------------
 Powerwave Technologies, Inc. 1           7,700          41,580
- ----------------------------------------------------------------
 Proxim Corp., Cl. A 1                    1,900           1,653
- ----------------------------------------------------------------
 Redback Networks, Inc. 1                51,000          42,840
- ----------------------------------------------------------------
 Riverstone Networks, Inc. 1             22,100          46,852
- ----------------------------------------------------------------
 Sonus Networks, Inc. 1                  17,900          17,900
- ----------------------------------------------------------------
 Sycamore Networks, Inc. 1               10,800          31,212
- ----------------------------------------------------------------
 Tekelec 1                                3,900          40,755
- ----------------------------------------------------------------
 Terayon Communication
 Systems, Inc. 1                          3,100           6,355
- ----------------------------------------------------------------
 Turnstone Systems, Inc. 1                  200             540
                                                     -----------
                                                        837,068

- ----------------------------------------------------------------
 Computers & Peripherals--2.9%
 Concurrent Computer Corp. 1             13,000          37,440
- ----------------------------------------------------------------
 Cray, Inc. 1                             7,000          53,690
- ----------------------------------------------------------------
 Gateway, Inc. 1                         17,900          56,206
- ----------------------------------------------------------------
 Hutchinson Technology, Inc. 1            2,900          60,030
- ----------------------------------------------------------------
 Imation Corp. 1                          2,000          70,160
- ----------------------------------------------------------------
 Intergraph Corp. 1                         600          10,656
- ----------------------------------------------------------------
 Iomega Corp. 1                           4,800          37,680
- ----------------------------------------------------------------
 Lexar Media, Inc. 1                      7,600          47,652



                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Computers & Peripherals Continued
 Maxtor Corp. 1                           9,800    $     49,588
- ----------------------------------------------------------------
 Neoware Systems, Inc. 1                  3,300          49,203
- ----------------------------------------------------------------
 Overland Storage, Inc. 1                   400           5,832
- ----------------------------------------------------------------
 Palm, Inc. 1                               700          10,990
- ----------------------------------------------------------------
 Pinnacle Systems, Inc. 1                 5,200          70,772
- ----------------------------------------------------------------
 Presstek, Inc. 1                           500           2,305
- ----------------------------------------------------------------
 Rainbow Technologies, Inc. 1               800           5,736
- ----------------------------------------------------------------
 Read-Rite Corp. 1                        1,100             385
- ----------------------------------------------------------------
 SanDisk Corp. 1                          2,400          48,720
- ----------------------------------------------------------------
 SBS Technologies, Inc. 1                   300           2,748
- ----------------------------------------------------------------
 Silicon Graphics, Inc. 1                10,300          11,639
- ----------------------------------------------------------------
 SimpleTech, Inc. 1                       2,400           7,248
- ----------------------------------------------------------------
 Storage Technology Corp. 1               1,000          21,420
- ----------------------------------------------------------------
 StorageNetworks, Inc. 1                 14,800          17,168
- ----------------------------------------------------------------
 Synaptics, Inc. 1                        2,500          19,000
- ----------------------------------------------------------------
 Western Digital Corp. 1                  6,900          44,091
                                                     -----------
                                                        740,359

- ----------------------------------------------------------------
 Electronic Equipment & Instruments--1.8%
 Acterna Corp. 1                          1,100             176
- ----------------------------------------------------------------
 Analogic Corp.                             100           5,029
- ----------------------------------------------------------------
 Artesyn Technologies, Inc. 1               500           1,920
- ----------------------------------------------------------------
 Avnet, Inc. 1                            2,900          31,407
- ----------------------------------------------------------------
 Benchmark Electronics, Inc. 1              500          14,330
- ----------------------------------------------------------------
 Checkpoint Systems, Inc. 1                 300           3,102
- ----------------------------------------------------------------
 Cognex Corp. 1                             700          12,901
- ----------------------------------------------------------------
 Cohu, Inc.                                 300           4,410
- ----------------------------------------------------------------
 Daktronics, Inc. 1                       1,500          20,070
- ----------------------------------------------------------------
 DSP Group, Inc. 1                          400           6,328
- ----------------------------------------------------------------
 Excel Technology, Inc. 1                 1,100          19,679
- ----------------------------------------------------------------
 Fargo Electronics, Inc. 1                3,400          29,682
- ----------------------------------------------------------------
 Global Imaging Systems, Inc. 1           2,800          51,464
- ----------------------------------------------------------------
 Identix, Inc. 1                          3,000          15,450
- ----------------------------------------------------------------
 Ingram Micro, Inc., Cl. A 1                300           3,705
- ----------------------------------------------------------------
 Keithley Instruments, Inc.               1,100          13,750
- ----------------------------------------------------------------
 Littlefuse, Inc. 1                         200           3,372
- ----------------------------------------------------------------
 Merix Corp. 1                              100             840
- ----------------------------------------------------------------
 Methode Electronics, Inc., Cl. A         5,700          62,529
- ----------------------------------------------------------------
 MTS Systems Corp.                        1,500          15,030
- ----------------------------------------------------------------
 OSI Systems, Inc. 1                        500           8,490
- ----------------------------------------------------------------
 Park Electrochemical Corp.                 700          13,440
- ----------------------------------------------------------------
 Photon Dynamics, Inc. 1                  1,900          43,320
- ----------------------------------------------------------------
 Research Frontiers, Inc. 1                 100             834
- ----------------------------------------------------------------
 ScanSource, Inc. 1                         600          29,580
- ----------------------------------------------------------------
 Sipex Corp. 1                              800           2,960
- ----------------------------------------------------------------
 Sypris Solutions, Inc.                   1,000          10,210


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Electronic Equipment & Instruments Continued
 Teledyne Technologies, Inc. 1            1,400      $   21,952
- ----------------------------------------------------------------
 Zygo Corp. 1                               700           4,893
                                                     -----------
                                                        450,853

- ----------------------------------------------------------------
 Internet Software & Services--3.1%
 Akamai Technologies, Inc. 1             12,300          21,279
- ----------------------------------------------------------------
 AsiaInfo Holdings, Inc. 1                3,800          24,092
- ----------------------------------------------------------------
 BroadVision, Inc. 1                        300           1,023
- ----------------------------------------------------------------
 CMG Information Services, Inc. 1        40,000          39,240
- ----------------------------------------------------------------
 CNET Networks, Inc. 1                   12,700          34,417
- ----------------------------------------------------------------
 Commerce One, Inc. 1                     1,300           3,575
- ----------------------------------------------------------------
 Covansys Corp. 1                           100             376
- ----------------------------------------------------------------
 Digital River, Inc. 1                    4,000          47,800
- ----------------------------------------------------------------
 Digitas, Inc. 1                          1,300           4,498
- ----------------------------------------------------------------
 DoubleClick, Inc. 1                      5,400          30,564
- ----------------------------------------------------------------
 EarthLink, Inc. 1                        7,300          39,785
- ----------------------------------------------------------------
 FindWhat.com1                              200           1,598
- ----------------------------------------------------------------
 FreeMarkets, Inc. 1                      4,900          31,551
- ----------------------------------------------------------------
 InfoSpace, Inc. 1                        3,100          26,192
- ----------------------------------------------------------------
 Internet Security Systems, Inc. 1          500           9,165
- ----------------------------------------------------------------
 Interwoven, Inc. 1                       8,600          22,360
- ----------------------------------------------------------------
 j2 Global Communications, Inc. 1         2,900          55,216
- ----------------------------------------------------------------
 LendingTree, Inc. 1                      1,900          24,472
- ----------------------------------------------------------------
 Net2Phone, Inc. 1                        1,700           6,885
- ----------------------------------------------------------------
 Netegrity, Inc. 1                       15,100          49,120
- ----------------------------------------------------------------
 Openwave Systems, Inc. 1                20,700          41,400
- ----------------------------------------------------------------
 Overture Services, Inc. 1                  900          24,579
- ----------------------------------------------------------------
 ParthusCeva, Inc. 1                        133             786
- ----------------------------------------------------------------
 PEC Solutions, Inc. 1                      400          11,960
- ----------------------------------------------------------------
 Register.com, Inc. 1                       100             450
- ----------------------------------------------------------------
 Secure Computing Corp. 1                 6,700          42,947
- ----------------------------------------------------------------
 SeeBeyond Technology Corp. 1            15,400          37,422
- ----------------------------------------------------------------
 Stellent, Inc. 1                         2,700          11,985
- ----------------------------------------------------------------
 United Online, Inc. 1                    2,800          44,635
- ----------------------------------------------------------------
 Vignette Corp. 1                         8,900          10,920
- ----------------------------------------------------------------
 WebEx Communications, Inc. 1             2,900          43,500
- ----------------------------------------------------------------
 Websense, Inc. 1                         2,400          51,267
                                                     -----------
                                                        795,059

- ----------------------------------------------------------------
 IT Consulting & Services--1.0%
 Acxiom Corp. 1                             600           9,228
- ----------------------------------------------------------------
 Anteon International Corp. 1             1,500          36,000
- ----------------------------------------------------------------
 Caminus Corp. 1                            500           1,170
- ----------------------------------------------------------------
 Carreker Corp. 1                         2,300          10,419
- ----------------------------------------------------------------
 Cognizant Technology
 Solutions Corp. 1                          600          43,338
- ----------------------------------------------------------------
 Gartner, Inc., Cl. B 1                     800           7,560



                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 IT Consulting & Services Continued
 Lawson Software, Inc. 1                  2,400    $     13,800
- ----------------------------------------------------------------
 ManTech International Corp. 1              400           7,628
- ----------------------------------------------------------------
 MPS Group, Inc. 1                          100             554
- ----------------------------------------------------------------
 PracticeWorks, Inc. 1                    1,900          15,010
- ----------------------------------------------------------------
 ProQuest Co. 1                             200           3,920
- ----------------------------------------------------------------
 Sapient Corp. 1                         18,700          38,335
- ----------------------------------------------------------------
 SS&C Technologies, Inc. 1                2,700          28,758
- ----------------------------------------------------------------
 Startek, Inc. 1                            500          13,800
- ----------------------------------------------------------------
 Syntel, Inc. 1                           1,000          21,010
- ----------------------------------------------------------------
 Tyler Technologies, Inc. 1               3,700          15,429
                                                     -----------
                                                        265,959

- ----------------------------------------------------------------
 Office Electronics--0.1%
 Gerber Scientific, Inc. 1                  500           2,030
- ----------------------------------------------------------------
 Ikon Office Solutions, Inc.              4,300          30,745
                                                     -----------
                                                         32,775

- ----------------------------------------------------------------
 Semiconductor Equipment & Products--5.5%
 Advanced Energy Industries, Inc. 1       3,600          45,792
- ----------------------------------------------------------------
 Amkor Technology, Inc. 1                10,900          51,884
- ----------------------------------------------------------------
 Asyst Technologies, Inc. 1               5,500          40,425
- ----------------------------------------------------------------
 Atmel Corp. 1                           17,000          37,910
- ----------------------------------------------------------------
 Axcelis Technologies, Inc. 1             9,500          53,285
- ----------------------------------------------------------------
 Brooks-PRI Automation, Inc. 1            1,100          12,606
- ----------------------------------------------------------------
 Cabot Microelectronics Corp. 1           1,400          66,080
- ----------------------------------------------------------------
 ChipPAC, Inc. 1                          6,200          22,010
- ----------------------------------------------------------------
 Cirrus Logic, Inc. 1                     1,700           4,896
- ----------------------------------------------------------------
 Credence Systems Corp. 1                 5,500          51,315
- ----------------------------------------------------------------
 Cymer, Inc. 1                              400          12,900
- ----------------------------------------------------------------
 Cypress Semiconductor Corp. 1            6,000          34,320
- ----------------------------------------------------------------
 Entegris, Inc. 1                         1,900          19,570
- ----------------------------------------------------------------
 ESS Technology, Inc. 1                   6,400          40,256
- ----------------------------------------------------------------
 FEI Co. 1                                  500           7,645
- ----------------------------------------------------------------
 FSI International, Inc. 1                1,700           7,667
- ----------------------------------------------------------------
 Genesis Microchip, Inc. 1                1,800          23,490
- ----------------------------------------------------------------
 GlobespanVirata, Inc. 1                 12,600          55,566
- ----------------------------------------------------------------
 Helix Technology Corp.                   2,300          25,760
- ----------------------------------------------------------------
 Integrated Device Technology, Inc. 1     6,500          54,405
- ----------------------------------------------------------------
 Intersil Corp., Cl. A 1                  2,000          27,880
- ----------------------------------------------------------------
 Kulicke & Soffa Industries, Inc. 1       8,200          46,904
- ----------------------------------------------------------------
 LTX Corp. 1                              8,800          53,064
- ----------------------------------------------------------------
 Mattson Technology, Inc. 1                 800           2,288
- ----------------------------------------------------------------
 MKS Instruments, Inc. 1                  3,500          57,505
- ----------------------------------------------------------------
 Mykrolis Corp. 1                         2,700          19,710
- ----------------------------------------------------------------
 Oak Technology, Inc. 1                  16,200          42,930
- ----------------------------------------------------------------
 ON Semiconductor Corp. 1                 1,500           2,055
- ----------------------------------------------------------------
 Photronics, Inc. 1                       1,500          20,550


STATEMENT OF INVESTMENTS Continued

                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Semiconductor Equipment & Products Continued
 Power Integrations, Inc. 1               1,500      $   25,500
- ----------------------------------------------------------------
 Rambus, Inc. 1                           6,400          42,944
- ----------------------------------------------------------------
 RF Micro Devices, Inc. 1                 3,500          25,655
- ----------------------------------------------------------------
 Semitool, Inc. 1                           100             623
- ----------------------------------------------------------------
 Silicon Image, Inc. 1                    1,000           6,000
- ----------------------------------------------------------------
 Silicon Laboratories, Inc. 1             1,900          36,252
- ----------------------------------------------------------------
 Silicon Storage Technology, Inc. 1       1,900           7,676
- ----------------------------------------------------------------
 Siliconix, Inc. 1                        1,400          32,760
- ----------------------------------------------------------------
 Skyworks Solutions, Inc. 1               6,400          55,168
- ----------------------------------------------------------------
 Standard Microsystems Corp. 1              600          11,682
- ----------------------------------------------------------------
 Supertex, Inc. 1                           200           2,978
- ----------------------------------------------------------------
 Three-Five Systems, Inc. 1                 700           4,515
- ----------------------------------------------------------------
 Transmeta Corp. 1                        8,500           9,945
- ----------------------------------------------------------------
 TriQuint Semiconductor, Inc. 1           2,900          12,296
- ----------------------------------------------------------------
 Ultratech Stepper, Inc. 1                4,000          39,356
- ----------------------------------------------------------------
 Varian Semiconductor
 Equipment Associates, Inc. 1             1,000          23,761
- ----------------------------------------------------------------
 Vitesse Semiconductor Corp. 1           19,100          41,733
- ----------------------------------------------------------------
 White Electronic Designs Corp. 1         5,000          38,250
- ----------------------------------------------------------------
 Zoran Corp. 1                            3,450          48,542
                                                     -----------
                                                      1,406,304

- ----------------------------------------------------------------
 Software--4.3%
 Agile Software Corp. 1                   6,300          48,762
- ----------------------------------------------------------------
 Altiris, Inc. 1                            700          11,144
- ----------------------------------------------------------------
 Amdocs Ltd. 1                            2,200          21,604
- ----------------------------------------------------------------
 Ansoft Corp. 1                           3,000          18,450
- ----------------------------------------------------------------
 Ansys, Inc. 1                            1,100          22,220
- ----------------------------------------------------------------
 Aspen Technology, Inc. 1                 4,100          11,603
- ----------------------------------------------------------------
 Autodesk, Inc.                           1,800          25,740
- ----------------------------------------------------------------
 Borland Software Corp. 1                 1,900          23,370
- ----------------------------------------------------------------
 Catapult Communications Corp. 1          1,200          14,340
- ----------------------------------------------------------------
 Citrix Systems, Inc. 1                   4,000          49,280
- ----------------------------------------------------------------
 Compuware Corp. 1                        7,700          36,960
- ----------------------------------------------------------------
 Concord Communications, Inc. 1           1,100           9,889
- ----------------------------------------------------------------
 Dendrite International, Inc.             2,200          16,434
- ----------------------------------------------------------------
 DocuCorp International, Inc. 1           2,500          16,552
- ----------------------------------------------------------------
 Documentum, Inc. 1                       2,900          45,414
- ----------------------------------------------------------------
 Dynamics Research Corp. 1                1,400          19,614
- ----------------------------------------------------------------
 E.piphany, Inc. 1                        5,500          22,935
- ----------------------------------------------------------------
 Eclipsys Corp. 1                         1,200           6,420
- ----------------------------------------------------------------
 Entrust Technologies, Inc. 1             3,000          10,080
- ----------------------------------------------------------------
 FactSet Research Systems, Inc.           1,200          33,924
- ----------------------------------------------------------------
 FileNet Corp. 1                          1,900          23,180
- ----------------------------------------------------------------
 Hyperion Solutions Corp. 1               1,700          43,639
- ----------------------------------------------------------------
 Informatica Corp. 1                      7,400          42,624



                                      Principal    Market Value
                                         Amount      See Note 1
- ----------------------------------------------------------------
 Software Continued
 Kronos, Inc. 1                             250      $    9,248
- ----------------------------------------------------------------
 Legato Systems, Inc. 1                   8,800          44,264
- ----------------------------------------------------------------
 Macromedia, Inc. 1                       5,000          53,250
- ----------------------------------------------------------------
 Magma Design Automation, Inc. 1            500           4,790
- ----------------------------------------------------------------
 Manugistics Group, Inc. 1                7,200          17,280
- ----------------------------------------------------------------
 Micromuse, Inc. 1                       13,500          51,570
- ----------------------------------------------------------------
 MICROS Systems, Inc. 1                     500          11,210
- ----------------------------------------------------------------
 NetIQ Corp. 1                              500           6,175
- ----------------------------------------------------------------
 Novadigm, Inc. 1                           300             699
- ----------------------------------------------------------------
 Novell, Inc. 1                           3,100          10,354
- ----------------------------------------------------------------
 Nuance Communications, Inc. 1              100             248
- ----------------------------------------------------------------
 Numerical Technologies, Inc. 1           1,100           3,806
- ----------------------------------------------------------------
 Parametric Technology Corp. 1           10,300          25,956
- ----------------------------------------------------------------
 Pegasystems, Inc. 1                      2,300          11,753
- ----------------------------------------------------------------
 Plumtree Software, Inc. 1                8,200          22,140
- ----------------------------------------------------------------
 Precis, Inc. 1                             200           1,104
- ----------------------------------------------------------------
 Quality Systems, Inc. 1                    600          12,060
- ----------------------------------------------------------------
 Quovadx, Inc. 1                            100             242
- ----------------------------------------------------------------
 Radiant Systems, Inc. 1                  4,200          40,446
- ----------------------------------------------------------------
 Roxio, Inc. 1                            2,500          11,925
- ----------------------------------------------------------------
 RSA Security, Inc. 1                     7,300          43,727
- ----------------------------------------------------------------
 SafeNet, Inc. 1                            200           5,070
- ----------------------------------------------------------------
 ScanSoft, Inc. 1                         6,500          33,800
- ----------------------------------------------------------------
 SERENA Software, Inc. 1                  2,900          45,791
- ----------------------------------------------------------------
 SpeechWorks International, Inc. 1          700           1,946
- ----------------------------------------------------------------
 Take-Two Interactive Software, Inc. 1    2,000          46,980
- ----------------------------------------------------------------
 Tripos, Inc. 1                             200           1,466
- ----------------------------------------------------------------
 Ulticom, Inc. 1                          1,100           8,239
- ----------------------------------------------------------------
 Viewpoint Corp. 1                          700           1,309
- ----------------------------------------------------------------
 Wind River Systems, Inc. 1               2,700          11,070
                                                     -----------
                                                      1,112,096

- ----------------------------------------------------------------
 Materials--5.4%
- ----------------------------------------------------------------
 Chemicals--1.7%
 AEP Industries, Inc. 1                     700           9,149
- ----------------------------------------------------------------
 Agrium, Inc.                             1,200          13,572
- ----------------------------------------------------------------
 Albemarle Corp.                            400          11,380
- ----------------------------------------------------------------
 Crompton Corp.                           1,000           5,950
- ----------------------------------------------------------------
 Cytec Industries, Inc. 1                   200           5,456
- ----------------------------------------------------------------
 Ferro Corp.                                600          14,658
- ----------------------------------------------------------------
 Georgia Gulf Corp.                       2,500          57,850
- ----------------------------------------------------------------
 Hercules, Inc. 1                         5,700          50,160
- ----------------------------------------------------------------
 IMC Global, Inc.                         4,000          42,680
- ----------------------------------------------------------------
 MacDermid, Inc.                            100           2,285
- ----------------------------------------------------------------
 Material Sciences Corp. 1                  600           7,764
- ----------------------------------------------------------------
 Millennium Chemicals, Inc.                 200           1,904


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Chemicals Continued
 Octel Corp.                              2,600      $   41,080
- ----------------------------------------------------------------
 OM Group, Inc.                           5,700          39,216
- ----------------------------------------------------------------
 Omnova Solutions, Inc. 1                 7,200          29,016
- ----------------------------------------------------------------
 PolyOne Corp.                            2,000           7,840
- ----------------------------------------------------------------
 Quaker Chemical Corp.                      400           9,280
- ----------------------------------------------------------------
 Schulman (A.), Inc.                      2,000          37,220
- ----------------------------------------------------------------
 Stepan Co.                                 100           2,500
- ----------------------------------------------------------------
 Terra Industries, Inc. 1                   100             153
- ----------------------------------------------------------------
 Valspar Corp. (The)                      1,000          44,180
                                                     -----------
                                                        433,293

- ----------------------------------------------------------------
 Construction Materials--0.1%
 AMCOL International Corp.                1,700           9,860
- ----------------------------------------------------------------
 Centex Construction Products, Inc.         700          24,605
                                                     -----------
                                                         34,465

- ----------------------------------------------------------------
 Containers & Packaging--1.5%
 Ball Corp.                               1,100          56,309
- ----------------------------------------------------------------
 Bway Corp. 1                             1,500          29,670
- ----------------------------------------------------------------
 Caraustar Industries, Inc. 1             1,200          11,376
- ----------------------------------------------------------------
 Crown Cork & Seal Co., Inc. 1            8,700          69,165
- ----------------------------------------------------------------
 Graphic Packaging
 International Corp. 1                    1,100           6,204
- ----------------------------------------------------------------
 Greif Bros. Corp., Cl. A                   100           2,380
- ----------------------------------------------------------------
 Jarden Corp. 1                           1,600          38,192
- ----------------------------------------------------------------
 Myers Industries, Inc.                   1,325          14,178
- ----------------------------------------------------------------
 Owens-Illinois, Inc. 1                   1,400          20,412
- ----------------------------------------------------------------
 Sealed Air Corp. 1                       1,500          55,950
- ----------------------------------------------------------------
 Silgan Holdings, Inc. 1                  1,400          34,552
- ----------------------------------------------------------------
 Temple-Inland, Inc.                        800          35,848
                                                     -----------
                                                        374,236

- ----------------------------------------------------------------
 Metals & Mining--1.4%
 AK Steel Holding Corp. 1                 4,900          39,200
- ----------------------------------------------------------------
 Century Aluminum Co.                       400           2,964
- ----------------------------------------------------------------
 Cleveland-Cliffs, Inc. 1                   100           1,985
- ----------------------------------------------------------------
 Commercial Metals Co.                    2,600          42,224
- ----------------------------------------------------------------
 Gibraltar Steel Corp.                    1,000          19,040
- ----------------------------------------------------------------
 Goldcorp, Inc.                           1,500          19,047
- ----------------------------------------------------------------
 IMCO Recycling, Inc. 1                   1,300          10,569
- ----------------------------------------------------------------
 Meridian Gold, Inc. 1                      900          15,803
- ----------------------------------------------------------------
 Meridian Gold, Inc. 1                    1,800          31,734
- ----------------------------------------------------------------
 NN, Inc.                                 1,100          10,989
- ----------------------------------------------------------------
 Oregon Steel Mills, Inc. 1               2,800          11,256
- ----------------------------------------------------------------
 Quanex Corp.                             1,200          40,200
- ----------------------------------------------------------------
 Royal Gold, Inc.                           100           2,492


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
 Metals & Mining Continued
 RTI International Metals, Inc. 1           600      $    6,060
- ----------------------------------------------------------------
 Schnitzer Steel Industries, Inc.           100           2,002
- ----------------------------------------------------------------
 Steel Dynamics, Inc. 1                   2,200          26,466
- ----------------------------------------------------------------
 Steel Technologies, Inc.                 1,500          25,440
- ----------------------------------------------------------------
 United States Steel Corp.                3,500          45,920
- ----------------------------------------------------------------
 USEC, Inc.                                 900           5,418
                                                     -----------
                                                        358,809
- ----------------------------------------------------------------
 Paper & Forest Products--0.7%
 Boise Cascade Corp.                        900          22,698
- ----------------------------------------------------------------
 Bowater, Inc.                              400          16,780
- ----------------------------------------------------------------
 Deltic Timber Corp.                      1,100          29,370
- ----------------------------------------------------------------
 Glatfelter                               2,400          31,584
- ----------------------------------------------------------------
 Louisiana-Pacific Corp.                  5,100          41,106
- ----------------------------------------------------------------
 Potlatch Corp.                           1,500          35,820
                                                     -----------
                                                        177,358

- ----------------------------------------------------------------
 Telecommunication Services--1.5%
- ----------------------------------------------------------------
 Diversified Telecommunication Services--0.9%
 Allegiance Telecom, Inc. 1               9,500           6,365
- ----------------------------------------------------------------
 American Tower Corp. 1                   7,700          27,181
- ----------------------------------------------------------------
 BroadWing, Inc. 1                       14,700          51,744
- ----------------------------------------------------------------
 Commonwealth Telephone
 Enterprises, Inc. 1                        800          28,672
- ----------------------------------------------------------------
 Crown Castle International Corp. 1      13,300          49,875
- ----------------------------------------------------------------
 IDT Corp. 1                                300           5,187
- ----------------------------------------------------------------
 Infonet Services Corp., Cl. B 1          2,700           5,346
- ----------------------------------------------------------------
 Intrado, Inc. 1                            800           7,840
- ----------------------------------------------------------------
 North Pittsburgh Systems, Inc.           1,300          17,720
- ----------------------------------------------------------------
 PTEK Holdings, Inc. 1                      900           3,960
- ----------------------------------------------------------------
 Talk America Holdings, Inc. 1            1,500           8,400
- ----------------------------------------------------------------
 Time Warner Telecom, Inc., Cl. A 1       6,200          13,082
                                                     -----------
                                                        225,372

- ----------------------------------------------------------------
 Wireless Telecommunication Services--0.6%
 Boston Communications Group, Inc. 1      2,100          26,691
- ----------------------------------------------------------------
 Centennial Communications Corp. 1          100             261
- ----------------------------------------------------------------
 EMS Technologies, Inc. 1                   800          12,456
- ----------------------------------------------------------------
 Metro One Telecommunication, Inc. 1      2,500          16,125
- ----------------------------------------------------------------
 Nextel Partners, Inc., Cl. A 1           1,900          11,533
- ----------------------------------------------------------------
 Triton PCS Holdings, Inc., Cl. A 1       4,200          16,506
- ----------------------------------------------------------------
 Western Wireless Corp. 1                 8,900          47,170
- ----------------------------------------------------------------
 Wireless Facilities, Inc. 1              3,600          21,636
                                                     -----------
                                                        152,378

STATEMENT OF INVESTMENTS Continued


                                                   Market Value
                                         Shares      See Note 1
- ----------------------------------------------------------------
Utilities--0.7%
- ----------------------------------------------------------------
Electric Utilities--0.3%
Aquila, Inc.                              1,300      $    2,301
- ----------------------------------------------------------------
CH Energy Group, Inc.                       800          37,304
- ----------------------------------------------------------------
CMS Energy Corp.                          1,800          16,992
- ----------------------------------------------------------------
OGE Energy Corp.                          1,000          17,600
                                                     -----------
                                                         74,197

- ----------------------------------------------------------------
Gas Utilities--0.3%
Nicor, Inc.                               1,300          44,239
- ----------------------------------------------------------------
Southwestern Energy Co. 1                   500           5,725
- ----------------------------------------------------------------
UGI Corp.                                   600          22,434
                                                     -----------
                                                         72,398

- ----------------------------------------------------------------
Multi-Utilities--0. 1%
Questar Corp.                             1,500          41,730
                                                     -----------
Total Common Stocks (Cost $25,202,426)               25,253,690

- ----------------------------------------------------------------
Preferred Stocks--0.0%
Astronics Corp., Cl. B1 (Cost $3,322)       250           1,563


                                      Principal    Market Value
                                         Amount      See Note 1
- ----------------------------------------------------------------
Joint Repurchase Agreements--2.9%
Undivided interest of 0.11% in joint
repurchase agreement (Market Value
$694,610,000) with Banc One Capital
Markets, Inc., 1.07%, dated 12/31/02, to
be repurchased at $735,044 on 1/2/03,
collateralized by U.S. Treasury Nts.,
3%--6.50%, 2/15/03--2/15/12, with a
value of $311,989,144 and U.S. Treasury
Bonds, 1.75%--9.375%, 4/30/04--2/15/23,
with a value of $397,082,690 (Cost
$735,000)                              $735,000    $    735,000
- ----------------------------------------------------------------
Total Investments, at Value
(Cost $25,940,748)                        101.2%     25,990,253
- ----------------------------------------------------------------
Liabilities in Excess of Other Assets      (1.2)       (302,243)
                                         -----------------------
Net Assets                                100.0%   $ 25,688,010
                                         =======================

Footnotes to Statement of Investments
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.

See accompanying Notes to Financial Statements.

STATEMENT OF ASSETS AND LIABILITIES  December 31, 2002



- ----------------------------------------------------------------------------------------------------------

 Assets
 Investments, at value (cost $25,940,748)--see accompanying
statement                          $25,990,253

- ----------------------------------------------------------------------------------------------------------

Cash
653

- ----------------------------------------------------------------------------------------------------------
 Unrealized appreciation on foreign currency
contracts                                                   4

- ----------------------------------------------------------------------------------------------------------
 Receivables and other assets:
 Investments
sold
131,850
 Shares of beneficial interest
sold                                                                 64,312
 Interest and
dividends
13,357

Other
1,776

                                                                    ------------
 Total
assets
26,202,205


- ----------------------------------------------------------------------------------------------------------
 Liabilities
 Payables and other liabilities:
 Investments
purchased
486,180
 Shares of beneficial interest redeemed
                                      13,636
 Distribution and service plan
fees                                                                  2,970
 Shareholder
reports
638
 Transfer and shareholder servicing agent
fees                                                         463
 Trustees'
compensation
234
 Other
                                                             10,074

- ------------
 Total liabilities
                   514,195



- ----------------------------------------------------------------------------------------------------------
 Net
Assets
$25,688,010

============


- ----------------------------------------------------------------------------------------------------------
 Composition of Net Assets
 Par value of shares of beneficial
interest                                                    $     2,761

- ----------------------------------------------------------------------------------------------------------
 Additional paid-in capital
                                           31,581,978

- ----------------------------------------------------------------------------------------------------------
 Accumulated net investment
loss                                                                   (11,369)

- ----------------------------------------------------------------------------------------------------------
 Accumulated net realized loss on investments and foreign currency
transactions                 (5,934,850)

- ----------------------------------------------------------------------------------------------------------
 Net unrealized appreciation on investments and translation of
 assets and liabilities denominated in foreign
currencies                                           49,490


- ------------
 Net
Assets
$25,688,010

                                                  ============


- ----------------------------------------------------------------------------------------------------------
 Net Asset Value Per Share
 Non-Service shares:
 Net asset value, redemption price per share and offering price per share
 (based on net assets of $19,576,969 and 2,103,490 shares of beneficial
interest outstanding)        $9.31

- ----------------------------------------------------------------------------------------------------------
 Service shares:
 Net asset value, redemption price per share and offering price per share
 (based on net assets of $6,111,041 and 657,527 shares of beneficial interest
outstanding)           $9.29



See accompanying Notes to Financial Statements.

STATEMENT OF OPERATIONS  For the Year Ended December 31, 2002

- ------------------------------------------------------------------------------------------------------------
Investment Income
 Dividends (net of foreign withholding taxes of
$358)                                            $   195,600

- ------------------------------------------------------------------------------------------------------------

Interest
12,722

                                                    ------------
 Total investment
income
208,322


- ------------------------------------------------------------------------------------------------------------
 Expenses
 Management
fees
170,358

- ------------------------------------------------------------------------------------------------------------
 Distribution and service plan fees--Service
shares                                                    5,396

- ------------------------------------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Non-Service
shares
10,498
 Service shares

507

- ------------------------------------------------------------------------------------------------------------
 Shareholder reports
                                       23,290

- ------------------------------------------------------------------------------------------------------------
 Legal, auditing and other professional
fees                                                           9,170

- ------------------------------------------------------------------------------------------------------------
 Custodian fees and
expenses
5,905

- ------------------------------------------------------------------------------------------------------------
 Trustees'
compensation
4,341

- ------------------------------------------------------------------------------------------------------------

Other
3,430

- ------------
 Total
expenses
232,895
 Less reduction to custodian
expenses                                                                   (286)
 Less voluntary waiver of transfer and shareholder servicing agent
fees--Service shares                 (382)

- ------------
 Net expenses
                                    232,227


- ------------------------------------------------------------------------------------------------------------
 Net Investment
Loss
(23,905)


- ------------------------------------------------------------------------------------------------------------
 Realized and Unrealized Gain (Loss)
 Net realized loss on:

Investments
(2,845,844)
 Foreign currency
transactions
(2,456)

                                                             ------------
 Net realized
loss
(2,848,300)

- ------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation) on:

Investments
(1,466,549)
 Translation of assets and liabilities denominated in foreign
currencies                               5,239

- ------------
 Net
change
           (1,461,310)

- ------------
 Net realized and unrealized
loss                                                                 (4,309,610)


- ------------------------------------------------------------------------------------------------------------
 Net Decrease in Net Assets Resulting from
Operations                                            $(4,333,515)

                                                 ============

 See accompanying Notes to Financial Statements.

STATEMENTS OF CHANGES IN NET ASSETS

 Year Ended December 31,
2002            2001

- -----------------------------------------------------------------------------------------------------
Operations
 Net investment loss                                                      $
(23,905)     $     (922)

- -----------------------------------------------------------------------------------------------------
 Net realized loss
(2,848,300)       (268,528)

- -----------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation)
(1,461,310)        362,920

- ----------------------------
 Net increase (decrease) in net assets resulting from operations
(4,333,515)         93,470


- -----------------------------------------------------------------------------------------------------
 Beneficial Interest Transactions
 Net increase in net assets resulting from beneficial
 interest transactions:
 Non-Service shares
4,845,883       3,821,166
 Service shares
6,553,550         108,184


- -----------------------------------------------------------------------------------------------------
 Net Assets
 Total increase
7,065,918       4,022,820

- -----------------------------------------------------------------------------------------------------
 Beginning of period
18,622,092      14,599,272

- ----------------------------
 End of period [including accumulated net investment
 loss of $11,369 and $382, respectively]
$25,688,010     $18,622,092

============================

 See accompanying Notes to Financial Statements.

FINANCIAL HIGHLIGHTS


 Non-Service shares   Year Ended December 31,            2002
2001          2000          1999          1998 1

- -----------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data
 Net asset value, beginning of period                   $11.05
$11.09        $14.07         $9.60        $10.00

- -----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                             (.01)           --
2        (.03)         (.02)         (.02)
 Net realized and unrealized gain (loss)                 (1.73)
(.04)        (2.35)         4.49          (.38)

- ----------------------------------------------------------------
 Total from investment operations                        (1.74)         (.04)
       (2.38)         4.47          (.40)

- -----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Distributions from net realized gain                       --
- --          (.60)           --            --

- -----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                         $ 9.31
$11.05        $11.09        $14.07        $ 9.60

================================================================


- -----------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 3                     (15.75)%
(0.36)%      (18.34)%       46.56%        (4.00)%


- -----------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
 Net assets, end of period (in thousands)              $19,577
$18,514       $14,599        $6,927          $994

- -----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                     $20,505
$15,307       $12,576        $2,738          $441

- -----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 4
 Net investment loss                                     (0.09)%
(0.01)%       (0.29)%       (0.37)%       (0.79)%
 Expenses                                                 1.00%
1.05%         1.37%         1.83%         0.87% 5
 Expenses, net of reduction to custodian expenses         1.00%
1.05%         1.35%         1.34%         0.87%

- -----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                   121%
213%          162%          176%           61%

1. For the period from May 1, 1998 (inception of offering) to December 31, 1998.
2. Less than $0.005 per share.
3. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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.
4. Annualized for periods of less than one full year.
5. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.

Service shares  Year Ended December
31,                                                               2002
2001 1

- ---------------------------------------------------------------------------------------------------------------------------
 Per Share Operating Data

 Net asset value, beginning of
period
$11.05       $ 10.61

- ---------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income
(loss)
             (.01)           -- 2
 Net realized and unrealized gain
(loss)
(1.75)          .44

   ----------------------
 Total from investment
operations
(1.76)          .44

- ---------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Distributions from net realized
gain
- --            --

- ---------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of
period
$9.29        $11.05

                                                       ======================


- ---------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 3
                                                  (15.93)%        4.15%

- ---------------------------------------------------------------------------------------------------------------------------


- ---------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
 Net assets, end of period (in
thousands)
$6,111          $108

- ---------------------------------------------------------------------------------------------------------------------------
 Average net assets (in
thousands)
$2,228          $ 26

- ---------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 4
 Net investment
loss
(0.26)%       (0.34)%
 Expenses

1.21%         1.19%
 Expenses, net of reduction to custodian expenses and/or voluntary waiver of
transfer agent fees        1.19%         1.19%

- ---------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover
rate
121%          213%


1. For the period from July 16, 2001 (inception of offering) to December 31,
2001.
2. Less than $0.005 per share.
3. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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.
4. Annualized for periods of less than one full year.

See accompanying Notes to Financial Statements.

NOTES TO FINANCIAL STATEMENTS


- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Main Street Small Cap Fund/VA (the Fund) is a separate series of
Oppenheimer Variable Account Funds (the Trust), an 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
Trust's investment advisor is OppenheimerFunds, Inc. (the Manager).
   The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other investment
products. The class of shares designated as Service shares is subject to a
distribution and service plan. All classes of shares have identical rights and
voting privileges. Earnings, net assets and net asset value per share may differ
by minor amounts due to each class having its own expenses directly attributable
to that class.
   The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. In the absence of a sale, the security is valued at the last sale
price on the prior trading day, if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Trustees, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint repurchase
agreement accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities pledged as
collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal; however,
in the event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
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 capital loss carryforwards, if any, to shareholders.

As of December 31, 2002, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:

               Expiring
               -----------------------
               2008         $1,795,693
               2009          1,282,533
               2010          2,591,314
                            ----------
               Total        $5,669,540
                            ==========

During the fiscal year ended December 31, 2002, the Fund did not utilize any
capital loss carryforward.
   As of December 31, 2002, the Fund had approximately $265,000 of post-October
losses available to offset future capital gains, if any. Such losses, if
unutilized, will expire in 2011.
- --------------------------------------------------------------------------------
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 Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during the
fiscal year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also, due to
timing of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net 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, 2002, amounts have been reclassified to reflect a
decrease in paid-in capital of $4,595, a decrease in accumulated net investment
loss of $12,918, and an increase in accumulated net realized loss on investments
of $8,323. Net assets of the Fund were unaffected by the reclassifications.
   No distributions were paid during the years ended December 31, 2002 and
December 31, 2001.

As of December 31, 2002, the components of distributable earnings on a tax basis
were as follows:

          Accumulated net investment loss   $   (11,369)
          Accumulated net realized loss      (5,934,850)
          Net realized appreciation              49,490
                                            -----------
          Total                             $(5,896,729)
                                            ===========
- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.

NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:

                     Year Ended December 31, 2002   Year Ended December 31,
2001 1
                            Shares         Amount            Shares       Amount
- ----------------------------------------------------------------------------------
Non-Service shares

Sold                     1,297,325   $ 13,674,065           869,437  $ 8,938,580
Redeemed                  (869,963)    (8,828,182)         (509,595)
(5,117,414)

- -----------------------------------------------------------
Net increase               427,362   $  4,845,883           359,842  $ 3,821,166

===========================================================

- ----------------------------------------------------------------------------------
Service shares
Sold                     2,221,410   $ 21,513,500            10,574  $   116,404
Redeemed                (1,573,671)   (14,959,950)             (786)
(8,220)

- -----------------------------------------------------------
Net increase               647,739   $  6,553,550             9,788  $   108,184

===========================================================
1. For the year ended December 31, 2001, for Non-Service shares and for the
period from July 16, 2001 (inception of offering) to December 31, 2001, for
Service shares.


- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2002, were
$37,836,922 and $26,729,121, respectively.

As of December 31, 2002, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $25,952,117 was composed of:

          Gross unrealized appreciation      $ 2,193,029
          Gross unrealized depreciation       (2,154,893)
                                             -----------
          Net unrealized appreciation        $    38,136
                                             ===========

The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts, investments
in passive foreign investment companies, and forward foreign currency exchange
contracts.

- --------------------------------------------------------------------------------
4. 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 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.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a $19.75 per account fee.


   Additionally, funds offered in variable annuity separate accounts are subject
to minimum fees of $5,000 for assets of less than $10 million and $10,000 for
assets of $10 million or more. The Fund is subject to the minimum fee in the
event that the per account fee does not equal or exceed the applicable minimum
fee.
   OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average net assets of the Fund. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc., the Distributor, for distribution-related services for the
Fund's Service shares. Under the Plan, payments are made quarterly at an annual
rate of up to 0.25% of the average annual net assets of the Service shares of
the Fund. For the year ended December 31, 2002, payments under the Service Plan
totaled $5,396.

- --------------------------------------------------------------------------------
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 as a receivable or payable and in the Statement of
Operations with the change in unrealized appreciation or depreciation.
   The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Such realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.

As of December 31, 2002, the Fund had outstanding foreign currency contracts as
follows:
                      Expiration          Contract      Valuation as of
Unrealized
Contract Description        Date     Amount (000s)    December 31, 2002
Appreciation
- --------------------------------------------------------------------------------------
Contracts to Sell
Canadian Dollar (CAD)     1/2/03             4CAD
$2,562             $4
- --------------------------------------------------------------------------------
6. Illiquid or Restricted Securities
As of December 31, 2002, 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, 2002 was $17,043, which
represents 0.07% of the Fund's net assets, all of which is considered
restricted. Information concerning restricted securities is as follows:

                        Acquisition              Valuation as of    Unrealized
Security                       Date     Cost   December 31, 2002  Depreciation
- -------------------------------------------------------------------------------
Stocks and/or Warrants
Canadian 88 Energy Corp.     6/4/02  $19,418             $17,043        $2,375

OPPENHEIMER MONEY FUND/VA
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 of
 Oppenheimer Money Fund/VA, which is a series of Oppenheimer Variable Account
 Funds, including the statement of investments, as of December 31, 2002, and the
 related statement of operations for the year then ended, the statements of
 changes in net assets for each of the two years in the period then ended, and
 the financial highlights for the five years in the period then ended. 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 auditing standards generally
 accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred
 to above present fairly, in all material respects, the financial position of
 Oppenheimer Money Fund/VA as of December 31, 2002, the results of its
 operations for the year then ended, the changes in its net assets for each of
 the two years in the period then ended, and the financial highlights for the
 five years in the period then ended, in conformity with accounting principles
 generally accepted in the United States of America.

/s/Deloitte & Touche LLP
 Deloitte & Touche LLP

 Denver, Colorado
 January 23, 2003


OPPENHEIMER MONEY FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2002


                                      Principal           Value
                                         Amount      See Note 1
 ---------------------------------------------------------------
 Certificates of Deposit--9.3%
 ---------------------------------------------------------------
 Domestic Certificates of Deposit--3.8%
 Citibank NA, 1.33%, 2/27/03        $ 2,500,000    $  2,500,000
 ---------------------------------------------------------------
 National Bank of Commerce,
 Tennessee, 1.41%, 6/20/03 1          5,000,000       4,999,498
 ---------------------------------------------------------------
 State Street Bank and Trust,
 1.33%, 2/13/03                       2,000,000       2,000,012
 ---------------------------------------------------------------
 Suntrust Bank, 1.47%, 5/23/03 1      5,000,000       5,001,854
                                                  --------------
                                                     14,501,364

 ---------------------------------------------------------------
 Yankee Certificates of Deposit--5.5%
 Abbey National Treasury Services,
 1.33%, 3/19/03                       3,000,000       3,000,000
 ---------------------------------------------------------------
 Barclays Bank plc, New York,
 1.74%, 3/3/03                        3,000,000       2,999,896
 ---------------------------------------------------------------
 BNP Paribas, New York,
 2.63%, 6/6/03                        2,000,000       2,010,625
 ---------------------------------------------------------------
 Canadian Imperial Bank
 of Commerce, New York,
 1.33%, 2/11/03                       3,000,000       3,000,000
 ---------------------------------------------------------------
 Royal Bank of Scotland,
 New York, 1.72%, 1/21/03             5,000,000       5,000,027
 ---------------------------------------------------------------
 Svenska Handelsbanken,
 New York, 1.94%, 1/22/03             5,000,000       5,000,029
                                                  --------------
                                                     21,010,577
                                                  --------------
 Total Certificates of Deposit
 (Cost $35,511,941)                                  35,511,941

 ---------------------------------------------------------------
 Direct Bank Obligations--10.9%
 AB SPINTAB, 1.33%, 4/10/03           4,000,000       3,985,425
 ---------------------------------------------------------------
 Abbey National North America,
 1.31%, 2/10/03                       1,000,000         998,545
 ---------------------------------------------------------------
 ABN AMRO North America Finance, Inc.:
 1.74%, 4/17/03                       3,500,000       3,482,068
 1.75%, 2/12/03                       6,000,000       5,987,750
 ---------------------------------------------------------------
 Governor & Co. of the Bank
 of Ireland, 1.76%, 4/23/03 2         3,000,000       2,983,573
 ---------------------------------------------------------------
 HBOS Treasury Services:
 1.35%, 3/6/03                        3,519,000       3,510,554
 1.70%, 3/12/03                       4,000,000       3,986,778
 ---------------------------------------------------------------
 Lloyds TSB Bank plc, 1.76%, 4/24/03  3,000,000       2,983,474
 ---------------------------------------------------------------
 Nationwide Building Society:
 1.54%, 2/4/03                        3,000,000       2,995,637
 1.74%, 4/16/03                       3,000,000       2,984,819
 ---------------------------------------------------------------
 Swedbank AB, 1.74%, 5/2/03           2,000,000       1,988,303
 ---------------------------------------------------------------
 Wells Fargo Bank NA, 1.68%, 4/1/03   5,450,000       5,450,531
                                                  --------------

 Total Direct Bank Obligations
 (Cost $41,337,457)                                  41,337,457



                                      Principal           Value
                                         Amount      See Note 1
 ---------------------------------------------------------------
 Short-Term Notes--72.2%
 ---------------------------------------------------------------
 Asset-Backed--24.2%
 Atlantic Asset Securitization
 Corp., 1.39%, 1/3/03 2             $ 2,000,000  $    1,999,845
- ----------------------------------------------------------------
 Barton Capital Corp.,
 1.40%, 1/17/03 2                     5,000,000       4,996,889
 ---------------------------------------------------------------
 Charta Corp.:
 1.60%, 1/31/03 2                     4,000,000       3,994,667
 1.79%, 1/24/03 2                     1,100,000       1,098,742
- ----------------------------------------------------------------
 Crown Point Capital Co.,
 1.82%, 1/29/03 2                     2,500,000       2,496,461
 ---------------------------------------------------------------
 Fairway Finance Corp.,
 1.79%, 4/23/03 2                     3,000,000       2,983,293
 ---------------------------------------------------------------
 FCAR Owner Trust I,
 1.70%, 1/24/03                       6,500,000       6,492,940
 ---------------------------------------------------------------
 FCAR Owner Trust II,
 1.72%, 1/24/03                       5,000,000       4,994,505
 ---------------------------------------------------------------
 Galaxy Funding, Inc.,
 1.77%, 1/21/03 2                     5,000,000       4,995,083
 ---------------------------------------------------------------
 GOVCO, Inc., 1.80%, 1/23/03 2        2,500,000       2,497,250
 ---------------------------------------------------------------
 Greyhawk Funding LLC,
 1.82%, 1/13/03 2                     5,000,000       4,996,967
 ---------------------------------------------------------------
 La Fayette Asset
 Securitization, 1.39%, 3/18/03 2     5,000,000       4,985,328
 ---------------------------------------------------------------
 Lexington Parker Capital Co. LLC:
 1.38%, 2/18/03 2                     2,500,000       2,495,400
 1.76%, 3/14/03 2                     4,000,000       3,985,920
 ---------------------------------------------------------------
 Neptune Funding Corp.:
 1.40%, 3/24/03 2                     3,800,000       3,787,882
 1.44%, 6/4/03 2                      2,000,000       1,987,680
 1.80%, 2/28/03 2                     5,000,000       4,985,500
 ---------------------------------------------------------------
 New Center Asset Trust:
 1.76%, 3/17/03                       5,000,000       4,981,667
 1.77%, 3/7/03                        5,000,000       4,984,021
 ---------------------------------------------------------------
 Perry Global Funding LLC, Series A:
 1.83%, 1/14/03 2                    10,000,000       9,993,392
 1.84%, 1/16/03 2                     2,000,000       1,998,467
 ---------------------------------------------------------------
 Scaldis Capital LLC, 1.76%,
 1/21/03 2                            6,213,000       6,206,925
                                                  --------------
                                                     91,938,824

 ---------------------------------------------------------------
 Broker-Dealer--8.4%
 Banc of America Securities
 LLC, 1.46%, 1/2/03 1                 5,000,000       5,000,000
 ---------------------------------------------------------------
 Goldman Sachs Group LP,
 1.42%, 3/13/03 3                     5,000,000       5,000,000
 ---------------------------------------------------------------
 Merrill Lynch & Co., Inc.,
 1.71%, 1/3/03                        5,000,000       4,999,525
 ---------------------------------------------------------------
 Morgan Stanley, 1.31%, 12/2/03 1     5,000,000       5,000,000
 ---------------------------------------------------------------
 Salomon Smith Barney Holdings, Inc.:
 1.79%, 4/25/03 1                     5,000,000       5,000,000
 1.81%, 1/10/03                       7,000,000       6,996,832
                                                  --------------
                                                     31,996,357
STATEMENT OF INVESTMENTS  Continued


                                      Principal           Value
                                         Amount      See Note 1
 ---------------------------------------------------------------
 Chemicals--0.8%
 BASF AG, 1.33%, 2/21/03 2           $ 3,000,000  $   2,994,348
 ---------------------------------------------------------------
 Commercial Finance--2.6%
 Private Export Funding Corp.,
 1.75%, 2/5/03 2                      9,700,000       9,683,497
 ---------------------------------------------------------------
 Commercial Services & Supplies--1.3%
 First Data Corp., 1.45%, 1/2/03      5,000,000       4,999,799
 ---------------------------------------------------------------
 Consumer Finance--5.3%
 American Express Credit Corp.,
 1.68%, 3/5/03                        5,000,000       4,985,300
 ---------------------------------------------------------------
 American Express Credit Corp.,
 Series B:
 1.41%, 4/25/03 1                     5,000,000       5,000,000
 1.42%, 5/7/03 1                      5,000,000       5,000,000
 ---------------------------------------------------------------
 American General Finance Corp.,
 1.98%, 1/8/03                        5,000,000       4,998,075
                                                  --------------
                                                     19,983,375

 ---------------------------------------------------------------
 Food Products--2.8%
 Nestle Capital Corp.:
 1.87%, 2/3/03 2                      5,800,000       5,790,058
 1.90%, 2/5/03 2                      5,000,000       4,990,764
                                                  --------------
                                                     10,780,822

 ---------------------------------------------------------------
 Insurance--5.5%
 General Electric Capital
 Assurance Co., 1.49%, 12/1/03 1,3    5,000,000       5,000,000
 ----------------------------------------------------------------
 ING America Insurance Holdings, Inc.:
 1.32%, 2/13/03                       1,500,000       1,497,635
 1.34%, 3/12/03                       3,000,000       2,992,183
 ---------------------------------------------------------------
 Metropolitan Life Insurance
 Co., 1.49%, 1/2/03 1                 3,500,000       3,500,000
 ---------------------------------------------------------------
 Pacific Life Insurance Co.,
 1.46%, 2/14/03 1,3                   4,000,000       4,000,000
 ---------------------------------------------------------------
 United of Omaha Life
 Insurance Co., 1.42%, 1/2/03 1,3     4,000,000       4,000,000
                                                  --------------

                                                     20,989,818

 ---------------------------------------------------------------
 Leasing & Factoring--1.3%
 American Honda
 Finance Corp., 1.41%, 4/9/03 1       5,000,000       5,000,000



                                      Principal           Value
                                         Amount      See Note 1
 ---------------------------------------------------------------
 Media--0.5%
 ---------------------------------------------------------------
 McGraw-Hill Cos., Inc., 1.33%,
 5/13/03                             $2,000,000    $  1,990,247
 ---------------------------------------------------------------
 Metals & Mining--0.8%
 Rio Tinto Ltd., 1.33%, 3/12/03 2     3,000,000       2,992,242
 ---------------------------------------------------------------
 Oil & Gas--3.6%
 Koch Industries, Inc., 1.20%,
 1/2/03 2                             8,500,000       8,499,716
 ---------------------------------------------------------------
 Total Fina Elf SA, 1.76%, 4/24/03 2  5,000,000       4,972,378
                                                  --------------
                                                     13,472,094

 ---------------------------------------------------------------
 Pharmaceuticals--0.5%
 GlaxoSmithKline Finance PLC,
 1.32%, 1/13/03 2                     2,000,000       1,999,120
 ---------------------------------------------------------------
 Special Purpose Financial--14.6%
 ---------------------------------------------------------------
 AriesOne Metafolio Corp.:
 1.43%, 1/6/03 2                      2,500,000       2,499,497
 1.45%, 1/7/03 2                      5,000,000       4,998,792
 ---------------------------------------------------------------
 Beta Finance, Inc., 1.87%, 1/6/03 2 10,000,000       9,997,410
 ---------------------------------------------------------------
 Cooperative Assn. of Tractor
 Dealers, Inc., Series A:
 1.80%, 1/22/03                       5,000,000       4,994,750
 1.82%, 4/9/03                        2,800,000       2,786,128
 ---------------------------------------------------------------
 Cooperative Assn. of Tractor
 Dealers, Inc., Series B:
 1.43%, 3/17/03                       1,500,000       1,495,547
 1.43%, 4/22/03                       1,000,000         995,606
 1.75%, 2/20/03                       2,700,000       2,693,437
 1.82%, 4/16/03                       2,600,000       2,586,198
 ---------------------------------------------------------------
 CORSAIR Trust, Series 1-1005,
 1.63%, 9/17/03 1,4                   5,000,000       5,000,000
 ---------------------------------------------------------------
 K2 (USA) LLC, 2.10%, 1/15/03 2       3,100,000       3,097,468
 ---------------------------------------------------------------
 LINKS Finance LLC:
 1.45%, 5/15/03 1                     3,000,000       2,999,700
 1.86%, 1/6/03 2                      5,000,000       4,998,701
 ---------------------------------------------------------------
 RACERS, Series 2002-31-C,
 1.42%, 9/3/03 1,4                    3,500,000       3,495,310
 ---------------------------------------------------------------
 RACERS, Series 2002-36-C,
 1.42%, 10/1/03 1,4                   3,000,000       2,995,770
                                                  --------------
                                                     55,634,314
                                                  --------------
 Total Short-Term Notes (Cost $274,454,857)         274,454,857


                                      PRINCIPAL           VALUE
                                         AMOUNT      SEE NOTE 1
 ---------------------------------------------------------------
 U.S. Government Agencies--6.9%
 Federal Home Loan Bank:
 1.58%, 12/9/03                     $ 5,000,000    $  5,000,000
 1.60%, 12/16/03                      5,000,000       5,000,000
 ---------------------------------------------------------------
 Federal National Mortgage Assn.,
 1.67%, 1/23/03                       3,000,000       2,996,938
 ---------------------------------------------------------------
 FNMA Master Credit Facility:
 1.72%, 1/2/03                        5,180,200       5,179,953
 2%, 4/1/03                           8,000,000       7,960,000
                                                  --------------
 Total U.S. Government Agencies
 (Cost $26,136,891)                                  26,136,891

- ---------------------------------------------------------------
 Total Investments, at Value
 (Cost $377,441,146)                       99.3%    377,441,146

- ---------------------------------------------------------------
 Other Assets Net of Liabilities            0.7       2,528,294
                                    ----------------------------
 Net Assets                               100.0%  $ 379,969,440
                                    ============================


Footnotes to Statement of Investments

Short-term notes and direct bank obligations are generally traded on a discount
basis; the interest rate shown is the discount rate received by the Fund at the
time of purchase. Other securities normally bear interest at the rates shown.

1. Represents the current interest rate for a variable or increasing rate
security.
2. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $140,983,255, or 37.10% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.
3. Identifies issues considered to be illiquid or restricted--See Note 4 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 $11,491,080 or 3.02% of the Fund's net
assets as of December 31, 2002.

See accompanying Notes to Financial Statements.


STATEMENT OF ASSETS AND LIABILITIES  December 31, 2002



 Assets

 Investments, at value (cost $377,441,146)--see accompanying
statement             $377,441,146

- -----------------------------------------------------------------------------------------------

Cash
238,051

- -----------------------------------------------------------------------------------------------
 Receivables and other assets:
 Shares of beneficial interest
sold                                                   3,997,554
 Interest
                             303,857

Other
384

- -------------
 Total assets
                                                          381,980,992


- -----------------------------------------------------------------------------------------------
 Liabilities
 Payables and other liabilities:
 Shares of beneficial interest redeemed
                                            1,838,522

Dividends
111,868
 Shareholder
reports
15,779
 Transfer and shareholder servicing agent
fees                                              433
 Trustees'
compensation
343
 Other
               44,607

- -------------
 Total
liabilities
2,011,552



- -----------------------------------------------------------------------------------------------
 Net
Assets
$379,969,440

                    =============


- -----------------------------------------------------------------------------------------------
 Composition of Net Assets
 Par value of shares of beneficial
interest                                        $    379,942

- -----------------------------------------------------------------------------------------------
 Additional paid-in
capital                                                         379,589,498

                   -------------
 Net Assets--applicable to 379,941,670 shares of beneficial interest
outstanding   $379,969,440

=============


- -----------------------------------------------------------------------------------------------
 Net Asset Value, Redemption Price Per Share and Offering Price Per
Share                 $1.00

 See accompanying Notes to Financial Statements.

STATEMENT OF OPERATIONS  For the Year Ended December 31, 2002


 -----------------------------------------------------------------------------
 Investment Income
 Interest                                                          $7,441,721

 -----------------------------------------------------------------------------
 Expenses
 Management fees                                                    1,738,866
 -----------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees                         10,431
 -----------------------------------------------------------------------------
 Custodian fees and expenses                                            8,249
 -----------------------------------------------------------------------------
 Trustees' compensation                                                 5,644
 -----------------------------------------------------------------------------
 Other                                                                 37,070
                                                                   -----------
 Total expenses                                                     1,800,260
 Less reduction to custodian expenses                                  (3,704)
                                                                   -----------
 Net expenses                                                       1,796,556


 -----------------------------------------------------------------------------
 Net Investment Income                                              5,645,165


 -----------------------------------------------------------------------------
 Net Realized Gain on Investments                                       6,284


 -----------------------------------------------------------------------------
 Net Increase in Net Assets Resulting from Operations              $5,651,449
                                                                   ===========


 See accompanying Notes to Financial Statements.

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December
31,
2002            2001

- ----------------------------------------------------------------------------------------------------------------
 Operations

 Net investment
income                                                              $
5,645,165    $ 10,350,301

- ----------------------------------------------------------------------------------------------------------------
 Net realized
gain
6,284          35,731

- -----------------------------
 Net increase in net assets resulting from
operations                                  5,651,449      10,386,032


- ----------------------------------------------------------------------------------------------------------------
 Dividends and/or Distributions to Shareholders
 Dividends from net investment
income                                                 (5,603,150)
(10,350,301)

- ----------------------------------------------------------------------------------------------------------------
 Dividends from net realized
gain
(42,015)             --


- ----------------------------------------------------------------------------------------------------------------
 Beneficial Interest Transactions
 Net increase in net assets resulting from beneficial interest
transactions            9,734,246     154,422,163


- ----------------------------------------------------------------------------------------------------------------
 Net Assets
 Total
increase
9,740,530     154,457,894

- ----------------------------------------------------------------------------------------------------------------
 Beginning of
period
370,228,910     215,771,016

- -----------------------------
 End of period
                                    $379,969,440    $370,228,910

=============================

 See accompanying Notes to Financial Statements.

FINANCIAL HIGHLIGHTS

Year Ended December 31                                   2002
2001          2000          1999          1998

- -------------------------------------------------------------------------------------------------------------------------
 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                    .01
..04           .06           .05           .05
 Dividends from net investment income                      (.01)
(.04)         (.06)         (.05)         (.05)
 Dividends from net realized gain                            -- 4
- --            --            --            --

- ----------------------------------------------------------------
 Net asset value, end of period                           $1.00
$1.00         $1.00         $1.00         $1.00

================================================================


- -------------------------------------------------------------------------------------------------------------------------
 Total Return 1                                            1.47%
3.85%         6.26%         4.96%         5.25%



- -------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)              $379,969
$370,229      $215,771      $201,066      $151,799

- -------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                     $386,457
$288,106      $204,586      $166,727      $137,633

- -------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income                                     1.46%
3.59%         5.98%         4.87%         5.12%
 Expenses                                                  0.47%
0.52%         0.51%         0.48%         0.50% 3


 1. Assumes an 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 of less than one full year.
 3. Expense ratio has been calculated without adjustment for the reduction to
 custodian expenses.
 4. Less than $0.005 per share.

See accompanying Notes to Financial Statements.


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), an open end management investment company
 registered under the Investment Company Act of 1940, as amended. The Fund's
 investment objective is to seek maximum current income from investments in
 money market securities consistent with low capital risk and the maintenance of
 liquidity. The Trust's investment advisor is OppenheimerFunds, Inc. (the
 Manager).
    The following is a summary of significant accounting policies consistently
 followed by the Fund.
 -------------------------------------------------------------------------------
 Securities Valuation. Portfolio securities are valued on the basis of amortized
 cost, which approximates market value.
 -------------------------------------------------------------------------------
 Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
 Manager, may transfer uninvested cash balances into one or more joint
 repurchase agreement accounts. These balances are invested in one or more
 repurchase agreements, secured by U.S. government securities. Securities
 pledged as collateral for repurchase agreements are held by a custodian bank
 until the agreements mature. Each agreement requires that the market value of
 the collateral be sufficient to cover payments of interest and principal;
 however, in the event of default by the other party to the agreement, retention
 of the collateral may be subject to legal proceedings.
 -------------------------------------------------------------------------------
 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.
 -------------------------------------------------------------------------------
 Classification of Dividends and Distributions to Shareholders. Net investment
 income (loss) and net realized gain (loss) may differ for financial statement
 and tax purposes. The character of dividends and distributions made during the
 fiscal year from net investment income or net realized gains may differ from
 their ultimate characterization for federal income tax purposes. Also, due to
 timing of dividends and distributions, the fiscal year in which amounts are
 distributed may differ from the fiscal year in which the income or net 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, 2002, amounts have been reclassified to reflect an
 increase in paid-in capital of $27,791, a decrease in undistributed net
 investment income of $42,015, and a decrease in accumulated net realized loss
 on investments of $14,224. Net assets of the Fund were unaffected by the
 reclassifications.
 -------------------------------------------------------------------------------
 Security Transactions. Security transactions are recorded on the trade date.
 Realized gains and losses on securities sold are determined on the basis of
 identified cost.
 -------------------------------------------------------------------------------
 Other. The preparation of financial statements in conformity with accounting
 principles generally accepted in the United States of America 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 $0.001 par value shares of
 beneficial interest. Transactions in shares of beneficial interest were as
 follows:


                                                           Year Ended December
31, 2002       Year Ended December 31, 2001

Shares            Amount           Shares            Amount

- ---------------------------------------------------------------------------------------------------------------------------

 Sold                                                   1,008,410,332   $
1,008,410,332    1,020,448,982    $1,020,448,982
 Dividends and/or distributions reinvested                  5,645,165
5,645,165       10,350,301        10,350,301
 Redeemed                                              (1,004,321,251)
(1,004,321,251)    (876,377,120)     (876,377,120)

- ---------------------------------------------------------------------
 Net increase                                               9,734,246   $
9,734,246      154,422,163    $  154,422,163


 3. 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 0.45% 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.
 -------------------------------------------------------------------------------
 Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the
 Manager, acts as the transfer and shareholder servicing agent for the Fund. The
 Fund pays OFS a $27.50 per account fee.
    Additionally, funds offered in variable annuity separate accounts are
 subject to minimum fees of $5,000 for assets of less than $10 million and
 $10,000 for assets of $10 million or more. The Fund is subject to the minimum
 fee in the event that the per account fee does not equal or exceed the
 applicable minimum fee.
    OFS has voluntarily agreed to limit transfer and shareholder servicing agent
 fees up to an annual rate of 0.35% of average net assets of the Fund. This
 undertaking may be amended or withdrawn at any time.
 -------------------------------------------------------------------------------
 4. Illiquid Securities
 As of December 31, 2002, investments in securities included issues that are
 illiquid. A security may be considered illiquid if it lacks a readily available
 market or if its valuation has not changed for a certain period of time. The
 Fund intends to invest no more than 10% of its net assets (determined at the
 time of purchase and reviewed periodically) in illiquid securities. The
 aggregate value of illiquid securities subject to this limitation as of
 December 31, 2002 was $18,000,000, which represents 4.74% of the Fund's net
 assets.

OPPENHEIMER MULTIPLE STRATEGIES FUND/VA
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 of
Oppenheimer Multiple Strategies Fund/VA which is a series of Oppenheimer
Variable Account Funds, including the statement of investments, as of December
31, 2002, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for the periods indicated. 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 auditing standards generally
accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Multiple Strategies Fund/VA as of December 31, 2002, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America.


/s/Deloitte & Touche LLP
Deloitte & Touche LLP

Denver, Colorado
January 23, 2003


OPPENHEIMER MULTIPLE STRATEGIES FUND/VA

STATEMENT OF INVESTMENTS  December 31, 2002

                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
 Common Stocks--53.5%
- --------------------------------------------------------------------------------
 Consumer Discretionary--10.6%
- --------------------------------------------------------------------------------
 Auto Components--0.6%
 Borg-Warner Automotive, Inc. 1                        20,000       $ 1,008,400
- --------------------------------------------------------------------------------
 Delphi Corp.                                         221,100         1,779,855
                                                                    ------------
                                                                      2,788,255

- --------------------------------------------------------------------------------
 Hotels, Restaurants & Leisure--0.9%
 Brinker International, Inc. 3                         70,000         2,257,500
- --------------------------------------------------------------------------------
 McDonald's Corp.                                      68,200         1,096,656
- --------------------------------------------------------------------------------
 MGM Mirage, Inc. 1,3                                  30,000           989,100
                                                                    ------------
                                                                      4,343,256

- --------------------------------------------------------------------------------
 Household Durables--0.9%
 Matsushita Electric Industrial Co. Ltd.,
 Sponsored ADR                                         82,000           787,200
- --------------------------------------------------------------------------------
 Nintendo Co. Ltd.                                     10,000           934,524
- --------------------------------------------------------------------------------
 Sony Corp.                                            13,000           543,356
- --------------------------------------------------------------------------------
 Sony Corp., Sponsored ADR                             10,000           413,100
- --------------------------------------------------------------------------------
 Toll Brothers, Inc. 3                                 60,000         1,212,000
                                                                    ------------
                                                                      3,890,180

- --------------------------------------------------------------------------------
 Leisure Equipment & Products--1.5%
 Callaway Golf Co.                                    120,000         1,590,000
- --------------------------------------------------------------------------------
 Hasbro, Inc.                                          90,000         1,039,500
- --------------------------------------------------------------------------------
 Mattel, Inc.                                         138,000         2,642,705
- --------------------------------------------------------------------------------
 Shimano, Inc.                                        100,000         1,516,811
                                                                    ------------
                                                                      6,789,016

- --------------------------------------------------------------------------------
 Media--4.6%
 Comcast Corp., Cl. A 3                               117,000         2,757,690
- --------------------------------------------------------------------------------
 Cox Radio, Inc., Cl. A 1,3                            48,300         1,101,723
- --------------------------------------------------------------------------------
 EchoStar Communications
 Corp., Cl. A 1, 3                                    115,000         2,559,900
- --------------------------------------------------------------------------------
 News Corp. Ltd. (The), Sponsored
 ADR, Preference                                       56,000         1,268,400
- --------------------------------------------------------------------------------
 Omnicom Group, Inc. 1                                 45,700         2,952,220
- --------------------------------------------------------------------------------
 Reed Elsevier plc                                    144,000         1,233,312
- --------------------------------------------------------------------------------
 SCMP Group Ltd.                                    1,608,000           670,137
- --------------------------------------------------------------------------------
 SES Global, FDR                                       80,000           537,293
- --------------------------------------------------------------------------------
 Viacom, Inc., Cl. B 1,3                              200,000         8,152,000
                                                                    ------------
                                                                     21,232,675

- --------------------------------------------------------------------------------
 Multiline Retail--0.6%
 Sears Roebuck & Co.                                  111,000         2,658,450
- --------------------------------------------------------------------------------
 Specialty Retail--1.0%
 Borders Group, Inc. 3                                 70,000         1,127,000
- --------------------------------------------------------------------------------
 Children's Place Retail Stores, Inc. 3                37,000           393,680
- --------------------------------------------------------------------------------
 Gap, Inc. (The) 1                                    144,000         2,234,880
- --------------------------------------------------------------------------------
 Talbots, Inc. (The)                                   29,000           798,370
                                                                    ------------
                                                                      4,553,930


                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
 Textiles & Apparel--0.5%
 Compagnie Financiere Richemont
 AG, A Units 3                                         48,150       $   898,438
- --------------------------------------------------------------------------------
 Nike, Inc., Cl. B 1                                   36,000         1,600,920
                                                                    ------------
                                                                      2,499,358

- --------------------------------------------------------------------------------
 Consumer Staples--3.6%
- --------------------------------------------------------------------------------
 Food & Drug Retailing--0.6%
 Companhia Brasileira de Distribuicao
 Grupo Pao de Acucar,
 Sponsored ADR                                         14,000           214,200
- --------------------------------------------------------------------------------
 Safeway, Inc. 3                                      110,000         2,569,600
                                                                    ------------
                                                                      2,783,800

- --------------------------------------------------------------------------------
 Food Products--1.4%
 ConAgra Foods, Inc.                                   58,000         1,450,580
- --------------------------------------------------------------------------------
 Sara Lee Corp.                                        60,000         1,350,600
- --------------------------------------------------------------------------------
 Tyson Foods, Inc., Cl. A                             155,000         1,739,100
- --------------------------------------------------------------------------------
 Unilever NV, NY Shares                                30,000         1,851,300
                                                                    ------------
                                                                      6,391,580

- --------------------------------------------------------------------------------
 Personal Products--0.9%
 Estee Lauder Cos., Inc. (The), Cl. A                  58,000         1,531,200
- --------------------------------------------------------------------------------
 Wella AG                                              47,500         2,878,635
                                                                    ------------
                                                                      4,409,835

- --------------------------------------------------------------------------------
 Tobacco--0.7%
 Philip Morris Cos., Inc. 1                            78,000         3,161,340
- --------------------------------------------------------------------------------
 Energy--4.5%
- --------------------------------------------------------------------------------
 Energy Equipment & Services--1.2%
 Cooper Cameron Corp. 1,3                               9,000           448,380
- --------------------------------------------------------------------------------
 Core Laboratories NV 3                                73,000           828,550
- --------------------------------------------------------------------------------
 GlobalSantaFe Corp. 1                                 78,000         1,896,960
- --------------------------------------------------------------------------------
 Noble Corp. 1,3                                       66,000         2,319,900
- --------------------------------------------------------------------------------
 Petroleum Geo-Services ASA,
 Sponsored ADR 3                                      140,000            56,000
                                                                    ------------
                                                                      5,549,790

- --------------------------------------------------------------------------------
 Oil & Gas--3.3%
 BP plc, ADR                                           20,800           845,520
- --------------------------------------------------------------------------------
 ChevronTexaco Corp.                                   13,000           864,240
- --------------------------------------------------------------------------------
 Devon Energy Corp. 1                                  50,000         2,295,000
- --------------------------------------------------------------------------------
 Exxon Mobil Corp.                                     17,000           593,980
- --------------------------------------------------------------------------------
 Houston Exploration Co. 3                             18,300           559,980
- --------------------------------------------------------------------------------
 Ocean Energy, Inc.                                    40,000           798,800
- --------------------------------------------------------------------------------
 Perez Companc SA, Sponsored ADR 3                     14,880            93,446
- --------------------------------------------------------------------------------
 Petroleo Brasileiro SA, Preference                    33,300           436,475
- --------------------------------------------------------------------------------
 Talisman Energy, Inc.                                 64,000         2,303,076
- --------------------------------------------------------------------------------
 TotalFinaElf SA, B Shares                              1,700           242,800
- --------------------------------------------------------------------------------
 TotalFinaElf SA, Sponsored ADR                        17,100         1,222,650


STATEMENT OF INVESTMENTS  Continued

                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
 Oil & Gas Continued
 Unocal Corp.                                         130,000       $ 3,975,400
- --------------------------------------------------------------------------------
 Westport Resources Corp. 3                            50,000         1,040,000
                                                                    ------------
                                                                     15,271,367

- --------------------------------------------------------------------------------
 Financials--8.4%
- --------------------------------------------------------------------------------
 Banks--3.4%
 AmSouth Bancorp                                       50,400           967,680
- --------------------------------------------------------------------------------
 Bank of America Corp. 1                               75,000         5,217,750
- --------------------------------------------------------------------------------
 Bank of New York Co., Inc. (The) 1                    71,000         1,701,160
- --------------------------------------------------------------------------------
 BBVA Banco Frances SA, ADR 3                          15,833            46,232
- --------------------------------------------------------------------------------
 U.S. Bancorp                                          93,000         1,973,460
- --------------------------------------------------------------------------------
 UBS AG 3                                              25,050         1,217,444
- --------------------------------------------------------------------------------
 UniCredito Italiano SpA                              414,000         1,655,261
- --------------------------------------------------------------------------------
 Washington Mutual, Inc.                               80,000         2,762,400
                                                                    ------------
                                                                     15,541,387

- --------------------------------------------------------------------------------
 Diversified Financials--1.9%
 CIT Group, Inc.                                      105,000         2,058,000
- --------------------------------------------------------------------------------
 ICICI Bank Ltd., Sponsored ADR                        44,375           288,438
- --------------------------------------------------------------------------------
 J.P. Morgan Chase & Co. 1                            225,400         5,409,600
- --------------------------------------------------------------------------------
 Merrill Lynch & Co., Inc. 1                           31,800         1,206,810
                                                                    ------------
                                                                      8,962,848

- --------------------------------------------------------------------------------
 Insurance--0.9%
 American International Group, Inc. 1                  32,000         1,851,200
- --------------------------------------------------------------------------------
 Hartford Financial Services
 Group, Inc. 1                                         47,600         2,162,468
                                                                    ------------
                                                                      4,013,668

- --------------------------------------------------------------------------------
 Real Estate--2.2%
 Camden Property Trust                                 28,000           924,000
- --------------------------------------------------------------------------------
 CarrAmerica Realty Corp.                              33,000           826,650
- --------------------------------------------------------------------------------
 Developers Diversified Realty Corp.                  100,000         2,199,000
- --------------------------------------------------------------------------------
 Equity Office Properties Trust                        46,000         1,149,080
- --------------------------------------------------------------------------------
 Health Care Property Investors, Inc.                  32,000         1,225,600
- --------------------------------------------------------------------------------
 Host Marriott Corp. 3                                276,000         2,442,600
- --------------------------------------------------------------------------------
 IRSA Inversiones y Representaciones
 SA, Sponsored GDR 3                                   16,553            84,420
- --------------------------------------------------------------------------------
 Shurgard Storage Centers, Inc.                        44,000         1,378,960
                                                                    ------------
                                                                     10,230,310

- --------------------------------------------------------------------------------
 Health Care--8.7%
- --------------------------------------------------------------------------------
 Biotechnology--0.8%
 Affymetrix, Inc. 1,3                                  38,000           869,820
- --------------------------------------------------------------------------------
 Human Genome Sciences, Inc. 3                         63,000           555,030
- --------------------------------------------------------------------------------
 Millennium Pharmaceuticals, Inc. 1,3                  35,000           277,900
- --------------------------------------------------------------------------------
 Wyeth                                                 50,000         1,870,000
                                                                    ------------
                                                                      3,572,750

                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
 Health Care Equipment & Supplies--0.8%
 Beckman Coulter, Inc.                                 59,000       $ 1,741,680
- --------------------------------------------------------------------------------
 Guidant Corp. 1,3                                     63,000         1,943,550
- --------------------------------------------------------------------------------
 Sun Healthcare Group, Inc. 3                             496               689
                                                                    ------------
                                                                      3,685,919

- --------------------------------------------------------------------------------
 Health Care Providers & Services--1.6%
 Anthem, Inc. 1,3                                      17,400         1,094,460
- --------------------------------------------------------------------------------
 Covance, Inc. 1,3                                     88,000         2,163,920
- --------------------------------------------------------------------------------
 Healthsouth Corp. 3                                  130,000           546,000
- --------------------------------------------------------------------------------
 Humana, Inc. 3                                       170,000         1,700,000
- --------------------------------------------------------------------------------
 Quintiles Transnational Corp. 3                       60,000           726,000
- --------------------------------------------------------------------------------
 Service Corp. International 3                        304,000         1,009,280
                                                                    ------------
                                                                      7,239,660

- --------------------------------------------------------------------------------
 Pharmaceuticals--5.5%
 Abbott Laboratories 1                                105,000         4,200,000
- --------------------------------------------------------------------------------
 AstraZeneca plc                                       41,800         1,467,963
- --------------------------------------------------------------------------------
 Bristol-Myers Squibb Co.                              74,800         1,731,620
- --------------------------------------------------------------------------------
 Eli Lilly & Co.                                       16,500         1,047,750
- --------------------------------------------------------------------------------
 GlaxoSmithKline plc, ADR                              71,000         2,659,660
- --------------------------------------------------------------------------------
 Johnson & Johnson 1                                   88,000         4,726,480
- --------------------------------------------------------------------------------
 Novartis AG                                           91,000         3,320,279
- --------------------------------------------------------------------------------
 Pharmacia Corp.                                       37,000         1,546,600
- --------------------------------------------------------------------------------
 Pliva d.d., GDR 2                                     20,000           284,000
- --------------------------------------------------------------------------------
 Schering-Plough Corp.                                120,000         2,664,000
- --------------------------------------------------------------------------------
 Watson Pharmaceuticals, Inc. 1,3                      70,000         1,978,900
                                                                    ------------
                                                                     25,627,252

- --------------------------------------------------------------------------------
 Industrials--3.0%
- --------------------------------------------------------------------------------
 Aerospace & Defense--0.5%
 Boeing Co.                                            45,000         1,484,550
- --------------------------------------------------------------------------------
 Northrop Grumman Corp. 1                              10,000           970,000
- --------------------------------------------------------------------------------
 Orbital Sciences Corp. 3                               1,476             6,229
                                                                    ------------
                                                                      2,460,779

- --------------------------------------------------------------------------------
 Air Freight & Couriers--0.3%
 United Parcel Service, Inc., Cl. B                    21,000         1,324,680
- --------------------------------------------------------------------------------
 Airlines--0.3%
 Delta Air Lines, Inc. 1                               42,000           508,200
- --------------------------------------------------------------------------------
 Singapore Airlines Ltd.                              116,000           682,156
                                                                    ------------
                                                                      1,190,356

- --------------------------------------------------------------------------------
 Commercial Services & Supplies--0.3%
 Pittston Brink's Group                                82,000         1,515,360
- --------------------------------------------------------------------------------
 Construction & Engineering--0.2%
 Insituform Technologies, Inc., Cl. A 3                64,000         1,091,200
- --------------------------------------------------------------------------------
 Electrical Equipment--0.0%
 Active Power, Inc. 3                                 137,000           243,860



                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
 Industrial Conglomerates--0.3%
 Tyco International Ltd. 1                              76,000      $ 1,298,080
- --------------------------------------------------------------------------------
 Machinery--0.5%
 Komatsu Ltd.                                          196,000          639,185
- --------------------------------------------------------------------------------
 Morgan Crucible Co. plc 3                             321,800          269,394
- --------------------------------------------------------------------------------
 SureBeam Corp., Cl. A 3                               120,000          484,800
- --------------------------------------------------------------------------------
 Wolverine Tube, Inc. 3                                122,400          698,904
                                                                    ------------
                                                                      2,092,283

- --------------------------------------------------------------------------------
 Road & Rail--0.6%
 Canadian National Railway Co.                          22,000          914,320
- --------------------------------------------------------------------------------
 Swift Transportation Co., Inc. 3                       90,000        1,801,620
                                                                    ------------
                                                                      2,715,940

- --------------------------------------------------------------------------------
 Information Technology--8.3%
- --------------------------------------------------------------------------------
 Communications Equipment--0.6%
 Brocade Communications
 Systems, Inc.                                          65,000          269,100
- --------------------------------------------------------------------------------
 Cisco Systems, Inc. 1,3                               100,000        1,310,000
- --------------------------------------------------------------------------------
 Juniper Networks, Inc. 1,3                             40,000          272,000
- --------------------------------------------------------------------------------
 Motorola, Inc. 1                                      106,000          916,900
                                                                    ------------
                                                                      2,768,000

- --------------------------------------------------------------------------------
 Computers & Peripherals--2.3%
 EMC Corp. 3                                           103,000          632,420
- --------------------------------------------------------------------------------
 International Business
 Machines Corp. 1                                      128,000        9,920,000
                                                                    ------------
                                                                     10,552,420

- --------------------------------------------------------------------------------
 Electronic Equipment & Instruments--1.1%
 Cognex Corp. 3                                         54,000          995,220
- --------------------------------------------------------------------------------
 Keyence Corp.                                           8,360        1,454,740
- --------------------------------------------------------------------------------
 Millipore Corp. 1                                      32,000        1,088,000
- --------------------------------------------------------------------------------
 Waters Corp. 1,3                                       62,000        1,350,360
                                                                    ------------
                                                                      4,888,320

- --------------------------------------------------------------------------------
 Internet Software & Services--0.2%
 Yahoo!, Inc. 1,3                                       52,000          850,200
- --------------------------------------------------------------------------------
 IT Consulting & Services--0.2%
 Titan Corp. (The) 1,3                                 110,000        1,144,000
- --------------------------------------------------------------------------------
 Semiconductor Equipment & Products--2.4%
 Analog Devices, Inc. 1,3                               50,000        1,193,500
- --------------------------------------------------------------------------------
 Applied Materials, Inc. 3                              43,600          568,108
- --------------------------------------------------------------------------------
 Applied Micro Circuits Corp. 3                         60,000          221,400
- --------------------------------------------------------------------------------
 ASML Holding NV 3                                      91,000          760,760
- --------------------------------------------------------------------------------
 Intel Corp. 1                                         198,000        3,082,860
- --------------------------------------------------------------------------------
 KLA-Tencor Corp. 1,3                                   47,700        1,687,149
- --------------------------------------------------------------------------------
 Lam Research Corp. 1,3                                 43,000          464,400
- --------------------------------------------------------------------------------
 STMicroelectronics NV, NY
 Registered Shares 1                                    62,000        1,209,620


                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
 Semiconductor Equipment & Products Continued
 Teradyne, Inc. 3                                      103,000      $ 1,340,030
- --------------------------------------------------------------------------------
 Texas Instruments, Inc. 1                              45,000          675,450
                                                                    ------------
                                                                     11,203,277

- --------------------------------------------------------------------------------
 Software--1.5%
 BEA Systems, Inc. 1,3                                 103,000        1,181,410
- --------------------------------------------------------------------------------
 i2 Technologies, Inc. 3                               123,000          141,450
- --------------------------------------------------------------------------------
 Peoplesoft, Inc. 3                                     80,000        1,464,000
- --------------------------------------------------------------------------------
 Rational Software Corp. 1,3                            70,000          727,300
- --------------------------------------------------------------------------------
 Red Hat, Inc. 3                                       111,000          656,010
- --------------------------------------------------------------------------------
 Reynolds & Reynolds Co., Cl. A                         43,000        1,095,210
- --------------------------------------------------------------------------------
 Synopsys, Inc. 1,3                                     20,500          946,075
- --------------------------------------------------------------------------------
 Veritas Software Corp. 3                               31,700          495,154
                                                                    ------------
                                                                      6,706,609

- --------------------------------------------------------------------------------
 Materials--4.1%
- --------------------------------------------------------------------------------
 Chemicals--2.6%
 Dow Chemical Co. 1                                     30,000          891,000
- --------------------------------------------------------------------------------
 Engelhard Corp.                                        95,000        2,123,250
- --------------------------------------------------------------------------------
 Ferro Corp.                                            72,000        1,758,960
- --------------------------------------------------------------------------------
 Hercules, Inc. 3                                      173,000        1,522,400
- --------------------------------------------------------------------------------
 International Flavors &
 Fragrances, Inc. 1                                     64,000        2,246,400
- --------------------------------------------------------------------------------
 Monsanto Co.                                           66,032        1,271,116
- --------------------------------------------------------------------------------
 Praxair, Inc. 1                                        32,000        1,848,640
- --------------------------------------------------------------------------------
 Sterling Chemicals, Inc. 3                                401           14,035
                                                                    ------------
                                                                     11,675,801

- --------------------------------------------------------------------------------
 Metals & Mining--0.9%
 Alcoa, Inc.                                            58,000        1,321,240
- --------------------------------------------------------------------------------
 Companhia Vale do Rio Doce,
 Sponsored ADR                                          68,800        1,892,000
- --------------------------------------------------------------------------------
 GrafTech International Ltd. 3                         170,000        1,013,200
                                                                    ------------
                                                                      4,226,440

- --------------------------------------------------------------------------------
 Paper & Forest Products--0.6%
 Georgia-Pacific Corp. 1                               110,000        1,777,600
- --------------------------------------------------------------------------------
 UPM-Kymmene Oyj                                        34,000        1,091,796
                                                                    ------------
                                                                      2,869,396

- --------------------------------------------------------------------------------
 Telecommunication Services--0.6%
- --------------------------------------------------------------------------------
 Diversified Telecommunication Services--0.1%
 Tele Norte Leste Participacoes
 SA (Telemar)                                       26,283,402          148,494
- --------------------------------------------------------------------------------
 Tele Norte Leste Participacoes
 SA (Telemar), Preference                            3,077,585           23,734
- --------------------------------------------------------------------------------
 Telefonica SA, BDR                                     16,262          144,704
- --------------------------------------------------------------------------------
 WorldCom, Inc./WorldCom Group 3                       375,000           46,125
                                                                    ------------
                                                                        363,057

STATEMENT OF INVESTMENTS  Continued


                                                                   Market Value
                                                       Shares        See Note 1
- --------------------------------------------------------------------------------
 Wireless Telecommunication Services--0.5%
 AT&T Wireless Services, Inc. 1,3                     330,000      $  1,864,500
- --------------------------------------------------------------------------------
 Millicom International Cellular SA 3                 170,000           302,600
- --------------------------------------------------------------------------------
 Telesp Celular Participacoes SA 3                 49,153,261            52,902
                                                                   -------------
                                                                      2,220,002

- --------------------------------------------------------------------------------
 Utilities--1.7%
- --------------------------------------------------------------------------------
 Electric Utilities--1.0%
 American Electric Power Co., Inc. 1                   33,000           901,890
- --------------------------------------------------------------------------------
 Edison International 1,3                              67,000           793,950
- --------------------------------------------------------------------------------
 Northeast Utilities Co.                               86,000         1,304,620
- --------------------------------------------------------------------------------
 Progress Energy, Inc.                                 28,000         1,213,800
- --------------------------------------------------------------------------------
 Xcel Energy, Inc.                                     56,000           616,000
                                                                   -------------
                                                                      4,830,260

- --------------------------------------------------------------------------------
 Gas Utilities--0.3%
 El Paso Corp.                                         50,000           348,000
- --------------------------------------------------------------------------------
 NiSource, Inc.                                        55,500         1,110,000
                                                                   -------------
                                                                      1,458,000

- --------------------------------------------------------------------------------
 Multi-Utilities--0.4%
 Energy East Corp.                                     65,000         1,435,850
- --------------------------------------------------------------------------------
 NorthWestern Corp.                                    58,000           294,640
                                                                   -------------
                                                                      1,730,490
                                                                   -------------
 Total Common Stocks (Cost $243,811,667)                            246,615,436

- --------------------------------------------------------------------------------
 Preferred Stocks--0.3%
 Qwest Trends Trust, 5.75% Cv. 2                       43,000           528,470
- --------------------------------------------------------------------------------
 Rouse Co. (The), $3.00 Cv., Series B                  23,000         1,058,690
                                                                   -------------
 Total Preferred Stocks (Cost $2,957,015)                             1,587,160

                                                        Units
- --------------------------------------------------------------------------------
 Rights, Warrants and Certificates--0.0%
 Applera Corp./Applied Biosystems
 Group Wts., Exp. 9/11/03 3,4                             249               996
- --------------------------------------------------------------------------------
 Covergent Communications,
 Inc. Wts., Exp. 4/1/08 3,4                             1,000                10
- --------------------------------------------------------------------------------
 HF Holdings, Inc. Wts.,
 Exp. 9/27/09 3,4                                       2,593               259
- --------------------------------------------------------------------------------
 Mexico Value Rts., Exp. 6/30/03 3,4                4,450,000             1,276
- --------------------------------------------------------------------------------
 Sterling Chemicals, Inc. Wts.,
 Exp. 12/31/07 3                                          651                --
- --------------------------------------------------------------------------------
 Sun Healthcare Group, Inc. Wts.,
 Exp. 2/28/05 3,4                                       1,241               620
- --------------------------------------------------------------------------------
 United Mexican States Bonds,
 Series E Rts., Exp. 6/30/07 3,4                    4,450,000             2,447
- --------------------------------------------------------------------------------
 United Mexican States Collateralized
 Fixed Rate Par Bonds:
 Series B, 6.25%, 12/31/19 Rts.,
 Exp. 6/30/04 3,4                                   4,450,000            16,688




                                                                   Market Value
                                                        Units        See Note 1
- --------------------------------------------------------------------------------
 Rights, Warrants and Certificates Continued
 United Mexican States Collateralized
 Fixed Rate Par Bonds: Continued
 Series C, 6.25%, 12/31/19 Rts.,
 Exp. 6/30/05 3,4                                   4,450,000      $      2,448
 Series D, 6.25%, 12/31/19 Rts.,
 Exp. 6/30/06 3,4                                   4,450,000             2,448
                                                                   -------------
 Total Rights, Warrants and
 Certificates (Cost $38,888)                                             27,192

                                                    Principal
                                                       Amount
- --------------------------------------------------------------------------------
 Mortgage-Backed Obligations--13.6%
 Federal Home Loan Mortgage Corp.,
 Gtd. Mtg. Pass-Through Participation
 Certificates, 7%, 5/1/29                        $  1,854,858         1,952,262
- --------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp.,
 Home Equity Loan Structured
 Pass-Through Certificates, Series
 HOO2, Cl. A2, 1.861%, 12/15/06                     1,300,000         1,294,008
- --------------------------------------------------------------------------------
 Federal National Mortgage Assn.:
 6%, 5/1/16                                        13,319,868        13,947,599
 6.50%, 11/1/27-1/25/33                            22,193,786        23,114,311
 7%, 1/25/33                                       16,848,000        17,721,990
- --------------------------------------------------------------------------------
 Federal National Mortgage Assn. Nts.:
 5.125%, 2/13/04                                    1,750,000         1,823,783
 7.125%, 1/15/30                                      400,000           495,268
- --------------------------------------------------------------------------------
 Government National Mortgage
 Assn., 8%, 4/15/23                                   731,938           800,792
- --------------------------------------------------------------------------------
 Washington Mutual Mortgage
 Securities Corp., Collateralized Mtg
 Obligations, Pass-Through
 Certificates, Series 2002-AR19,
 Cl. A-1, 1.771%, 1/25/33                           1,550,000         1,550,000
                                                                   -------------
 Total Mortgage-Backed Obligations
 (Cost $61,251,297)                                                  62,700,013

- --------------------------------------------------------------------------------
 U.S. Government Obligations--11.5%
 Federal Home Loan Mortgage Corp.
 Unsec. Nts., 5.50%, 7/15/06                        3,300,000         3,630,505
- --------------------------------------------------------------------------------
 Federal National Mortgage Assn
 Unsec. Nts., 7.25%, 1/15/10-5/15/30                6,600,000         8,135,344
- --------------------------------------------------------------------------------
 U.S. Treasury Bonds:
 5.375%, 2/15/31                                    1,365,000         1,488,490
 6%, 2/15/26                                          575,000           659,117
 7.50%, 11/15/16                                    1,310,000         1,713,542
 8.875%, 8/15/17                                    2,900,000         4,239,324
 STRIPS, 6.32%, 8/15/25 5                           5,465,000         1,658,944
 STRIPS, 6.54%, 8/15/15 5                           6,035,000         3,349,226
 STRIPS, 7.10%, 11/15/18 5                         13,600,000         6,067,803
 STRIPS, 7.26%, 11/15/18 5                          8,500,000         3,815,930
 STRIPS, 7.31%, 8/15/19 5                          15,300,000         6,496,763

                                                           Principal     Market
Value
                                                              Amount       See
Note 1
- --------------------------------------------------------------------------------------
 U.S. Government Obligations Continued

 U.S. Treasury Nts.:
 4%, 11/15/12                                            $ 1,916,000      $
1,943,694
 5%, 8/15/11                                               5,000,000
5,484,380
 6.25%, 2/15/07                                            3,800,000
4,360,948

- ------------
 Total U.S. Government Obligations
 (Cost $45,272,507)
53,044,010

- --------------------------------------------------------------------------------------
 Foreign Government Obligations--0.2%
 Philippines (Republic of) Bonds,
 8.60%, 6/15/27 4 (Cost $1,154,237)                        1,150,000
934,375

- --------------------------------------------------------------------------------------
 Non-Convertible Corporate Bonds and Notes--9.3%
 ABN Amro Bank NV (NY Branch),
 7.125% Sub. Nts., Series B, 10/15/93                        400,000
412,063
- --------------------------------------------------------------------------------------
 Albertson's, Inc., 7.45% Unsec
 Debs., 8/1/29                                               380,000
420,963
- --------------------------------------------------------------------------------------
 American Cellular Corp., 9.50% Sr. Sub.
 Nts., 10/15/09 7                                            700,000
136,500
- --------------------------------------------------------------------------------------
 American International Group, Inc./
 SunAmerica Global Financing VI,
 6.30% Sr. Sec. Nts., 5/10/11 2                            1,000,000
1,104,031
- --------------------------------------------------------------------------------------
 Amgen, Inc., 8.125% Unsec
 Debs., 4/1/97                                                91,000
110,878
- --------------------------------------------------------------------------------------
 Amtran, Inc., 10.50% Sr. Nts., 8/1/04                       500,000
210,000
- --------------------------------------------------------------------------------------
 AT&T Corp., 8.50% Sr. Nts., 11/15/31 8,9                    300,000
331,806
- --------------------------------------------------------------------------------------
 AT&T Wireless Services, Inc., 7.50%
 Sr. Unsec. Nts., 5/1/07                                     835,000
860,994
- --------------------------------------------------------------------------------------
 Bank of America Corp., 7.80% Jr
 Unsec. Sub. Nts., 2/15/10                                   400,000
476,472
- --------------------------------------------------------------------------------------
 Blount, Inc., 13% Sr. Sub. Nts., 8/1/09                     700,000
439,250
- --------------------------------------------------------------------------------------
 Boeing Capital Corp., 6.50%
 Nts., 2/15/12                                               750,000
801,040
- --------------------------------------------------------------------------------------
 Bristol-Myers Squibb Co.,
 5.75% Nts., 10/1/11 8                                     1,000,000
1,066,691
- --------------------------------------------------------------------------------------
 Cambridge Industries, Inc.,
 Liquidating Trust Interests, 7/15/07 7
309,823               --
- --------------------------------------------------------------------------------------
 Chancellor Media Corp., 8.75%
 Sr. Unsec. Sub. Nts., Series B, 6/15/07 4                 1,000,000
1,048,750
- --------------------------------------------------------------------------------------
 Charter Communications Holdings
 LLC/Charter Communications
 Holdings Capital Corp., 0%/9.92%
 Sr. Unsec. Disc. Nts., 4/1/11 6                             400,000
142,000
- --------------------------------------------------------------------------------------
 CIT Group, Inc., 7.75% Sr. Unsec
 Unsub. Nts., 4/2/12                                       1,000,000
1,125,044
- --------------------------------------------------------------------------------------
 Citigroup, Inc., 6.875% Unsec
 Nts., 2/15/98                                               450,000
491,307
- --------------------------------------------------------------------------------------
 Citizens Communications Co., 9.25%
 Sr. Nts., 5/15/11                                           440,000
524,995
- --------------------------------------------------------------------------------------
 Coast Hotels & Casinos, Inc., 9.50%
 Sr. Unsec. Sub. Nts., 4/1/09                                200,000
215,000


                                                           Principal     Market
Value
                                                              Amount       See
Note 1
- --------------------------------------------------------------------------------------
 Non-Convertible Corporate Bonds and Notes Continued
 Coca-Cola Co. (The), 7.375% Unsec
 Debs., 7/29/93                                          $   360,000      $
426,906
- --------------------------------------------------------------------------------------
 Collins & Aikman Floorcoverings, Inc.,
 9.75% Sr. Sub. Nts., Series B, 2/15/10                      200,000
201,000
- --------------------------------------------------------------------------------------
 Conoco, Inc., 6.95% Sr. Unsec
 Nts., 4/15/29                                               400,000
454,810
- --------------------------------------------------------------------------------------
 Credit Suisse First Boston (USA), Inc.,
 6.125% Nts., 11/15/11                                       740,000
773,427
- --------------------------------------------------------------------------------------
 Doman Industries Ltd., 8.75%
 Sr. Nts., 3/15/04 7                                         700,000
91,000
- --------------------------------------------------------------------------------------
 Duke Energy Corp., 5.625%
 Nts., 11/30/12                                              330,000
329,955
- --------------------------------------------------------------------------------------
 Dynegy Holdings, Inc., 8.75%
 Sr. Nts., 2/15/12                                           250,000
88,750
- --------------------------------------------------------------------------------------
 FirstEnergy Corp., 7.375% Sr
 Unsub. Nts., Series C, 11/15/31                             870,000
846,323
- --------------------------------------------------------------------------------------
 Fleming Cos., Inc., 10.625% Sr
 Unsec. Sub. Nts., Series D, 7/31/07                         100,000
65,500
- --------------------------------------------------------------------------------------
 Ford Motor Co., 7.70%
 Unsec. Debs., 5/15/97                                       400,000
336,372
- --------------------------------------------------------------------------------------
 Forest Oil Corp., 10.50%
 Sr. Unsec. Sub. Nts., 1/15/06                               400,000
424,000
- --------------------------------------------------------------------------------------
 France Telecom SA:
 8.70% Sr. Unsec. Nts., 3/1/06 9                             365,000
399,958
 9.25% Sr. Unsec. Nts., 3/1/11                               370,000
428,576
- --------------------------------------------------------------------------------------
 Funding Corp./Beaver Valley Funding
 Corp., 9% Second Lease Obligation
 Bonds, 6/1/17                                               989,000
1,097,440
- --------------------------------------------------------------------------------------
 General Electric Capital Corp.,
 7.25% Nts., Series A, 2/1/05                                400,000
440,502
- --------------------------------------------------------------------------------------
 General Motors Acceptance Corp.,
 6.875% Unsec. Unsub. Nts., 8/28/12                        1,500,000
1,481,194
- --------------------------------------------------------------------------------------
 Goldman Sachs Group, Inc. (The),
 7.80% Sr. Unsec. Unsub. Nts.,
 Series B, 1/28/10                                           400,000
466,072
- --------------------------------------------------------------------------------------
 Graphic Packaging Corp., 8.625%
 Sub. Nts., 2/15/12                                          200,000
211,500
- --------------------------------------------------------------------------------------
 Hornbeck-Leevac Marine
 Services, Inc., 10.625% Sr. Nts., 8/1/08                    250,000
265,000
- --------------------------------------------------------------------------------------
 Horseshoe Gaming LLC,
 8.625% Sr. Sub. Nts., 5/15/09                               400,000
427,000
- --------------------------------------------------------------------------------------
 Household Finance Corp.,
 7% Nts., 5/15/12                                            715,000
784,492
- --------------------------------------------------------------------------------------
 Huntsman Corp./ICI Chemical Co.
 plc, Zero Coupon Sr. Unsec. Disc
 Nts., 13.08%, 12/31/09 5                                    500,000
115,000
- --------------------------------------------------------------------------------------
 Isle of Capri Casinos, Inc.,
 9% Sr. Sub. Nts., 3/15/12                                   300,000
313,500
- --------------------------------------------------------------------------------------
 ISP Holdings, Inc., 10.625% Sr. Sec
 Nts., 12/15/09                                              250,000
218,750

STATEMENT OF INVESTMENTS  Continued


                                                          Principal    Market
Value
                                                             Amount      See
Note 1
- ------------------------------------------------------------------------------------
Non-Convertible Corporate Bonds and Notes Continued
 IT Group, Inc., 11.25% Sr. Unsec.
 Sub. Nts., Series B, 4/1/09 3,4,7                       $  400,000      $
520
- ------------------------------------------------------------------------------------
 J.P. Morgan Chase & Co., 6.75%
 Sub. Nts., 2/1/11                                          750,000
816,693
- ------------------------------------------------------------------------------------
 K. Hovnanian Enterprises, Inc.,
 8.875% Sr. Sub. Nts., 4/1/12                               700,000
672,000
- ------------------------------------------------------------------------------------
 Kaiser Aluminum & Chemical Corp.:
 10.875% Sr. Nts., Series B, 10/15/06 3,7                   250,000
168,750
 12.75% Sr. Sub. Nts., 2/1/03 3,7                           800,000
64,000
- ------------------------------------------------------------------------------------
 Kinder Morgan, Inc., 6.50%
 Nts., 9/1/12 2                                             445,000
465,890
- ------------------------------------------------------------------------------------
 Kroger Co. (The), 6.75% Nts., 4/15/12                      380,000
421,245
- ------------------------------------------------------------------------------------
 Lamar Media Corp., 9.625%
 Sr. Unsec. Sub. Nts., 12/1/06                              150,000
155,250
- ------------------------------------------------------------------------------------
 Leap Wireless International, Inc.:
 0%/14.50% Sr. Unsec. Disc. Nts.,
 4/15/10 6,7                                                300,000
28,500
 12.50% Sr. Nts., 4/15/10 4,7                               400,000
58,000
- ------------------------------------------------------------------------------------
 Lockheed Martin Corp., 8.20%
 Nts., 12/1/09                                              500,000
618,748
- ------------------------------------------------------------------------------------
 Lyondell Chemical Co.:
 9.625% Sr. Sec. Nts., Series A, 5/1/07                     150,000
144,750
 9.875% Sec. Nts., Series B, 5/1/07                         400,000
386,000
- ------------------------------------------------------------------------------------
 MBNA America Bank NA,
 6.625% Sub. Nts., 6/15/12                                1,000,000
1,019,670
- ------------------------------------------------------------------------------------
 MeriStar Hospitality Corp.:
 8.75% Sr. Unsec. Sub. Nts., 8/15/07                        500,000
337,500
 9.125% Sr. Unsec. Nts., 1/15/11                            700,000
612,500
- ------------------------------------------------------------------------------------
 Metallurg, Inc., 11% Sr. Nts., 12/1/07                     450,000
324,000
- ------------------------------------------------------------------------------------
 Mohegan Tribal Gaming Authority,
 8% Sr. Sub. Nts., 4/1/12                                   400,000
419,000
- ------------------------------------------------------------------------------------
 NiSource Finance Corp., 7.875% Sr
 Unsec. Nts., 11/15/10                                      630,000
693,413
- ------------------------------------------------------------------------------------
 Omnipoint Corp., 11.50% Sr. Nts.,
 9/15/09 2                                                  250,000
266,250
- ------------------------------------------------------------------------------------
 Orbcomm Global LP (Escrow),
 8/15/04 3,7
200,000              --
- ------------------------------------------------------------------------------------
 Pathmark Stores, Inc., 8.75%
 Sr. Sub. Nts., 2/1/12                                      300,000
277,500
- ------------------------------------------------------------------------------------
 Penn National Gaming, Inc.,
 8.875% Sr. Sub. Nts., 3/15/10                              500,000
515,000
- ------------------------------------------------------------------------------------
 Petco Animal Supplies, Inc.,
 10.75% Sr. Sub. Nts., 11/1/11                              250,000
276,563
- ------------------------------------------------------------------------------------
 Premier Parks, Inc., 9.75% Sr
 Nts., 6/15/07                                              500,000
487,500
- ------------------------------------------------------------------------------------
 R&B Falcon Corp., 9.50%
 Sr. Unsec. Nts., 12/15/08                                  500,000
626,342
- ------------------------------------------------------------------------------------
 Riverwood International Corp.:
 10.625% Sr. Unsec. Nts., 8/1/07                            500,000
520,000
 10.875% Sr. Sub. Nts., 4/1/08                              250,000
252,500


                                                          Principal    Market
Value
                                                             Amount      See
Note 1
- ------------------------------------------------------------------------------------
 Non-Convertible Corporate Bonds and Notes Continued
 Rural Cellular Corp., 9.625% Sr. Sub.
 Nts., Series B, 5/15/08                                 $  750,000      $
453,750
- ------------------------------------------------------------------------------------
 Sinclair Broadcast Group, Inc.,
 8.75% Sr. Sub. Nts., 12/15/07                              900,000
941,625
- ------------------------------------------------------------------------------------
 Sprint Capital Corp., 8.75%
 Nts., 3/15/32                                              460,000
438,331
- ------------------------------------------------------------------------------------
 Standard Pacific Corp., 9.25%
 Sr. Sub. Nts., 4/15/12                                     200,000
194,000
- ------------------------------------------------------------------------------------
 Sterling Chemicals, Inc.:
 10% Sr. Sec. Nts., 12/19/07                                207,000
134,550
 11.25% Sr. Sub. Nts., 8/15/06 3,7
335,000              --
- ------------------------------------------------------------------------------------
 Sun International Hotels Ltd.,
 8.875% Sr. Unsec. Sub. Nts., 8/15/11                       400,000
410,000
- ------------------------------------------------------------------------------------
 TCI Communications, Inc.,
 9.80% Sr. Unsec. Debs., 2/1/12                           1,090,000
1,312,262
- ------------------------------------------------------------------------------------
 Terex Corp., 9.25% Sr. Unsec. Sub.
 Nts., 7/15/11                                              250,000
229,063
- ------------------------------------------------------------------------------------
 Time Warner Entertainment Co.
 LP, 10.15% Sr. Nts., 5/1/12                                500,000
632,187
- ------------------------------------------------------------------------------------
 Time Warner, Inc., 9.125%
 Debs., 1/15/13                                             500,000
587,640
- ------------------------------------------------------------------------------------
 Tritel PCS, Inc., 10.375% Sr. Sub.
 Nts., 1/15/11                                              262,000
281,650
- ------------------------------------------------------------------------------------
 Triton PCS, Inc., 8.75% Sr. Unsec. Sub.
 Nts., 11/15/11                                             400,000
326,000
- ------------------------------------------------------------------------------------
 Tyco International Group SA, 6.375%
 Nts., 10/15/11                                             750,000
702,627
- ------------------------------------------------------------------------------------
 Union Carbide Corp., 6.25% Nts.,
 6/15/03                                                    490,000
494,808
- ------------------------------------------------------------------------------------
 United Pan-Europe Communications
 NV, 10.875% Sr. Unsec. Nts.,
 Series B, 8/1/09 3,7                                       400,000
32,000
- ------------------------------------------------------------------------------------
 United States Steel LLC, 10.75%
 Sr. Nts., 8/1/08                                           600,000
594,000
- ------------------------------------------------------------------------------------
 Viacom, Inc., 7.70% Sr. Unsec
 Nts., 7/30/10                                              750,000
892,348
- ------------------------------------------------------------------------------------
 Vodafone Group plc, 7.75%
 Unsec. Unsub. Nts., 2/15/10                                400,000
472,548
- ------------------------------------------------------------------------------------
 Walt Disney Co. (The), 6.375%
 Sr. Unsec. Nts., 3/1/12                                  1,000,000
1,095,689
- ------------------------------------------------------------------------------------
 Waste Management, Inc., 7%
 Sr. Nts., 7/15/28                                          650,000
645,017
- ------------------------------------------------------------------------------------
 Williams Scotsman, Inc., 9.875%
 Sr. Unsec. Nts., 6/1/07                                    100,000
93,000
- ------------------------------------------------------------------------------------
 Wolverine Tube, Inc., 10.50%
 Sr. Nts., 4/1/09                                           500,000
512,500
- ------------------------------------------------------------------------------------
 WorldCom, Inc., 6.95% Sr. Unsec
 Nts., 8/15/28 7                                            900,000
216,000


                                                      Principal    Market Value
                                                         Amount      See Note 1
- --------------------------------------------------------------------------------
 Non-Convertible Corporate Bonds and Notes Continued
 XO Communications, Inc., 0%/12.25%
 Sr. Unsec. Disc. Nts., 6/1/09 3,4,6,7              $   350,000    $      2,187
                                                                     -----------
 Total Non-Convertible Corporate
 Bonds and Notes (Cost $45,771,097)                                  42,926,677

- --------------------------------------------------------------------------------
 Convertible Corporate Bonds and Notes--0.1%
 Gilat Satellite Networks Ltd.,
 4.25% Cv. Unsec. Sub. Nts., 3/15/05 4,7
 (Cost $1,161,826)                                    1,500,000         270,000

- --------------------------------------------------------------------------------
 Structured Notes--1.5%
 JPMorgan Chase Bank, High Yield
 Index Credit-Linked Trust Nts.,
 8.75%, 11/15/07                                      3,580,000       3,606,850
- --------------------------------------------------------------------------------
 UBS AG, High Grade Credit-Linked
 Nts., 3.065%, 12/10/04 9                             3,550,000       3,546,450
                                                                     -----------
 Total Structured Notes (Cost $7,042,564)                             7,153,300


                                                      Principal    Market Value
                                                         Amount      See Note 1
- --------------------------------------------------------------------------------
 Joint Repurchase Agreements--18.3% 10
 Undivided interest of 12.14% in joint repurchase
 agreement (Market Value $694,610,000) with
 Banc One Capital Markets, Inc., 1.07%, dated
 12/31/02, to be repurchased at $84,339,013
 on 1/2/03, collateralized by U.S. Treasury
 Nts., 3%--6.50%, 2/15/03--2/15/12, with a
 value of $311,989,144 and U.S. Treasury
 Bonds, 1.75%--9.375%, 4/30/04--2/15/23,
 with a value of $397,082,690
 (Cost $84,334,000)                                 $84,334,000    $ 84,334,000

- --------------------------------------------------------------------------------
 Total Investments, at Value
 (Cost $492,795,098)                                      108.3%    499,592,163
- --------------------------------------------------------------------------------
 Liabilities in Excess of Other Assets                     (8.3)    (38,437,578)
                                                    ----------------------------
 Net Assets                                               100.0%   $461,154,585
                                                    ============================



STATEMENT OF INVESTMENTS  Continued



Footnotes to Statement of Investments
1. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:

                                                   Contracts
Expiration          Exercise       Premium        Market Value
                                             Subject to Call
Dates             Price      Received          See Note 1
- ----------------------------------------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc.                            720
1/20/04           $ 12.50   $     69,838       $     18,000
 Abbott Laboratories                                     200
1/19/04             60.00         17,800                 --
 Affymetrix, Inc.                                        120
5/19/03             35.00         20,329              7,200
 American Electric Power Co., Inc.                       330
2/24/03             25.00         91,409            102,300
 American International Group, Inc.                       60
1/20/04             90.00         11,820              3,600
 American International Group, Inc.                       60
5/19/03             75.00         17,520              2,400
 Analog Devices, Inc.                                    150
1/20/04             55.00         24,750              6,750
 Anthem, Inc.                                             74
3/24/03             65.00         74,517             22,200
 Bank of America Corp.                                    84
5/19/03             80.00         14,448              9,240
 Bank of New York Co., Inc. (The)                         66
1/20/04             40.00          7,722                660
 BEA Systems, Inc.                                       300
1/20/04             25.00         26,700             18,000
 Borg-Warner Automotive, Inc.                             44
4/21/03             55.00          9,328              9,900
 Cisco Systems, Inc.                                     200
1/20/04             25.00         15,800              8,000
 Cooper Cameron Corp.                                     90
5/19/03             50.00         48,659             45,900
 Covance, Inc.                                           440
5/19/03             25.00         82,279             99,000
 Covance, Inc.                                           440
5/19/03             22.50         53,679            167,200
 Cox Radio, Inc., Cl. A                                   11
5/19/03             30.00          1,507                605
 Delta Air Lines, Inc.                                    22
1/20/04             30.00          2,134                990
 Devon Energy Corp.                                      100
4/21/03             55.00         34,699              8,000
 Dow Chemical Co.                                        150
1/20/04             35.00         29,485             30,000
 EchoStar Communications Corp., Cl. A                    220
1/20/04             35.00         27,528             27,500
 Edison International                                    255
1/20/04             15.00         33,772             39,525
 Edison International                                     85
7/21/03             15.00          8,355              5,100
 Gap, Inc. (The)                                         450
1/20/04             20.00         43,424             74,250
 Georgia-Pacific Corp.                                   110
4/21/03             17.50         15,070             14,300
 GlobalSantaFe Corp.                                     230
4/21/03             30.00         32,660              9,200
 Guidant Corp.                                           180
1/20/04             50.00         15,523              9,000
 Hartford Financial Services Group, Inc.                 150
3/24/03             55.00         23,550              3,750
 Intel Corp.                                             360
1/20/04             30.00         33,839             19,800
 International Business Machines Corp.                   128
1/20/04            130.00         20,096             10,880
 International Business Machines Corp.                   128
4/21/03             90.00         17,536             26,880
 International Flavors & Fragrances, Inc.                200
5/19/03             40.00         23,508             10,000
 J.P. Morgan Chase & Co.                                 440
1/20/04             35.00         44,879             33,000
 Johnson & Johnson                                       120
1/20/04             75.00         16,440              7,800
 Juniper Networks, Inc.                                  120
1/20/04             20.00         12,541              4,800
 KLA-Tencor Corp.                                        150
1/20/04             50.00         56,549             60,000
 Lam Research Corp.                                       73
1/20/04             25.00          7,811              4,015
 MGM Mirage, Inc.                                         90
3/24/03             40.00         15,986              2,250
 Merrill Lynch & Co., Inc.                               223
1/20/04             60.00         39,470             13,380
 Merrill Lynch & Co., Inc.                                95
4/21/03             45.00         12,065              9,500
 Millennium Pharmaceuticals, Inc.                        350
1/20/04             25.00         33,949             14,000
 Millipore Corp.                                         100
4/21/03             40.00         17,580              8,000
 Motorola, Inc.                                          420
1/20/04             15.00         51,239             18,900
 Nike, Inc., Cl. B                                       115
1/20/04             60.00         29,555             17,825
 Noble Corp.                                             126
1/21/03             50.00         27,342                 --
 Northrop Grumman Corp.                                   50
1/20/04            135.00         18,850             13,250
 Omnicom Group, Inc.                                     107
4/21/03             75.00         52,108             23,540
 Omnicom Group, Inc.                                     100
4/21/03             90.00         14,700              2,000
 Philip Morris Cos., Inc.                                155
3/24/03             47.50         16,974              3,875
 Philip Morris Cos., Inc.                                155
1/20/04             40.00         77,034             68,200
 Praxair, Inc.                                            64
7/21/03             65.00         19,093             15,680
 Rational Software Corp.                                 350
1/20/04             20.00         43,032                 --
 STMicroelectronics NV, NY Registered Shares             180
1/20/04             40.00         31,860              9,000
 Synopsys, Inc.                                          105
6/23/03             55.00         59,548             29,400
 Texas Instruments, Inc.                                 450
1/20/04             30.00         60,524             18,000
 Titan Corp. (The)                                       360
4/21/03             15.00         48,120             12,600
 Tyco International Ltd.                                 420
1/20/04             25.00         74,339             60,900
 Viacom, Inc., Cl. B                                     300
1/20/04             60.00         84,821             36,000
 Waters Corp.                                            175
5/19/03             35.00         23,100                 --
 Watson Pharmaceuticals, Inc.                            320
5/19/03             30.00         45,439             64,000
 Yahoo!, Inc.                                            270
1/20/04             30.00         49,774             29,700
 Yahoo!, Inc.                                            250
4/21/03             20.00         29,245             25,000


- -------------------------------

$  2,063,251       $  1,414,745


===============================

2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $2,648,641 or 0.57% of the Fund's net
assets as of December 31, 2002.
3. Non-income producing security.
4. Identifies issues considered to be illiquid--See Note 8 of Notes to Financial
Statements.
5. Zero coupon bond reflects effective yield on the date of purchase.
6. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
7. Issuer is in default.
8. Securities with an aggregate market value of $1,232,594 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
9. Represents the current interest rate for a variable or increasing rate
security.
10. The Fund may have elements of risk due to concentrated investments. Such
concentrations may subject the Fund to additional risks.

See accompanying Notes to Financial Statements.



STATEMENT OF ASSETS AND LIABILITIES  December 31, 2002


 Assets

 Investments, at value (including $84,334,000 in repurchase agreements) (cost
$492,795,098)
  --see accompanying
statement
$499,592,163
- ---------------------------------------------------------------------------------------------------------------------

Cash
689,631
- ---------------------------------------------------------------------------------------------------------------------
 Receivables and other assets:
 Interest and
dividends
1,225,126
 Shares of beneficial interest sold
                                                 1,049,437
 Daily variation on futures
contracts
174,203
 Other
                               6,182

- --------------
 Total
assets
    502,736,742

- ---------------------------------------------------------------------------------------------------------------------
 Liabilities
 Options written, at value (premiums received $2,063,251)--see accompanying
statement                      1,414,745
- ---------------------------------------------------------------------------------------------------------------------
 Payables and other liabilities:
 Investments purchased (including $39,116,427 purchased on a when-issued
basis)                           39,932,503
 Shares of beneficial interest
redeemed
204,747
 Distribution and service plan
fees
1,134
 Trustees'
compensation
869
 Shareholder
reports
767
 Transfer and shareholder servicing agent
fees                                                                   443

Other
26,949

                                                          --------------
 Total
liabilities
41,582,157


- ---------------------------------------------------------------------------------------------------------------------
 Net
Assets
$461,154,585


==============

- ---------------------------------------------------------------------------------------------------------------------
 Composition of Net Assets
 Par value of shares of beneficial
interest                                                             $
35,040
- ---------------------------------------------------------------------------------------------------------------------
 Additional paid-in capital

475,788,710
- ---------------------------------------------------------------------------------------------------------------------
 Undistributed net investment income
                                                   13,848,088
- ---------------------------------------------------------------------------------------------------------------------
 Accumulated net realized loss on investments and foreign currency
transactions                          (34,291,622)
- ---------------------------------------------------------------------------------------------------------------------
 Net unrealized appreciation on investments and translation of assets and
liabilities
  denominated in foreign
currencies
5,774,369

- --------------
 Net Assets

$461,154,585

==============

- ---------------------------------------------------------------------------------------------------------------------
 Net Asset Value Per Share
 Non-Service shares:
 Net asset value, redemption price per share and offering price per share
 (based on net assets of $458,848,361 and 34,864,257 shares of beneficial
interest outstanding)               $13.16
- ---------------------------------------------------------------------------------------------------------------------
 Service shares:
 Net asset value, redemption price per share and offering price per share
 (based on net assets of $2,306,224 and 175,560 shares of beneficial interest
outstanding)                    $13.14

 See accompanying Notes to Financial Statements.

STATEMENT OF OPERATIONS  For the Year Ended December 31, 2002

Investment Income

Interest
$   16,670,343
- ------------------------------------------------------------------------------------------------------------
 Dividends (net of foreign withholding taxes of
$81,065)                                         4,330,350

           ----------------
 Total investment
income
21,000,693

- ------------------------------------------------------------------------------------------------------------
 Expenses
 Management
fees
3,758,161
- ------------------------------------------------------------------------------------------------------------
 Distribution and service plan fees--Service
shares                                                  1,719
- ------------------------------------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees
                    10,475
- ------------------------------------------------------------------------------------------------------------
 Custodian fees and
expenses
28,535
- ------------------------------------------------------------------------------------------------------------
 Trustees'
compensation
17,125
- ------------------------------------------------------------------------------------------------------------

Other
43,768

- ----------------
 Total
expenses
3,859,783
 Less reduction to custodian
expenses                                                               (4,706)


- ----------------
 Net expenses
                      3,855,077
- ------------------------------------------------------------------------------------------------------------
 Net Investment Income
                     17,145,616
- ------------------------------------------------------------------------------------------------------------
 Realized and Unrealized Gain (Loss)
 Net realized gain (loss) on:
 Investments (including premiums on options
exercised)                                         (28,460,531)
 Closing of futures contracts
                          244,959
 Closing and expiration of option contracts
written                                              4,193,215
 Foreign currency
transactions
(7,578,304)

- ----------------
 Net realized
loss
(31,600,661)
- ------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation) on:

Investments
(57,226,471)
 Translation of assets and liabilities denominated in foreign
currencies                        10,804,486

- ----------------
 Net change
                                   (46,421,985)

- ----------------
 Net realized and unrealized
loss                                                              (78,022,646)


- ------------------------------------------------------------------------------------------------------------
 Net Decrease in Net Assets Resulting from
Operations                                         $(60,877,030)

                                                                ----------------
See accompanying Notes to Financial Statements.

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December
31,
2002                2001
- -----------------------------------------------------------------------------------------------------------------------------

Operations
Net investment
income                                                                     $
17,145,616       $  20,489,430
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain
(loss)
(31,600,661)          2,713,633
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
depreciation
(46,421,985)        (11,868,642)

- -----------------------------------
Net increase (decrease) in net assets resulting from
operations                             (60,877,030)         11,334,421


- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or Distributions to
Shareholders
Dividends from net investment
income:
Non-Service
shares
(19,151,437)        (22,752,705)
Service
shares
- --                  --
- -----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gain:
Non-Service
shares
(7,948,868)        (30,390,350)
Service shares

- --                  --

- -----------------------------------------------------------------------------------------------------------------------------
Beneficial Interest
Transactions
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Non-Service shares

(46,188,223)         45,543,527
Service
shares
2,287,406                --

- -----------------------------------------------------------------------------------------------------------------------------
Net Assets

Total increase
(decrease)
(131,878,152)          3,734,893
- -----------------------------------------------------------------------------------------------------------------------------
Beginning of
period
593,032,737         589,297,844

    -----------------------------------
End of period [including undistributed net investment income of
$13,848,088
and $18,706,094,
respectively]                                                            $
461,154,585       $ 593,032,737


===================================

See accompanying Notes to Financial Statements.


FINANCIAL HIGHLIGHTS

Non-Service shares   Year Ended December 31,                      2002
2001        2000          1999         1998
- ----------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period                            $15.40
$16.55      $17.46        $17.05       $17.01
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                              .50
..53         .72           .82          .71
Net realized and unrealized gain (loss)                          (2.02)
(.19)        .38          1.04          .42

- -------------------------------------------------------------
Total from investment operations                                 (1.52)
..34        1.10          1.86         1.13
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                              (.51)
(.64)       (.82)         (.59)        (.16)
Distributions from net realized gain                              (.21)
(.85)      (1.19)         (.86)        (.93)

- -------------------------------------------------------------
Total dividends and/or distributions to shareholders              (.72)
(1.49)      (2.01)        (1.45)       (1.09)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                  $13.16
$15.40      $16.55        $17.46       $17.05

=============================================================

- ----------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                              (10.40)%
2.22%       6.44%        11.80%        6.66%

- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                      $458,848
$593,033    $589,298      $578,783     $622,333
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                             $517,516
$599,324    $566,724      $593,151     $640,131
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                             3.31%
3.42%       4.36%         4.46%        4.05%
Expenses                                                          0.74%
0.76%       0.76%         0.73%        0.76% 3
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                             42%
30%         42%           17%          43%

1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.

FINANCIAL HIGHLIGHTS  Continued

Service shares    Year Ended December 31,                                2002 1
- -------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period                                   $14.51
- -------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                                     .13
Net realized and unrealized loss                                        (1.50)
                                                                      ---------
Total from investment operations                                        (1.37)
- -------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                                       --
Distributions from net realized gain                                       --
                                                                      ---------
Total dividends and/or distributions to shareholders                       --
- -------------------------------------------------------------------------------
Net asset value, end of period                                         $13.14
                                                                      =========

- -------------------------------------------------------------------------------
Total Return, at Net Asset Value 2                                      (9.44)%

- -------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)                               $2,306
- -------------------------------------------------------------------------------
Average net assets (in thousands)                                      $1,037
- -------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                                    3.30%
Expenses                                                                 0.99%
- -------------------------------------------------------------------------------
Portfolio turnover rate                                                    42%


1. For the period from May 1, 2002 (inception of offering) to December 31, 2002.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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 of less than one full year.

See accompanying Notes to Financial Statements.


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), an 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 investment
return, which includes current income and capital appreciation in the value of
its shares. The Trust's investment advisor is OppenheimerFunds, Inc. (the
Manager).
   The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other
investment products. The class of shares designated as Service shares is
subject to a distribution and service plan. All classes of shares have
identical rights and voting privileges. Earnings, net assets and net asset
value per share may differ by minor amounts due to each class having its own
expenses directly attributable to that class.
   The following is a summary of significant accounting policies consistently
ollowed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. In the absence of a sale, the security is valued at the last
sale price on the prior trading day, if it is within the spread of the closing
bid and asked prices, and if not, at the closing bid price. Securities
(including restricted securities) for which quotations are not readily
available are valued primarily using dealer-supplied valuations, a portfolio
pricing service authorized by the Board of Trustees, or at their fair value.
Fair value is determined in good faith under consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
Structured Notes. The Fund invests in index-linked structured notes whose
principal and/or interest payments depend on the performance of an underlying
index. The structured notes are leveraged, which increases the volatility of
each note's market value relative to the change in the underlying index.
Fluctuations in value of these securities are recorded as unrealized gains and
losses in the accompanying financial statements. The Fund records a realized
gain or loss when a structured note is sold or matures. As of December 31,
2002, the market value of these securities comprised 1.5% of the Fund's net
assets, and resulted in unrealized gains in the current period of $110,736.
- --------------------------------------------------------------------------------
Securities Purchased on a When-Issued Basis. Delivery and payment for
securities that have been purchased by the Fund on a when-issued basis can take
place a month or more after the trade date. Normally the settlement date occurs
within six months after the trade date; however, the Fund may, from time to
time, purchase securities whose settlement date extends six months 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 commitments. These transactions of
securities on a when-issued basis may increase the volatility of the Fund's net
asset value to the extent the Fund executes such transactions while remaining
substantially fully invested. As of December 31, 2002, the Fund had entered
into when-issued purchase commitments of $39,116,427.
   In connection with its ability to purchase securities on a when-issued
basis, the Fund may enter into forward roll transactions with respect to
mortgage-related securities. Forward roll transactions require the sale of
securities for delivery in the current month, and a simultaneous agreement with
the same counterparty to repurchase similar (same type, coupon and maturity)
but not identical securities on a specified future date. The forward roll may
not extend for a period of greater than one year. The Fund generally records
the incremental difference between the forward purchase and sell of each
forward roll as interest income.
   Risks to the Fund of entering into forward roll transactions include the
potential inability of the counterparty to meet the terms of the agreement; the
potential of the Fund to receive inferior securities to what was sold to the
counterparty at redelivery; counterparty credit risk; and the potential pay
down speed variance between the mortgage-related pools.


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, 2002,
securities with an aggregate market value of $1,067,457, representing 0.23% 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.
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint
repurchase agreement accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each agreement requires that the market value of
the collateral be sufficient to cover payments of interest and principal;
however, in the event of default by the other party to the agreement, retention
of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily
to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
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 capital loss carryforwards, if any, to shareholders.

As of December 31, 2002, the Fund had available for federal income tax purposes
an unused capital loss carryforward as follows:

                              Expiring
                              -------------------------
                              2010          $13,317,573

During the fiscal year ended December 31, 2002, the Fund did not utilize any
capital loss carryforward.

   As of December 31, 2002, the Fund had approximately $17,327,000 of
post-October losses available to offset future capital gains, if any. Such
losses, if unutilized, will expire in 2011. Additionally, the Fund had
approximately $3,046,000 of post-October foreign currency losses which were
deferred. If unutilized by the Fund in the following fiscal year, such losses
will expire.
- --------------------------------------------------------------------------------
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 Dividends and 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 dividends and distributions made during the fiscal year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividends and distributions, the fiscal year in which amounts are distributed
may differ from the fiscal year in which the income or net 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, 2002, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $2,852,185. Accumulated net
realized loss on investments was decreased by the same amount. Net assets of
the Fund were unaffected by the reclassifications.

The tax character of distributions paid during the years ended December 31,
2002 and December 31, 2001 was as follows:

                                        Year Ended         Year Ended
                                 December 31, 2002  December 31, 2001
      ------------------------------------------------------------------
      Distributions paid from:
      Ordinary income                  $23,577,984        $32,313,114
      Long-term capital gain             3,522,321         20,829,941
      Return of capital                         --                 --
                                       -------------------------------
      Total                            $27,100,305        $53,143,055
                                       ===============================

As of December 31, 2002, the components of distributable earnings on a tax basis
were as follows:

       Undistributed net investment income   $ 13,848,088
       Accumulated net realized loss          (34,291,622)
       Net unrealized appreciation              5,774,369
                                             -------------
       Total                                 $(14,669,165)
                                             =============

- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:

                                                      Year Ended December 31,
2002 1     Year Ended December 31, 2001
                                                          Shares
Amount           Shares            Amount
- -----------------------------------------------------------------------------------------------------------------------

Non-Service shares
Sold                                                   3,369,152     $
47,017,452        6,369,169     $ 100,976,185
Dividends and/or distributions reinvested              1,834,820
27,100,305        3,507,792        53,143,055
Redeemed                                              (8,852,327)
(120,305,980)      (6,967,146)     (108,575,713)

- -------------------------------------------------------------------
Net increase (decrease)                               (3,648,355)    $
(46,188,223)       2,909,815     $  45,543,527

===================================================================

- -----------------------------------------------------------------------------------------------------------------------
Service shares
Sold                                                     205,258     $
2,669,841               --     $          --
Dividends and/or distributions reinvested                     --
- --               --                --
Redeemed                                                 (29,698)
(382,435)              --                --

- -------------------------------------------------------------------
Net increase (decrease)                                  175,560     $
2,287,406               --     $          --

===================================================================

1. For the year ended December 31, 2002, for Non-Service shares and for the
period from May 1, 2002 (inception of offering) to December 31, 2002, for
Service shares.

NOTES TO FINANCIAL STATEMENTS  Continued

- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2002, were
$195,967,629 and $251,811,866, respectively.

As of December 31, 2002, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $493,923,072 was composed of:

            Gross unrealized appreciation             $ 57,578,493
            Gross unrealized depreciation              (51,909,402)
                                                      ------------
            Net unrealized appreciation               $  5,669,091
                                                      ============

The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts,
investments in passive foreign investment companies, and forward foreign
currency exchange contracts.

- --------------------------------------------------------------------------------
4. 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.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a $19.75 per account fee.
   Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $5,000 for assets of less than $10 million and
$10,000 for assets of $10 million or more. The Fund is subject to the minimum
fee in the event that the per account fee does not equal or exceed the
applicable minimum fee.
   OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average net assets of the Fund. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc., the Distributor, for distribution-related services for the
Fund's Service shares. Under the Plan, payments are made quarterly at an annual
rate of up to 0.25% of the average annual net assets of the Service shares of
the Fund. For the year ended December 31, 2002, payments under the Service Plan
totaled $1,719.

- --------------------------------------------------------------------------------
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 as a receivable or payable and in the Statement of
Operations with the change in unrealized appreciation or depreciation.
   The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Such realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.

- --------------------------------------------------------------------------------
6. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a particular price on a stipulated future
date at a negotiated price. Futures contracts are traded on a commodity
exchange. The Fund may buy and sell futures contracts that relate to broadly
based securities indices "financial futures" or debt securities "interest rate
futures" in order to gain exposure to or to seek to protect against changes in
market value of stock and bonds or 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 decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes 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 recognizes 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. Realized
gains and losses are reported in the Statement of Operations as closing and
expiration of futures contracts.
   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, 2002, the Fund had outstanding futures contracts as follows:

Unrealized
                                            Expiration       Number of
Valuation as of         Appreciation
Contract Description                             Dates       Contracts
December 31, 2002        (Depreciation)
- -------------------------------------------------------------------------------------------------------------------

Contracts to Purchase
U.S. Long Bonds                                3/20/03
289           $32,566,688        $  (1,173,625)
U.S. Treasury Nts., 5 yr.                      3/27/03
285            32,276,250             (749,367)
U.S. Treasury Nts., 10 yr.                     3/20/03
26             2,991,219              (45,500)

- ---------------


(1,968,492)

- ---------------

Contracts to Sell
U.S. Treasury Nts., 2 yr.                      3/27/03
157            33,784,438              295,531

- ---------------

                                                         $(1,672,961)

- --------------------------------------------------------------------------------
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.

NOTES TO FINANCIAL STATEMENTS  Continued



- --------------------------------------------------------------------------------
7. Option Activity Continued
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. Realized 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, 2002 was as follows:

                                                    Number of       Amount of
                                                    Contracts        Premiums
     -------------------------------------------------------------------------
     Options outstanding as of December 31, 2001       11,211     $ 2,712,380
     Options written                                   22,306       4,031,794
     Options closed or expired                        (19,720)     (4,223,235)
     Options exercised                                 (1,407)       (457,688)
                                                     -------------------------
     Options outstanding as of December 31, 2002       12,390      $2,063,251
                                                     -------------------------

- --------------------------------------------------------------------------------
8. Illiquid Securities
As of December 31, 2002, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 15% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of
December 31, 2002 was $2,341,024, which represents 0.51% of the Fund's net
assets.

OPPENHEIMER STRATEGIC BOND FUND/VA
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 of
Oppenheimer Strategic Bond Fund/VA (which is a series of Oppenheimer Variable
Account Funds), including the statement of investments, as of December 31,
2002, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for the periods indicated. 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 auditing standards generally
accepted in the United States of America. 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, 2002, 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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Strategic Bond Fund/VA as of December 31, 2002, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America.


/s/Deloitte & Touche LLP
Deloitte & Touche LLP

Denver, Colorado
January 23, 2003



OPPENHEIMER STRATEGIC BOND FUND/VA
STATEMENT OF INVESTMENTS  December 31, 2002

                                                    Principal      Market Value
                                                       Amount        See Note 1
- --------------------------------------------------------------------------------
Asset-Backed Securities--2.4%
American Money Management
Corp., Commercial Debt Obligations
Sub. Bonds, Series I, Cl. D1,
13.602%, 1/15/12 1                               $    172,858      $     86,429
- --------------------------------------------------------------------------------
Conseco Finance Securitizations
Corp., Home Equity Loan
Pass-Through Certificates, Series
2001-D, Cl. M2, 3.17%, 11/15/32 2                   3,000,000         2,808,787
- --------------------------------------------------------------------------------
Consumer Credit Reference Index
Securities Program, Credit Card
Asset-Backed Certificates, Series
2002-B, Cl. FX, 10.421%, 3/22/07 1                    500,000           519,062
- --------------------------------------------------------------------------------
Embarcadero Aircraft Securitization
Trust, Airplane Collateral Obligations,
Series 2000-A, Cl. B, 2.52%, 8/15/25 1,2            1,820,063            91,003
- --------------------------------------------------------------------------------
Impac Secured Assets CMN Owner
Trust, Home Equity Collateralized
Mtg. Obligations, Series 2001-5,
Cl. M1, 7.25%, 8/25/31                              2,197,000         2,395,420
- --------------------------------------------------------------------------------
Lehman ABS Manufactured Housing
Contract, Commercial Mtg
Pass-Through Certificates, Series
2001-B, Cl. A4, 5.27%, 9/15/18                      3,000,000         3,125,854
- --------------------------------------------------------------------------------
NC Finance Trust, Collateralized
Mtg. Obligations, Series 1999-I,
Cl. ECFD, 8.75%, 12/25/28 1                            84,826            37,323
- --------------------------------------------------------------------------------
Option One Mortgage Securities
Corp., Home Equity Collateralized
Mtg. Obligations, Series 1999-1,
Cl. CTFS, 10.06%, 3/26/29 1                            14,195            13,651
- --------------------------------------------------------------------------------
Principal Residential Mortgage
Capital Resources Trust, Real
Estate Mtg. Investment Conduit
Participation Certificates, Series
2000-1, Cl. B, 3.07%, 6/20/05 1,2                   1,000,000           986,563
                                                                   -------------
Total Asset-Backed Securities
(Cost $11,773,045)                                                   10,064,092

- --------------------------------------------------------------------------------
Mortgage-Backed Obligations--54.0%
- --------------------------------------------------------------------------------
Government Agency--46.8%
- --------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--42.9%
Federal Home Loan Mortgage
Corp., Gtd. Mtg. Pass-Through
Participation Certificates:
11%, 11/1/14                                          223,625           252,201
Series 151, Cl. F, 9%, 5/15/21                        289,715           300,302
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corp., Home Equity Loan Structured
Pass-Through Certificates, Series
HOO2, Cl. A2, 1.861%, 12/15/06                        860,000           856,036


                                                    Principal      Market Value
                                                       Amount        See Note 1
- --------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored Continued
Federal Home Loan Mortgage
Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 192, Cl. IO, 6.50%, 2/1/28 3              $  6,781,014      $    804,186
Series 194, Cl. IO, 6.50%, 4/1/28 3                20,492,874         2,526,387
Series 208, Cl. IO, 7%, 6/1/30 3                    5,132,557           606,283
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%, 2/25/33 4                                     136,295,000       140,894,956
6.50%, 5/1/29-1/25/33 4                            12,608,155        13,133,703
7%, 1/25/33 4                                      12,293,000        12,930,699
7.50%, 8/1/25                                         123,998           132,507
- --------------------------------------------------------------------------------
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 5                                           4,500,000         4,634,294
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed
Security:
Trust 294, Cl. 2, 7%, 2/1/28 3                        797,126            99,143
Trust 313, Cl. 2, 6.50%, 6/25/31 3                  6,122,886           822,763
                                                                   -------------
                                                                    177,993,460

- --------------------------------------------------------------------------------
GNMA/Guaranteed--3.9%
Government National Mortgage Assn.:
6.625%, 11/20/25                                       45,425            46,909
7%, 3/15/28-7/15/28                                 5,408,713         5,745,243
7.50%, 2/15/27                                        676,070           723,172
8%, 11/15/25-5/15/26                                  695,932           759,837
- --------------------------------------------------------------------------------
Government National Mortgage
Assn., Gtd. Multiclass Mtg
Participation Certificates, Series
1999-27, Cl. PQ, 7.50%, 8/16/28                     8,220,125         8,886,661
                                                                   -------------
                                                                     16,161,822

- --------------------------------------------------------------------------------
Private--7.2%
- --------------------------------------------------------------------------------
Commercial--6.6%
AMRESCO Commercial Mortgage
Funding I Corp., Multiclass Mtg
Pass-Through Certificates, Series
1997-C1, Cl. G, 7%, 6/17/29 6                         100,000            97,844
- --------------------------------------------------------------------------------
Asset Securitization Corp.,
Commercial Mtg. Pass-Through
Certificates:
Series 1996-D2, Cl. A3, 7.499%,
2/14/29 2                                           3,000,000         3,150,201
Series 1996-MD6, Cl. A7, 7.689%,
11/13/29 2                                          2,000,000         1,727,662
Series 1997-D4, Cl. B1, 7.525%,
4/14/29                                               375,000           368,758


STATEMENT OF INVESTMENTS  Continued

                                                   Principal       Market Value
                                                      Amount         See Note 1
- --------------------------------------------------------------------------------
Commercial Continued
FDIC Trust, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates, Series 1994-C1, Cl. 2G,
8.70%, 9/25/25 1                                $    153,594       $    150,522
- --------------------------------------------------------------------------------
First Chicago/Lennar Trust 1,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-CHL1, Cl. D, 8.114%,
4/29/39 1,2                                          350,000            355,633
Series 1997-CHL1, Cl. E, 8.114%,
4/29/39 1,2                                          600,000            514,313
- --------------------------------------------------------------------------------
First Union-Lehman Brothers
Commercial Mortgage Trust,
Commercial Mtg. Pass-Through
Certificates:
Series 1997-C2, Cl. F, 7.50%,
11/18/29                                             225,000            199,898
Series 1997-C2, Cl. G, 7.50%,
11/18/29                                           2,000,000          1,674,375
- --------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Interest-Only
Stripped Mtg.-Backed Security
Pass-Through Certificates, Series
1997-C1, Cl. X, 11.692%, 7/15/27 3                 3,455,059            203,524
- --------------------------------------------------------------------------------
GMAC Commercial Mortgage
Securities, Inc., Mtg. Pass-Through
Certificates:
Series 1997-C1, Cl. G, 7.414%,
7/15/29                                              440,000            378,284
Series 1997-C2, Cl. F, 6.75%, 4/15/29                250,000            100,000
Series 1998-C1, Cl. F, 7.175%,
5/15/30 2                                          1,800,000          1,659,996
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors,
Inc., Mtg. Pass-Through Certificates,
Series 1995-C2, Cl. D, 7.756%,
6/15/21 2                                            202,600            218,553
- --------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc.,
Commercial Mtg. Pass-Through
Certificates:
Series 1996-C1, Cl. E, 7.428%,
2/15/28 1,2                                          553,342            561,643
Series 1996-C1, Cl. F, 7.428%,
2/15/28 2,6                                          162,744            146,549
Series 1997-HF1, Cl. F, 6.86%,
2/15/10 6                                            150,000            149,318
Series 1997-RR, Cl. D, 7.727%,
4/30/39 2,6                                          450,024            416,413
Series 1997-RR, Cl. E, 7.699%,
4/30/39 2,6                                          300,016            249,517
Series 1997-RR, Cl. F, 7.727%,
4/30/39 2,6                                          600,032            409,756
Series 1997-XL1, Cl. G, 7.695%,
10/3/30 6                                            390,000            382,977
Series 1998-HF1, Cl. F, 7.18%,
12/15/09 6                                         1,500,000          1,512,356


                                                    Principal       Market Value
                                                     Amount          See Note 1
- --------------------------------------------------------------------------------
Commercial Continued
Mortgage Capital Funding, Inc.,
Commercial Mtg. Pass-Through Certificates:
Series 1996-MC1, Cl. G, 7.15%,
6/15/06 1                                       $  1,800,000       $  1,801,125
Series 1996-MC2, Cl. F, 5.75%,
12/21/26                                           4,350,000          4,162,746
Series 1997-MC1, Cl. F, 7.452%,
5/20/07 6                                             63,720             61,991
- --------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II
LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG
2000-C1, Cl. A2, 7.306%, 10/6/15                   4,000,000          4,474,133
- --------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Commercial
Mtg. Pass-Through Certificates,
Series 1996-C1, Cl. F, 8.493%,
1/20/06 1,2                                        1,000,000            953,750
- --------------------------------------------------------------------------------
Strategic Hotel Capital, Inc.,
Commercial Mtg. Obligations,
Series 2001-SCH1, Cl. E, 3.62%,
4/17/06 1,2                                        1,496,870          1,279,823
- --------------------------------------------------------------------------------
Structured Asset Securities
Corp., Commercial Mtg
Obligations, Series 1995-C4,
Cl. E, 8.963%, 6/25/26 2,6                            45,923             45,904
                                                                   -------------
                                                                     27,407,564

- --------------------------------------------------------------------------------
Residential--0.6%
Lehman Structured Securities
Corp., Collateralized Mtg
Obligations, Series 2001-GE4,
Cl. A, 7.466%, 10/25/30 2                          1,068,580          1,078,264
- --------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities VII, Inc., Commercial
Mtg. Pass-Through Certificates,
Series 1996-B, Cl. 1, 6.957%,
4/25/26 1,2                                          216,274            175,858
- --------------------------------------------------------------------------------
Washington Mutual Mortgage
Securities Corp., Collateralized
Mtg. Obligations, Pass-Through
Certificates, Series 2002-AR19,
Cl. A-1, 1.771%, 1/25/33                           1,040,000          1,040,000
                                                                   -------------
                                                                      2,294,122
                                                                   -------------
Total Mortgage-Backed Obligations
(Cost $228,137,120)                                                 223,856,968

- --------------------------------------------------------------------------------
U.S. Government Obligations--8.6%


Federal Home Loan Mortgage
Corp. Sr. Unsec. Nts., 5.75%,
9/15/10 [EUR]                                        940,000          1,086,668
- --------------------------------------------------------------------------------
Federal National Mortgage Assn
Sr. Unsec. Nts., 2.125%, 10/9/07 [JPY]           160,000,000          1,463,824


                                                     Principal     Market Value
                                                        Amount       See Note 1
- --------------------------------------------------------------------------------
U.S. Government Obligations Continued
Federal National Mortgage
Assn. Unsec. Nts.:
1.75%, 3/26/08 [JPY]                               260,000,000      $ 2,349,575
5.25%, 4/15/07                                       2,890,000        3,166,986
- --------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.375%, 2/15/31                                      4,018,000        4,381,504
8.75%, 5/15/17                                       1,660,000        2,400,516
8.875%, 2/15/19                                        735,000        1,085,561
11.875%, 11/15/03                                      500,000          545,801
- --------------------------------------------------------------------------------
U.S. Treasury Nts.:
3%, 11/15/07 7                                       4,216,000        4,268,042
4%, 11/15/12                                         1,707,000        1,731,673
5.875%, 2/15/04                                      2,300,000        2,419,223
6.50%, 2/15/10 8                                     4,810,000        5,750,961
6.75%, 5/15/05                                       2,700,000        3,011,029
7%, 7/15/06                                          1,760,000        2,041,120
                                                                    ------------
Total U.S. Government Obligations
(Cost $33,559,051)                                                   35,702,483

- --------------------------------------------------------------------------------
Foreign Government Obligations--21.0%
- --------------------------------------------------------------------------------
Argentina--0.4%
Argentina (Republic of) Bonds:
11.375%, 3/15/10 1,9,10                              1,065,000          239,625
11.75%, 6/15/15 9,10                                 2,095,000          490,230
Series 2008, 7%, 12/19/08 9,10                         922,000          207,450
Series 2018, 3.063%, 6/19/18 9,10                    1,698,000          348,090
- --------------------------------------------------------------------------------
Argentina (Republic of) Par Bonds,
6.017%, 3/31/23 9                                      565,000          265,550
- --------------------------------------------------------------------------------
Argentina (Republic of) Unsub
Bonds, Series 2031, 2.79%, 6/19/31 9,10              1,378,000          282,490
- --------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds,
Bonos de Consolidacion de Deudas,
Series PBA1, 3.257%, 4/1/07 1,9 [ARP]                   95,836           22,281
                                                                    ------------
                                                                      1,855,716

- --------------------------------------------------------------------------------
Australia--0.3%
Australia (Commonwealth of) Bonds,
Series 808, 8.75%, 8/15/08 [AUD]                     1,575,000        1,054,344
- --------------------------------------------------------------------------------
Austria--0.6%
Austria (Republic of) Bonds,
6.25%, 7/15/27 [EUR]                                   158,000          196,976
- --------------------------------------------------------------------------------
Austria (Republic of) Nts.:
3.40%, 10/20/04 [EUR]                                  414,000          439,448
4.30%, 7/15/03 [EUR]                                   230,000          243,172
5.50%, 10/20/07 [EUR]                                  825,000          941,513
- --------------------------------------------------------------------------------
Austria (Republic of) Sr. Unsec
Unsub. Nts., Series MTN1, 5%,
7/15/12 [EUR]                                          529,000          586,398
                                                                    ------------
                                                                      2,407,507


                                                     Principal     Market Value
                                                        Amount       See Note 1
- --------------------------------------------------------------------------------
Belgium--1.7%
Belgium (Kingdom of) Bonds:
5%, 9/28/11 [EUR]                                      410,000      $   454,951
5.50%, 3/28/28 [EUR]                                 1,115,000        1,268,251
Series 26, 6.25%, 3/28/07 [EUR]                      3,170,000        3,696,848
- --------------------------------------------------------------------------------
Belgium (Kingdom of) Debs.,
7.25%, 4/29/04 [EUR]                                 1,545,000        1,715,522
                                                                    ------------
                                                                      7,135,572

- --------------------------------------------------------------------------------
Belize--0.1%
Belize (Government of) Bonds,
9.50%, 8/15/12 1                                       265,000          263,012
- --------------------------------------------------------------------------------
Brazil--0.5%
Brazil (Federal Republic of) Bonds,
8.875%, 4/15/24                                      2,986,000        1,649,765
- --------------------------------------------------------------------------------
Brazil (Federal Republic of) Debt
Conversion Bonds:
Series 18 yr., 2.625%, 4/15/12 2                       675,000          369,562
Series D, 2.625%, 4/15/12 2                             50,000           27,375
                                                                    ------------
                                                                      2,046,702

- --------------------------------------------------------------------------------
Bulgaria--0.2%
Bulgaria (Republic of) Interest Arrears
Debs., Series PDI, 2.688%, 7/28/11 2                   868,150          807,379
- --------------------------------------------------------------------------------
Canada--0.2%
Canada (Government of) Bonds,
5.50%, 6/1/09 [CAD]                                  1,377,000          927,963
- --------------------------------------------------------------------------------
Chile--0.2%
Chile (Republic of) Nts.,
7.125%, 1/11/12                                        820,000          923,636
- --------------------------------------------------------------------------------
Colombia--0.3%
Colombia (Republic of) Bonds,
10%, 1/23/12                                           225,000          227,812
- --------------------------------------------------------------------------------
Colombia (Republic of) Nts.:
8.625%, 4/1/08                                         280,000          280,700
10.50%, 7/9/10                                          95,000           99,987
- --------------------------------------------------------------------------------
Colombia (Republic of) Unsec
Unsub. Bonds, 8.375%, 2/15/27                        1,095,000          845,888
                                                                    ------------
                                                                      1,454,387

- --------------------------------------------------------------------------------
Dominican Republic--0.1%
Dominican Republic Unsec
Unsub. Bonds, 9.50%, 9/27/06                           346,000          367,625
- --------------------------------------------------------------------------------
Ecuador--0.3%
Ecuador (Republic of) Unsec
Bonds, 6%, 8/15/30 2                                 2,553,000        1,065,877
- --------------------------------------------------------------------------------
El Salvador--0.2%
El Salvador (Republic of) Bonds,
7.75%, 1/24/23 6                                       315,000          314,212
- --------------------------------------------------------------------------------
El Salvador (Republic of) Unsec. Nts.,
8.50%, 7/25/11 6                                       675,000          727,313
                                                                    ------------
                                                                      1,041,525

STATEMENT OF INVESTMENTS  Continued


                                                   Principal       Market Value
                                                      Amount         See Note 1
- --------------------------------------------------------------------------------
France--2.2%
France (Government of) Obligations
Assimilables du Tresor Bonds:
5%, 4/25/12 [EUR]                                  1,060,000        $ 1,166,870
5.75%, 10/25/32 [EUR]                                820,000            980,080
- --------------------------------------------------------------------------------
France (Government of)
Treasury Nts.:
3.50%, 7/12/04 [EUR]                               2,455,000          2,607,849
3.75%, 1/12/07 [EUR]                               4,185,000          4,470,000
                                                                    ------------
                                                                      9,224,799

- --------------------------------------------------------------------------------
Germany--2.6%
Germany (Republic of) Bonds:
4.75%, 7/4/28 [EUR]                                  600,000            619,251
Series 01, 5%, 7/4/11 [EUR]                          710,000            790,672
Series 02, 5%, 7/4/12 [EUR]                        3,710,000          4,126,870
Series 139, 4%, 2/16/07 [EUR]                      2,890,000          3,111,315
Series 140, 4.50%, 8/17/07 [EUR]                     335,000            367,334
- --------------------------------------------------------------------------------
Treuhandanstalt Gtd. Nts.,
6.75%, 5/13/04 [EUR]                               1,540,000          1,702,213
                                                                    ------------
                                                                     10,717,655

- --------------------------------------------------------------------------------
Great Britain--0.9%
United Kingdom Treasury Bonds,
5.75%, 12/7/09 [GBP]                               2,025,000          3,545,954
- --------------------------------------------------------------------------------
Greece--0.3%
Greece (Republic of) Bonds,
5.35%, 5/18/11 [EUR]                                 980,000          1,102,761
- --------------------------------------------------------------------------------
Guatemala--0.2%
Guatemala (Republic of) Nts.:
8.50%, 8/3/07                                         25,000             26,563
10.25%, 11/8/11 1                                    820,000            928,650
                                                                    ------------
                                                                        955,213

- --------------------------------------------------------------------------------
Italy--0.7%
Italy (Republic of) Treasury Bonds,
Buoni del Tesoro Poliennali:
0.375%, 10/10/06 [JPY]                            89,000,000            754,554
5.25%, 8/1/11 [EUR]                                1,015,000          1,142,896
- --------------------------------------------------------------------------------
Italy (Republic of) Treasury Nts.,
Cert Di Credito Del Tesoro,
3.90%, 2/1/03 2 [EUR]                                985,000          1,033,762
                                                                    ------------
                                                                      2,931,212

- --------------------------------------------------------------------------------
Ivory Coast--0.0%
Ivory Coast (Government of) Past
Due Interest Bonds, 3/29/18 9,10 [FRF]             2,194,500             50,028
- --------------------------------------------------------------------------------
Mexico--1.7%
United Mexican States Bonds:
8.30%, 8/15/31                                       300,000            317,250
10.375%, 2/17/09                                     620,000            765,080


                                                   Principal       Market Value
                                                      Amount         See Note 1
- --------------------------------------------------------------------------------
Mexico Continued
United Mexican States Nts.:
7.50%, 1/14/12                                   $ 1,314,000        $ 1,409,265
8.125%, 12/30/19                                   1,160,000          1,226,700
8.375%, 1/14/11                                    2,290,000          2,593,425
Series A, 9.875%, 2/1/10                             435,000            535,094
                                                                    ------------
                                                                      6,846,814

- --------------------------------------------------------------------------------
Nigeria--0.1%
Nigeria (Federal Republic of)
Promissory Nts., Series RC,
5.092%, 1/5/10 9                                     501,751            283,399
- --------------------------------------------------------------------------------
Norway--0.4%
Norway (Kingdom of) Bonds,
5.50%, 5/15/09 [NOK]                               8,950,000          1,282,207
- --------------------------------------------------------------------------------
Norway (Kingdom of) Treasury Bills,
Zero Coupon, Series SS75, 6.69%,
3/19/03 11 [NOK]                                   3,210,000            457,874
                                                                    ------------
                                                                      1,740,081

- --------------------------------------------------------------------------------
Panama--0.1%
Panama (Republic of) Bonds,
9.375%, 4/1/29                                       222,000            238,650
- --------------------------------------------------------------------------------
Panama (Republic of) Interest
Reduction Bonds, 5%, 7/17/14 2                        62,225             55,380
- --------------------------------------------------------------------------------
Panama (Republic of) Nts.,
8.25%, 4/22/08                                        71,000             73,840
- --------------------------------------------------------------------------------
Panama (Republic of) Past Due
Interest Debs., 20 yr., 2.75%, 7/17/16 2              85,907             68,511
                                                                    ------------
                                                                        436,381

- --------------------------------------------------------------------------------
Peru--0.3%
Peru (Republic of) Sr. Nts., Zero
Coupon, 4.53%, 2/28/16 11                          2,553,583          1,364,124
- --------------------------------------------------------------------------------
Philippines--0.7%
Philippines (Republic of) Bonds,
9.375%, 1/18/17                                      790,000            813,700
- --------------------------------------------------------------------------------
Philippines (Republic of) Nts.,
10.625%, 3/16/25                                     175,000            180,687
- --------------------------------------------------------------------------------
Philippines (Republic of)
Unsec. Bonds:
8.875%, 4/15/08                                      400,000            417,000
9.875%, 1/15/19                                    1,719,000          1,706,108
                                                                    ------------
                                                                      3,117,495

- --------------------------------------------------------------------------------
Portugal--0.4%
Portugal (Republic of) Obrig Do Tes
Medio Prazo Unsec. Unsub. Bonds,
5.85%, 5/20/10 [EUR]                               1,300,000          1,518,411
- --------------------------------------------------------------------------------
Russia--1.7%
Russian Federation Unsec. Unsub
Nts., 8.75%, 7/24/05                                 115,000            124,775
- --------------------------------------------------------------------------------
Russian Federation Unsub. Nts.,
5%, 3/31/30 2                                      7,274,875          5,783,526


                                                   Principal       Market Value
                                                      Amount         See Note 1
- --------------------------------------------------------------------------------
Russia Continued
Russian Ministry of Finance Unsec.
Debs., Series IV, 3%, 5/14/03                    $ 1,030,000        $ 1,023,627
                                                                    ------------
                                                                      6,931,928

- --------------------------------------------------------------------------------
South Africa--0.3%
South Africa (Republic of) Unsec. Nts.:
7.375%, 4/25/12                                      445,000            482,825
8.50%, 6/23/17                                       795,000            902,325
                                                                    ------------
                                                                      1,385,150

- --------------------------------------------------------------------------------
Supranational--0.2%
European Investment Bank Nts.,
2.125%, 9/20/07 [JPY]                             80,000,000            733,193
- --------------------------------------------------------------------------------
Sweden--0.1%
Sweden (Kingdom of) Debs.,
Series 1040, 6.50%, 5/5/08 [SEK]                   4,400,000            558,942
- --------------------------------------------------------------------------------
The Netherlands--0.9%
The Netherlands (Government of)
Bonds:
5%, 7/15/11 [EUR]                                    435,000            484,609
5.50%, 1/15/28 [EUR]                                 168,000            192,765
5.75%, 1/15/04 [EUR]                                 488,000            527,880
6.50%, 4/15/03 [EUR]                                 480,000            509,253
Series 1, 5.75%, 2/15/07 [EUR]                     1,015,000          1,164,732
- --------------------------------------------------------------------------------
The Netherlands (Government of)
Treasury Bills, Zero Coupon, 3.13%,
2/28/03 11 [EUR]                                     650,000            679,088
                                                                    ------------
                                                                      3,558,327

- --------------------------------------------------------------------------------
Trinidad & Tobago--0.1%
Trinidad & Tobago (Republic of)
Nts., 9.875%, 10/1/09                                385,000            468,738
- --------------------------------------------------------------------------------
Turkey--0.4%
Turkey (Republic of) Bonds,
11.75%, 6/15/10                                      235,000            249,687
- --------------------------------------------------------------------------------
Turkey (Republic of) Sr. Unsec
Unsub. Nts., 11.875%, 1/15/30                        895,000            941,988
- --------------------------------------------------------------------------------
Turkey (Republic of) Sr. Unsub
Bonds, 12.375%, 6/15/09                              315,000            341,775
                                                                    ------------
                                                                      1,533,450

- --------------------------------------------------------------------------------
Ukraine--0.6%
Ukraine (Republic of) Sr. Unsec
Nts., 11%, 3/15/07                                 2,387,280          2,463,554
- --------------------------------------------------------------------------------
Uruguay--0.0%
Banco Central Del Uruguay Nts.,
Series A, 6.75%, 2/19/21                             185,000            126,263
- --------------------------------------------------------------------------------
Venezuela--1.0%
Venezuela (Republic of) Bonds,
9.25%, 9/15/27                                     1,340,000            914,550
- --------------------------------------------------------------------------------
Venezuela (Republic of) Collateralized
Par Bonds, Series W-A, 6.75%, 3/31/20                415,000            335,112


                                                   Principal       Market Value
                                                      Amount         See Note 1
- --------------------------------------------------------------------------------
Venezuela Continued
Venezuela (Republic of) Debs.,
Series DL, 2.313%, 12/18/07 2                    $ 2,743,332        $ 2,105,507
- --------------------------------------------------------------------------------
Venezuela (Republic of) Front-Loaded
Interest Reduction Bonds:
Series A, 2.688%, 3/31/07 2                          508,273            392,641
Series B, 2.688%, 3/31/07 2                          362,134            280,654
                                                                    ------------
                                                                      4,028,464
                                                                    ------------
Total Foreign Government Obligations
(Cost $81,326,566)                                                   86,973,581

- --------------------------------------------------------------------------------
Loan Participations--0.6%
Algeria (Republic of) Loan
Participation Nts., 2.625%, 3/4/10 1,2               582,500            524,978
- --------------------------------------------------------------------------------
Deutsche Bank AG, Indonesia
Rupiah Loan Participation Nts.:
2.636%, 5/21/04 1,9                                  525,000            257,250
2.636%, 3/25/05 1,9                                  265,000            137,800
2.636%, 12/14/13 1,9                                 795,000            365,700
- --------------------------------------------------------------------------------
Deutsche Bank AG, OAO
Gazprom Loan Participation Nts.,
9.50%, 2/19/03                                       530,000            531,855
- --------------------------------------------------------------------------------
Ministry Finance of Russia Debs.,
Series VI, 3%, 5/14/06                                20,000             17,700
- --------------------------------------------------------------------------------
Morocco (Kingdom of) Loan
Participation Agreement, Tranche A,
2.563%, 1/1/09 1,2                                   455,000            416,325
                                                                    ------------
Total Loan Participations (Cost $2,331,571)                           2,251,608

- --------------------------------------------------------------------------------
Corporate Bonds and Notes--37.8%
- --------------------------------------------------------------------------------
Consumer Discretionary--12.3%
- --------------------------------------------------------------------------------
Auto Components--0.7%
Burke Industries, Inc., 10% Sr. Sub.
Nts., 8/15/07 9,10                                   150,000             34,500
- --------------------------------------------------------------------------------
Cambridge Industries, Inc.,
Liquidating Trust Interests, 7/15/07                  77,456                 --
- --------------------------------------------------------------------------------
Collins & Aikman Floorcoverings,
Inc., 9.75% Sr. Sub. Nts., Series B,
2/15/10                                              200,000            201,000
- --------------------------------------------------------------------------------
Collins & Aikman Products Co.,
10.75% Sr. Nts., 12/31/11                            400,000            383,000
- --------------------------------------------------------------------------------
Dana Corp.:
9% Unsec. Nts., 8/15/11                              420,000            407,400
10.125% Nts., 3/15/10                                200,000            203,500
- --------------------------------------------------------------------------------
Dura Operating Corp.:
9% Sr. Sub. Nts., Series B, 5/1/09  [EUR]            400,000            390,377
9% Sr. Unsec. Sub. Nts., Series D,
5/1/09                                               500,000            457,500
- --------------------------------------------------------------------------------
Metaldyne Corp., 11% Sr. Sub. Nts.,
6/15/12                                              300,000            247,500
- --------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12            600,000            576,000
                                                                    ------------
                                                                      2,900,777


STATEMENT OF INVESTMENTS  Continued

                                                   Principal     Market Value
                                                      Amount       See Note 1
- --------------------------------------------------------------------------------
Automobiles--0.5%
Ford Motor Credit Co.:
7.25% Nts., 10/25/11                             $ 1,442,000      $ 1,403,393
7.375% Nts., 10/28/09                                615,000          610,345
- --------------------------------------------------------------------------------
General Motors Acceptance Corp.,
6.875% Unsec. Unsub. Nts., 8/28/12                   305,000          301,176
                                                                  --------------
                                                                    2,314,914

- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure--3.3%
Apcoa, Inc., 9.25% Sr. Unsec. Sub.
Nts., 3/15/08 1                                      100,000           30,500
- --------------------------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec. Sub.
Nts., 8/15/11                                        850,000          875,500
- --------------------------------------------------------------------------------
Boca Resorts, Inc., 9.875% Sr. Sub.
Nts., 4/15/09                                        450,000          470,250
- --------------------------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr. Sub.
Nts., 4/15/12                                        300,000          313,500
- --------------------------------------------------------------------------------
Buffets, Inc., 11.25% Sr. Sub. Nts.,
7/15/10 6                                            300,000          285,000
- --------------------------------------------------------------------------------
Coast Hotels & Casinos, Inc.,
9.50% Sr. Unsec. Sub. Nts., 4/1/09                   300,000          322,500
- --------------------------------------------------------------------------------
Hilton Hotels Corp., 7.625% Nts.,
12/1/12                                              400,000          404,637
- --------------------------------------------------------------------------------
Hollywood Casino Corp.,
11.25% Sr. Sec. Nts., 5/1/07 1                       250,000          271,250
- --------------------------------------------------------------------------------
Hollywood Park, Inc., 9.25% Sr.
Unsec. Sub. Nts., Series B, 2/15/07                  325,000          289,250
- --------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts.,
8/15/08                                              350,000          358,750
- --------------------------------------------------------------------------------
Isle of Capri Casinos, Inc.,
9% Sr. Sub. Nts., 3/15/12                            500,000          522,500
- --------------------------------------------------------------------------------
John Q. Hammons Hotels, Inc.,
8.875% Sr. Nts., Series B, 5/15/12                   300,000          303,000
- --------------------------------------------------------------------------------
Jupiters Ltd., 8.50% Sr. Unsec. Nts.,
3/1/06                                               400,000          406,000
- --------------------------------------------------------------------------------
Mandalay Resort Group, 10.25%
Sr. Unsec. Sub. Nts., Series B, 8/1/07               650,000          716,625
- --------------------------------------------------------------------------------
MGM Mirage, Inc., 8.375% Sr.
Unsec. Sub. Nts., 2/1/11 5                         1,200,000        1,299,000
- --------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
8% Sr. Sub. Nts., 4/1/12                             400,000          419,000
8.125% Sr. Nts., 1/1/06                              300,000          317,250
8.375% Sr. Sub. Nts., 7/1/11                         600,000          633,750
8.75% Sr. Unsec. Sub. Nts., 1/1/09                   700,000          738,500
- --------------------------------------------------------------------------------
Park Place Entertainment Corp.,
7.875% Sr. Sub. Nts., 3/15/10                        200,000          204,500
- --------------------------------------------------------------------------------
Premier Cruise Ltd., 11% Sr. Nts.,
3/15/08 1,9,10                                       250,000               --
- --------------------------------------------------------------------------------
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts., 4/1/08 12                     750,000          729,375
9.75% Sr. Nts., 6/15/07                              500,000          487,500



                                                   Principal     Market Value
                                                      Amount       See Note 1
- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure Continued
Prime Hospitality Corp.,
8.375% Sr. Sub. Nts., 5/1/12                     $   400,000      $   390,000
- --------------------------------------------------------------------------------
Six Flags, Inc., 8.875% Sr. Nts.,
2/1/10                                               800,000          756,000
- --------------------------------------------------------------------------------
Station Casinos, Inc., 9.875% Sr.
Unsec. Sub. Nts., 7/1/10                             800,000          872,000
- --------------------------------------------------------------------------------
Sun International Hotels Ltd.,
8.875% Sr. Unsec. Sub. Nts.,
8/15/11                                              700,000          717,500
- --------------------------------------------------------------------------------
Trump Atlantic City Associates/
Trump Atlantic City Funding, Inc.,
11.25% First Mtg. Nts., 5/1/06                        25,000           19,625
- --------------------------------------------------------------------------------
Vail Resorts, Inc., 8.75% Sr. Unsec.
Sub. Nts., 5/15/09                                   200,000          206,000
- --------------------------------------------------------------------------------
Venetian Casino Resort LLC/
Las Vegas Sands, Inc., 11% Bonds,
6/15/10 6                                            250,000          262,500
                                                                  --------------
                                                                   13,621,762

- --------------------------------------------------------------------------------
Household Durables--1.1%
Beazer Homes USA, Inc.,
8.375% Sr. Nts., 4/15/12                             400,000          414,000
- --------------------------------------------------------------------------------
D.R. Horton, Inc.:
7.875% Sr. Nts., 8/15/11                             300,000          294,000
9.375% Sr. Unsec. Sub. Nts., 3/15/11                 400,000          404,000
9.75% Sr. Sub. Nts., 9/15/10                         400,000          412,000
- --------------------------------------------------------------------------------
Del Webb Corp., 10.25% Sr.
Unsec. Sub. Debs., 2/15/10                           300,000          328,500
- --------------------------------------------------------------------------------
KB Home:
7.75% Sr. Nts., 10/15/04                             300,000          307,500
8.625% Sr. Sub. Nts., 12/15/08                       250,000          260,000
9.50% Sr. Unsec. Sub. Nts., 2/15/11                  400,000          426,000
- --------------------------------------------------------------------------------
Salton, Inc., 10.75% Sr. Unsec. Sub.
Nts., 12/15/05                                       425,000          414,906
- --------------------------------------------------------------------------------
Standard Pacific Corp.,
9.25% Sr. Sub. Nts., 4/15/12                         200,000          194,000
- --------------------------------------------------------------------------------
WCI Communities, Inc.,
9.125% Sr. Sub. Nts., 5/1/12                         300,000          271,500
- --------------------------------------------------------------------------------
Williams Scotsman, Inc.,
9.875% Sr. Unsec. Nts., 6/1/07                       800,000          744,000
                                                                  --------------
                                                                    4,470,406

- --------------------------------------------------------------------------------
Internet & Catalog Retail--0.4%
Amazon.com, Inc., 0%/10% Sr. Unsec.
Disc. Nts., 5/1/08 12                              1,100,000        1,105,500
- --------------------------------------------------------------------------------
USA Interactive, 7% Nts., 1/15/13 6                  473,000          489,973
                                                                  --------------
                                                                    1,595,473


                                             Principal           Market Value
                                                Amount             See Note 1
- -------------------------------------------------------------------------------
Media--5.0%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 9           $   350,000            $   131,250
10.25% Sr. Unsec. Nts., 11/1/06 9              400,000                152,000
10.25% Sr. Unsec. Sub. Nts.,
6/15/11 9,10                                   400,000                156,000
10.875% Sr. Unsec. Nts., 10/1/10 9,10          200,000                 77,000
- -------------------------------------------------------------------------------
Allbritton Communications Co.,
7.75% Sr. Sub. Nts., 12/15/12 6              1,200,000              1,207,500
- -------------------------------------------------------------------------------
AMC Entertainment, Inc.,
9.50% Sr. Unsec. Sub. Nts., 2/1/11             500,000                495,000
- -------------------------------------------------------------------------------
AOL Time Warner, Inc.,
6.875% Nts., 5/1/12                          1,321,000              1,398,004
- -------------------------------------------------------------------------------
Block Communications, Inc.,
9.25% Sr. Sub. Nts., 4/15/09                   400,000                415,000
- -------------------------------------------------------------------------------
Chancellor Media Corp., 8.75% Sr.
Unsec. Sub. Nts., Series B, 6/15/07 1          300,000                314,625
- -------------------------------------------------------------------------------
Charter Communications Holdings
LLC/Charter Communications
Holdings Capital Corp.:
0%/9.92% Sr. Unsec. Disc. Nts.,
4/1/11 12                                      900,000                319,500
8.625% Sr. Unsec. Nts., 4/1/09                 200,000                 90,000
10.75% Sr. Unsec. Nts., 10/1/09              1,100,000                503,250
11.125% Sr. Unsec. Nts., 1/15/11               500,000                228,750
- -------------------------------------------------------------------------------
Classic Cable, Inc.,
10.50% Sr. Sub. Nts., 3/1/10 1,9,10            200,000                 25,000
- -------------------------------------------------------------------------------
Comcast Cable Communications,
Inc.:
6.75% Sr. Unsub. Nts., 1/30/11                 848,000                883,975
8.875% Unsub. Nts., 5/1/17                     877,000              1,024,401
- -------------------------------------------------------------------------------
Corus Entertainment, Inc.,
8.75% Sr. Sub. Nts., 3/1/12                    300,000                319,125
- -------------------------------------------------------------------------------
Cox Communications, Inc.,
7.125% Nts., 10/1/12                         1,128,000              1,255,146
- -------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr.
Unsec. Unsub. Nts., Series B,
4/1/11                                         850,000                802,187
- -------------------------------------------------------------------------------
Cumulus Media, Inc., 10.375% Sr.
Unsec. Sub. Nts., 7/1/08                       150,000                162,187
- -------------------------------------------------------------------------------
EchoStar DBS Corp.:
9.375% Sr. Unsec. Nts., 2/1/09                 750,000                796,875
10.375% Sr. Unsec. Nts., 10/1/07               800,000                870,000
- -------------------------------------------------------------------------------
Emmis Communications Corp.:
0%/12.50% Sr. Unsec. Disc. Nts.,
3/15/11 12                                     548,000                442,510
8.125% Sr. Unsec. Sub. Nts.,
Series B, 3/15/09                              600,000                624,000
- -------------------------------------------------------------------------------
Entravision Communications Corp.,
8.125% Sr. Sub. Nts., 3/15/09                  400,000                418,000
- -------------------------------------------------------------------------------
Hollinger International Publishing,
Inc., 9% Sr. Nts., 12/15/10 6                  400,000                405,500
- -------------------------------------------------------------------------------
Insight Midwest LP/Insight Capital,
Inc., 9.75% Sr. Nts., 10/1/09                  200,000                191,000

                                             Principal           Market Value
                                                Amount             See Note 1
- -------------------------------------------------------------------------------
Media Continued
Lamar Media Corp.:
8.625% Sr. Sub. Nts., 9/15/07              $   150,000            $   157,125
9.625% Sr. Unsec. Sub. Nts.,
12/1/06                                         50,000                 51,750
- -------------------------------------------------------------------------------
Mediacom LLC/Mediacom
Capital Corp., 9.50% Sr. Unsec.
Nts., 1/15/13                                  500,000                452,500
- -------------------------------------------------------------------------------
News America Holdings, Inc.,
8.875% Sr. Debs., 4/26/23                      625,000                695,196
- -------------------------------------------------------------------------------
News America, Inc.,
7.625% Sr. Debs., 11/30/28                     280,000                286,696
- -------------------------------------------------------------------------------
PanAmSat Corp., 8.50% Sr. Nts.,
2/1/12 6                                       900,000                864,000
- -------------------------------------------------------------------------------
R.H. Donnelley Financial Corp. I,
10.875% Sr. Sub. Nts., 12/15/12 6              400,000                438,000
- -------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec.
Sub. Nts., Series B, 7/1/11                    200,000                215,000
- -------------------------------------------------------------------------------
Regal Cinemas, Inc., 9.375% Sr.
Sub. Nts., Series B, 2/1/12                    200,000                214,000
- -------------------------------------------------------------------------------
Rogers Cablesystems Ltd.,
10% Second Priority Sr. Sec. Debs.,
12/1/07                                        200,000                205,000
- -------------------------------------------------------------------------------
Rogers Communications, Inc.,
8.75% Sr. Nts., 7/15/07  [CAD]                 400,000                241,170
- -------------------------------------------------------------------------------
Shaw Communications, Inc.,
8.54% Debs., 9/30/27 [CAD]                     340,000                141,068
- -------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Sub. Nts., 3/15/12                      750,000                785,625
8% Sr. Sub. Nts., 3/15/12 6                    300,000                314,250
8.75% Sr. Sub. Nts., 12/15/07                  100,000                104,625
8.75% Sr. Sub. Nts., 12/15/11                  300,000                324,375
- -------------------------------------------------------------------------------
Spanish Broadcasting System, Inc.,
9.625% Sr. Unsec. Sub. Nts., 11/1/09           800,000                832,000
- -------------------------------------------------------------------------------
United Pan-Europe Communications NV:
0%/13.375% Sr. Unsec. Disc. Nts.,
Series B, 11/1/09 9,10,12                      500,000                 32,500
0%/13.75% Sr. Unsec. Disc. Nts.,
Series B, 2/1/10 9,10,12                       200,000                 13,000
11.25% Sr. Nts., Series B,
11/1/09 9,10 [EUR]                             250,000                 15,741
- -------------------------------------------------------------------------------
WRC Media, Inc./Weekly Reader
Corp./Compass Learning Corp.,
12.75% Sr. Sub. Nts., 11/15/09                 500,000                492,500
                                                                  -------------
                                                                   20,583,906

- -------------------------------------------------------------------------------
Multiline Retail--0.3%
Saks, Inc.:
8.25% Sr. Unsec. Nts., 11/15/08                700,000                700,000
9.875% Nts., 10/1/11                           400,000                420,000
                                                                  -------------
                                                                    1,120,000

STATEMENT OF INVESTMENTS  Continued

                                                 Principal         Market Value
                                                    Amount           See Note 1
- --------------------------------------------------------------------------------
Specialty Retail--0.8%
Asbury Automotive Group, Inc.,
9% Sr. Sub. Nts., 6/15/12                       $  300,000           $  262,500
- --------------------------------------------------------------------------------
AutoNation, Inc., 9% Sr. Unsec.
Nts., 8/1/08                                       500,000              507,500
- --------------------------------------------------------------------------------
CSK Auto, Inc., 12% Sr. Unsec.
Nts., 6/15/06                                      400,000              430,000
- --------------------------------------------------------------------------------
Eye Care Centers of America, Inc.,
9.125% Sr. Unsec. Sub. Nts., 5/1/08                200,000              167,000
- --------------------------------------------------------------------------------
Finlay Enterprises, Inc., 9% Debs.,
5/1/08                                             100,000               88,500
- --------------------------------------------------------------------------------
Finlay Fine Jewelry Corp.,
8.375% Sr. Nts., 5/1/08                            300,000              283,500
- --------------------------------------------------------------------------------
Gap, Inc. (The), 6.90% Nts., 9/15/07               100,000               98,000
- --------------------------------------------------------------------------------
Hollywood Entertainment Corp.,
9.625% Sr. Sub. Nts., 3/15/11                      400,000              410,000
- --------------------------------------------------------------------------------
Petco Animal Supplies, Inc.,
10.75% Sr. Sub. Nts., 11/1/11                      200,000              221,250
- --------------------------------------------------------------------------------
United Rentals (North America), Inc.:
10.75% Sr. Nts., 4/15/08 6                         300,000              297,000
10.75% Sr. Unsec. Nts., 4/15/08                    500,000              500,000
- --------------------------------------------------------------------------------
United Rentals, Inc., 9.25% Sr. Unsec.
Sub. Nts., Series B, 1/15/09                       250,000              205,625
                                                                     -----------
                                                                      3,470,875

- --------------------------------------------------------------------------------
Textiles & Apparel--0.2%
Galey & Lord, Inc., 9.125% Sr.
Unsec. Sub. Nts., 3/1/08 1,9,10                    400,000               42,000
- --------------------------------------------------------------------------------
Levi Strauss & Co.,
12.25% Sr. Nts., 12/15/12 6                        600,000              591,000
- --------------------------------------------------------------------------------
Phillips-Van Heusen Corp.,
9.50% Sr. Unsec. Sub. Nts., 5/1/08                 200,000              201,500
- --------------------------------------------------------------------------------
Russell Corp., 9.25% Sr. Nts., 5/1/10              200,000              215,000
                                                                     -----------
                                                                      1,049,500

- --------------------------------------------------------------------------------
Consumer Staples--1.6%
- --------------------------------------------------------------------------------
Beverages--0.1%
Constellation Brands, Inc.,
8.125% Sr. Sub. Nts., 1/15/12                      300,000              312,000
- --------------------------------------------------------------------------------
Packaged Ice, Inc., 9.75% Sr.
Unsec. Nts., Series B, 2/1/05                      200,000              157,250
                                                                     -----------
                                                                        469,250

- --------------------------------------------------------------------------------
Food & Drug Retailing--0.5%
Delhaize America, Inc.,
8.125% Unsub. Debs., 4/15/11                       632,000              612,361
- --------------------------------------------------------------------------------
Fleming Cos., Inc.:
10.125% Sr. Unsec. Nts., 4/1/08                    400,000              346,000
10.625% Sr. Unsec. Sub. Nts.,
Series D, 7/31/07                                  200,000              131,000
- --------------------------------------------------------------------------------
Great Atlantic & Pacific Tea Co.,
Inc. (The), 9.125% Sr. Nts., 12/15/11              400,000              294,000



                                                 Principal         Market Value
                                                    Amount           See Note 1
- --------------------------------------------------------------------------------
Food & Drug Retailing Continued
Pantry, Inc. (The),
10.25% Sr. Sub. Nts., 10/15/07                  $  200,000           $  180,500
- --------------------------------------------------------------------------------
Pathmark Stores, Inc.,
8.75% Sr. Sub. Nts., 2/1/12                        500,000              462,500
- --------------------------------------------------------------------------------
Real Time Data Co.,
13% Disc. Nts., 5/31/09 1,9,10,13                  142,981               25,736
                                                                     -----------
                                                                      2,052,097

- --------------------------------------------------------------------------------
Food Products--0.7%
American Seafood Group LLC,
10.125% Sr. Sub. Nts., 4/15/10                     200,000              205,000
- --------------------------------------------------------------------------------
Aurora Foods, Inc.,
8.75% Sr. Sub. Nts., Series B, 7/1/08              200,000               98,000
- --------------------------------------------------------------------------------
Burns Philp Capital Pty Ltd.,
9.75% Sr. Sub. Nts., 7/15/12 6                     450,000              434,250
- --------------------------------------------------------------------------------
Del Monte Corp.,
8.625% Sr. Sub. Nts., 12/15/12 6                   400,000              410,000
- --------------------------------------------------------------------------------
Doane Pet Care Co., 9.75% Sr.
Unsec. Sub. Nts., 5/15/07                          200,000              158,000
- --------------------------------------------------------------------------------
Dole Food Co., Inc.,
7.25% Sr. Nts., 5/1/09                             400,000              387,870
- --------------------------------------------------------------------------------
Smithfield Foods, Inc., 7.625% Sr.
Unsec. Sub. Nts., 2/15/08                          400,000              392,000
- --------------------------------------------------------------------------------
Sparkling Spring Water Group Ltd.,
11.50% Sr. Sec. Sub. Nts., 11/15/07 1              200,000              212,000
- --------------------------------------------------------------------------------
United Biscuits Finance plc,
10.75% Sr. Sub. Nts., 4/15/11 1 [GBP]              400,000              734,115
                                                                     -----------
                                                                      3,031,235

- --------------------------------------------------------------------------------
Household Products--0.3%
AKI Holdings Corp.,
0%/13.50% Sr. Disc. Debs., 7/1/09 12               150,000              128,437
- --------------------------------------------------------------------------------
AKI, Inc., 10.50% Sr. Unsec. Nts.,
7/1/08                                             350,000              341,688
- --------------------------------------------------------------------------------
Playtex Products, Inc., 9.375% Sr.
Unsec. Sub. Nts., 6/1/11                           500,000              555,000
- --------------------------------------------------------------------------------
Styling Technology Corp., 10.875%
Sr. Unsec. Sub. Nts., 7/1/08 1,9,10                 70,000                   --
                                                                     -----------
                                                                      1,025,125

- --------------------------------------------------------------------------------
Energy--2.8%
- --------------------------------------------------------------------------------
Energy Equipment & Services--0.9%
Dresser, Inc., 9.375% Sr. Sub. Nts.,
4/15/11                                            300,000              303,000
- --------------------------------------------------------------------------------
Grant Geophysical, Inc., 9.75% Sr.
Unsec. Nts., Series B, 2/15/08 1                   560,000              141,400
- --------------------------------------------------------------------------------
Hanover Equipment Trust, 8.50%
Sr. Sec. Nts., Trust 2001, Cl. A, 9/1/08 6         500,000              490,000
- --------------------------------------------------------------------------------
Hornbeck-Leevac Marine Services,
Inc., 10.625% Sr. Nts., 8/1/08                     750,000              795,000



                                              Principal            Market Value
                                                Amount               See Note 1
- --------------------------------------------------------------------------------
Energy Equipment & Services Continued
Ocean Rig Norway AS,
10.25% Sr. Sec. Nts., 6/1/08               $    700,000            $    633,500
- --------------------------------------------------------------------------------
Petroleum Helicopters, Inc.,
9.375% Sr. Nts., 5/1/09                         200,000                 211,250
- --------------------------------------------------------------------------------
Petroliam Nasional Berhad,
7.125% Unsub. Nts., 10/18/06 6                  330,000                 369,660
- --------------------------------------------------------------------------------
Universal Compression Holdings,
Inc., 0%/9.875% Sr. Disc. Nts.,
2/15/08 1,12                                    800,000                 828,000
                                                                   -------------
                                                                      3,771,810

- --------------------------------------------------------------------------------
Oil & Gas--1.9%
Chesapeake Energy Corp.:
7.75% Sr. Nts., 1/15/15 6                       400,000                 400,000
8.125% Sr. Unsec. Nts., 4/1/11                  600,000                 621,000
- --------------------------------------------------------------------------------
Forest Oil Corp., 7.75% Sr. Nts.,
5/1/14                                          300,000                 307,500
- --------------------------------------------------------------------------------
Frontier Oil Corp., 11.75% Sr. Nts.,
11/15/09                                        400,000                 414,000
- --------------------------------------------------------------------------------
Giant Industries, Inc.,
11% Sr. Sub. Nts., 5/15/12                      300,000                 202,500
- --------------------------------------------------------------------------------
Newfield Exploration Co.,
8.375% Sr. Sub. Nts., 8/15/12                   500,000                 534,245
- --------------------------------------------------------------------------------
Pemex Project Funding Master
Trust, 8.50% Unsub. Nts., 2/15/08               420,000                 469,350
- --------------------------------------------------------------------------------
Petroleos Mexicanos:
7.375% Unsec. Nts., 8/13/07 1 [ITL]         550,900,000                 303,722
9.375% Sr. Unsec. Bonds, 12/2/08                585,000                 677,137
- --------------------------------------------------------------------------------
Petronas Capital Ltd.:
7.875% Nts., 5/22/22                          1,015,000               1,094,709
7.875% Nts., 5/22/22 6                          355,000                 382,589
- --------------------------------------------------------------------------------
Pioneer Natural Resources Co.,
7.50% Sr. Nts., 4/15/12                         600,000                 650,086
- --------------------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub.
Nts., Series B, 5/15/07 1                       300,000                 314,625
- --------------------------------------------------------------------------------
Premcor USA, Inc., 11.50% Cum.
Sr. Nts., 10/1/09                                78,000                  75,270
- --------------------------------------------------------------------------------
Stone Energy Corp., 8.75% Sr. Sub.
Nts., 9/15/07 1                                 270,000                 282,150
- --------------------------------------------------------------------------------
Westport Resources Corp.,
8.25% Sr. Sub. Nts., 11/1/11 6                  400,000                 422,000
- --------------------------------------------------------------------------------
XTO Energy, Inc., 7.50% Sr. Nts.,
4/15/12                                         500,000                 533,750
                                                                   -------------
                                                                      7,684,633

- --------------------------------------------------------------------------------
Financials--3.3%
- --------------------------------------------------------------------------------
Banks--1.0%
Bank Plus Corp., 12% Sr. Nts.,
7/18/07 1                                         7,000                   7,534
- --------------------------------------------------------------------------------
BankUnited Capital Trust,
10.25% Capital Securities, 12/31/26 1           100,000                 100,375


                                              Principal            Market Value
                                                Amount               See Note 1
- --------------------------------------------------------------------------------
Banks Continued
Chohung Bank,
11.875% Sub. Nts., 4/1/10 2                $    550,000            $    636,335
- --------------------------------------------------------------------------------
European Investment Bank Eligible
Interest Nts., 3%, 9/20/06 [JPY]            173,000,000               1,609,001
- --------------------------------------------------------------------------------
Hanvit Bank, 12.75% Unsec. Sub.
Nts., 3/1/10 2                                  639,000                 744,351
- --------------------------------------------------------------------------------
Local Financial Corp., 11% Sr. Nts.,
9/8/04 1                                        150,000                 154,875
- --------------------------------------------------------------------------------
Ongko International Finance Co.
BV, 10.50% Sec. Nts., 3/29/04 1,9,10             90,000                     675
- --------------------------------------------------------------------------------
Tokai Preferred Capital Co. LLC,
9.98% Non-Cum. Bonds, Series A,
12/29/49 2,6                                    585,000                 513,967
- --------------------------------------------------------------------------------
Western Financial Bank, 9.625%
Unsec. Sub. Debs., 5/15/12 1                    500,000                 487,500
                                                                   -------------
                                                                      4,254,613

- --------------------------------------------------------------------------------
Diversified Financials--1.5%
AmeriCredit Corp.,
9.875% Sr. Nts., 4/15/06                        600,000                 507,000
- --------------------------------------------------------------------------------
Berry Plastics Corp.,
10.75% Sr. Sub. Nts., 7/15/12                   400,000                 428,000
- --------------------------------------------------------------------------------
CIT Group, Inc., 7.75% Sr. Unsec.
Unsub. Nts., 4/2/12                             655,000                 736,904
- --------------------------------------------------------------------------------
Finova Group, Inc. (The),
7.50% Nts., 11/15/09                            900,000                 315,000
- --------------------------------------------------------------------------------
Fuji JGB Investment LLC:
9.87% Non-Cum. Bonds,
Series A, 12/31/49 2                            165,000                 146,610
9.87% Non-Cum. Bonds,
Series A, 12/31/49 2,6                          695,000                 617,541
- --------------------------------------------------------------------------------
Household Finance Corp.,
7% Nts., 5/15/12                              1,356,000               1,487,792
- --------------------------------------------------------------------------------
IBJ Preferred Capital Co.
(The) LLC:
8.79% Bonds, 12/29/49 2,6                     1,685,000               1,426,968
8.79% Non-Cum. Bonds,
Series A, 12/29/49 2                            105,000                  88,921
- --------------------------------------------------------------------------------
LaBranche & Co., Inc.,
12% Sr. Unsec. Sub. Nts., 3/2/07                200,000                 224,000
- --------------------------------------------------------------------------------
Ocwen Financial Corp.,
11.875% Nts., 10/1/03                           235,000                 237,350
- --------------------------------------------------------------------------------
SBS Agro Finance BV,
10.25% Bonds, 7/21/00 1,9,10                    339,000                  15,255
                                                                   -------------
                                                                      6,231,341

- --------------------------------------------------------------------------------
Insurance--0.0%
Conseco, Inc., 10.75% Sr. Unsec.
Nts., 6/15/09 6,9                               300,000                  76,500
- --------------------------------------------------------------------------------
Real Estate--0.8%
Capstar Hotel Co.,
8.75% Sr. Sub. Nts., 8/15/07                    175,000                 118,125


STATEMENT OF INVESTMENTS  Continued


                                                  Principal        Market Value
                                                     Amount          See Note 1
- --------------------------------------------------------------------------------
Real Estate Continued
CB Richard Ellis Services, Inc.,
11.25% Sr. Unsec. Sub. Nts., 6/15/11            $   250,000         $   231,250
- --------------------------------------------------------------------------------
Corrections Corp. of America,
9.875% Sr. Nts., 5/1/09 6                           300,000             319,500
- --------------------------------------------------------------------------------
Felcor Lodging LP, 8.50% Sr. Nts.,
6/1/11                                              406,000             401,940
- --------------------------------------------------------------------------------
Host Marriott LP, 9.50% Sr. Nts.,
1/15/07                                             400,000             408,000
- --------------------------------------------------------------------------------
IStar Financial, Inc., 8.75% Sr.
Unsec. Nts., 8/15/08                                200,000             213,081
- --------------------------------------------------------------------------------
MeriStar Hospitality Corp.:
8.75% Sr. Unsec. Sub. Nts., 8/15/07                 325,000             219,375
9.125% Sr. Unsec. Nts., 1/15/11                   1,300,000           1,137,500
- --------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment
Trust, 9.75% Sr. Sec. Nts., Series B,
4/1/08 1                                            245,000             244,388
                                                                    ------------
                                                                      3,293,159

- --------------------------------------------------------------------------------
Health Care--2.2%
- --------------------------------------------------------------------------------
Health Care Equipment & Supplies--0.2%
Kinetic Concepts, Inc., 9.625% Sr.
Unsec. Sub. Nts., Series B, 11/1/07                 250,000             260,000
- --------------------------------------------------------------------------------
Sybron Dental Specialties, Inc.,
8.125% Sr. Sub. Nts., 6/15/12                       300,000             304,500
- --------------------------------------------------------------------------------
Vanguard Health Systems, Inc.,
9.75% Sr. Unsec. Sub. Nts., 8/1/11                  300,000             288,000
                                                                    ------------
                                                                        852,500

- --------------------------------------------------------------------------------
Health Care Providers & Services--1.8%
AmerisourceBergen Corp.,
7.25% Sr. Nts., 11/15/12 6                          300,000             309,000
- --------------------------------------------------------------------------------
Beverly Enterprises, Inc.,
9.625% Sr. Unsec. Nts., 4/15/09                     800,000             676,000
- --------------------------------------------------------------------------------
Extendicare Health Services, Inc.,
9.50% Sr. Nts., 7/1/10 6                            300,000             292,500
- --------------------------------------------------------------------------------
Fresenius Medical Care Capital
Trust II, 7.875% Nts., 2/1/08                       900,000             888,750
- --------------------------------------------------------------------------------
Fresenius Medical Care Capital
Trust III, 7.375% Nts., 2/1/08  [DEM]                25,000              12,877
- --------------------------------------------------------------------------------
Fresenius Medical Care Capital
Trust IV, 7.875% Trust Preferred
Nts., 6/15/11                                       600,000             585,000
- --------------------------------------------------------------------------------
Hanger Orthopedic Group, Inc.,
10.375% Sr. Nts., 2/15/09                           125,000             130,000
- --------------------------------------------------------------------------------
Healthsouth Corp., 7.625% Nts.,
6/1/12                                            1,000,000             830,000
- --------------------------------------------------------------------------------
Magellan Health Services, Inc.,
9.375% Sr. Nts., 11/15/07 6                         700,000             556,500
- --------------------------------------------------------------------------------
Medquest, Inc., 11.875% Sr. Sub. Nts.,
8/15/12 6                                           600,000             588,000


                                                  Principal        Market Value
                                                     Amount          See Note 1
- --------------------------------------------------------------------------------
Health Care Providers & Services Continued
PacifiCare Health Systems, Inc.,
10.75% Sr. Unsec. Unsub. Nts.,
6/1/09                                          $   900,000         $   967,500
- --------------------------------------------------------------------------------
Tenet Healthcare Corp.,
6.375% Sr. Nts., 12/1/11                            959,000             864,797
- --------------------------------------------------------------------------------
Triad Hospitals, Inc., 8.75% Sr.
Unsec. Nts., Series B, 5/1/09                       400,000             430,500
- --------------------------------------------------------------------------------
US Oncology, Inc.,
9.625% Sr. Sub. Nts., 2/1/12                        300,000             306,000
                                                                    ------------
                                                                      7,437,424

- --------------------------------------------------------------------------------
Pharmaceuticals--0.2%
aaiPharma, Inc., 11% Sr. Sub. Nts.,
4/1/10                                              200,000             201,000
- --------------------------------------------------------------------------------
Pfizer, Inc., 0.80% Unsec. Bonds,
Series INTL, 3/18/08[JPY]                        53,000,000             453,941
                                                                    ------------
                                                                        654,941

- --------------------------------------------------------------------------------
Industrials--5.0%
- --------------------------------------------------------------------------------
Aerospace & Defense--0.5%
Alliant Techsystems, Inc., 8.50%
Sr. Unsec. Sub. Nts., 5/15/11                       300,000             325,500
- --------------------------------------------------------------------------------
American Plumbing & Mechanical,
Inc., 11.625% Sr. Sub. Nts., Series B,
10/15/08 1                                          425,000             125,375
- --------------------------------------------------------------------------------
BE Aerospace, Inc., 8.875% Sr.
Unsec. Sub. Nts., 5/1/11                            200,000             148,000
- --------------------------------------------------------------------------------
Boeing Capital Corp., 5.80% Nts.,
1/15/13                                             305,000             309,489
- --------------------------------------------------------------------------------
K&F Industries, Inc., 9.625% Sr.
Sub. Nts., 12/15/10 6                               225,000             230,063
- --------------------------------------------------------------------------------
L-3 Communications Corp.,
7.625% Sr. Sub. Nts., 6/15/12                       300,000             310,500
- --------------------------------------------------------------------------------
Rexnord Corp., 10.125% Sr. Sub.
Nts., 12/15/12 6                                    350,000             360,500
- --------------------------------------------------------------------------------
TransDigm, Inc., 10.375% Sr.
Sub. Nts., 12/1/08                                  200,000             208,000
                                                                    ------------
                                                                      2,017,427

- --------------------------------------------------------------------------------
Air Freight & Couriers--0.0%
Atlas Air, Inc.:
9.25% Sr. Nts., 4/15/08                             100,000              21,250
9.375% Sr. Unsec. Nts., 11/15/06                    650,000             138,125
                                                                    ------------
                                                                        159,375

- --------------------------------------------------------------------------------
Airlines--0.1%
America West Airlines, Inc.,
10.75% Sr. Nts., 9/1/05                             450,000             182,250
- --------------------------------------------------------------------------------
Amtran, Inc.:
9.625% Nts., 12/15/05                               300,000             126,000
10.50% Sr. Nts., 8/1/04                             700,000             294,000
                                                                    ------------
                                                                        602,250

                                                    Principal      Market Value
                                                       Amount        See Note 1
- --------------------------------------------------------------------------------
Building Products--0.3%
Associated Materials, Inc.,
9.75% Sr. Sub. Nts., 4/15/12                       $  200,000        $  212,000
- --------------------------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Unsec. Nts., Series B,
9/1/07                                                650,000           669,500
9.25% Sr. Nts., Series B, 3/15/07                     150,000           154,875
9.875% Sr. Unsec. Sub. Nts., 6/15/11                  250,000           251,562
                                                                     -----------
                                                                      1,287,937

- --------------------------------------------------------------------------------
Commercial Services & Supplies--1.9%
Allied Waste North America, Inc.:
8.50% Sr. Sub. Nts., 12/1/08                          900,000           909,000
8.875% Sr. Nts., Series B, 4/1/08                     800,000           816,000
9.25% Sr. Nts., 9/1/12 6                            1,450,000         1,493,500
10% Sr. Unsec. Sub. Nts., Series B,
8/1/09                                                900,000           897,750
- --------------------------------------------------------------------------------
Budget Group, Inc., 9.125% Sr.
Unsec. Nts., 4/1/06 9,10                              700,000           157,500
- --------------------------------------------------------------------------------
Buhrmann US, Inc., 12.25% Sr.
Unsec. Sub. Nts., 11/1/09                             500,000           467,500
- --------------------------------------------------------------------------------
Coinmach Corp., 9% Sr. Nts.,
2/1/10                                                250,000           263,437
- --------------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts.,
3/1/07 1                                              350,000           364,000
- --------------------------------------------------------------------------------
Hydrochem Industrial Services,
Inc., 10.375% Sr. Sub. Nts., 8/1/07 1                 150,000           113,438
- --------------------------------------------------------------------------------
Iron Mountain, Inc.,
7.75% Sr. Sub. Nts., 1/15/15                          400,000           402,000
- --------------------------------------------------------------------------------
IT Group, Inc., 11.25% Sr. Unsec.
Sub. Nts., Series B, 4/1/09 1,9,10                    400,000               520
- --------------------------------------------------------------------------------
Kindercare Learning Centers, Inc.,
9.50% Sr. Sub. Nts., 2/15/09                          500,000           487,500
- --------------------------------------------------------------------------------
Mail-Well I Corp., 9.625% Sr. Nts.,
3/15/12                                               400,000           358,000
- --------------------------------------------------------------------------------
NDCHealth Corp.,
10.50% Sr. Sub. Nts., 12/1/12 6                       250,000           251,250
- --------------------------------------------------------------------------------
Protection One, Inc./Protection
One Alarm Monitoring, Inc.,
7.375% Sr. Unsec. Nts., 8/15/05                       400,000           330,000
- --------------------------------------------------------------------------------
Safety-Kleen Corp., 9.25% Sr.
Unsec. Nts., 5/15/09 1,9,10                           400,000            16,000
- --------------------------------------------------------------------------------
Synagro Technologies, Inc.,
9.50% Sr. Sub. Nts., 4/1/09                           200,000           209,500
- --------------------------------------------------------------------------------
Waste Management, Inc.,
6.375% Nts., 11/15/12 6                               183,000           188,659
                                                                     -----------
                                                                      7,725,554


                                                    Principal      Market Value
                                                       Amount        See Note 1
- --------------------------------------------------------------------------------
Construction & Engineering--0.3%

Integrated Electrical Services, Inc.,
9.375% Sr. Sub. Nts., Series C,
2/1/09 1                                           $  700,000        $  647,500
- --------------------------------------------------------------------------------
URS Corp.:
11.50% Sr. Nts., 9/15/09 6                            150,000           134,250
12.25% Sr. Sub. Nts., Series B, 5/1/09                375,000           301,875
                                                                     -----------
                                                                      1,083,625

- --------------------------------------------------------------------------------
Electrical Equipment--0.0%
Dayton Superior Corp., 13% Sr.
Unsec. Sub. Nts., 6/15/09                             200,000           173,000
- --------------------------------------------------------------------------------
Industrial Conglomerates--0.4%
Great Lakes Dredge & Dock Corp.,
11.25% Sr. Unsec. Sub. Nts., 8/15/08                  500,000           523,125
- --------------------------------------------------------------------------------
Tyco International Group SA,
6.375% Nts., 10/15/11                               1,000,000           936,836
                                                                     -----------
                                                                      1,459,961

- --------------------------------------------------------------------------------
Machinery--1.1%
Actuant Corp., 13% Sr. Sub. Nts.,
5/1/09                                                208,000           244,400
- --------------------------------------------------------------------------------
AGCO Corp., 9.50% Sr. Unsec. Nts.,
5/1/08                                                800,000           868,000
- --------------------------------------------------------------------------------
Blount, Inc., 13% Sr. Sub. Nts.,
8/1/09                                                300,000           188,250
- --------------------------------------------------------------------------------
Cummins, Inc., 9.50% Sr. Nts.,
12/1/10                                               200,000           214,000
- --------------------------------------------------------------------------------
Eagle-Picher Industries, Inc.,
9.375% Sr. Unsec. Sub. Nts., 3/1/08 1                 300,000           213,000
- --------------------------------------------------------------------------------
Manitowoc Co., Inc. (The),
10.50% Sr. Sub. Nts., 8/1/12 6                        500,000           521,250
- --------------------------------------------------------------------------------
NMHG Holding Co., 10% Sr. Nts.,
5/15/09                                               300,000           301,500
- --------------------------------------------------------------------------------
Roller Bearing Co. of America, Inc.,
9.625% Sr. Sub. Nts., Series B, 6/15/07               540,000           510,975
- --------------------------------------------------------------------------------
SPX Corp., 7.50% Sr. Nts., 1/1/13                     800,000           815,000
- --------------------------------------------------------------------------------
Terex Corp.:
8.875% Sr. Unsec. Sub. Nts., 4/1/08                   250,000           226,563
8.875% Sr. Unsec. Sub. Nts., Series C,
4/1/08                                                100,000            90,625
9.25% Sr. Unsec. Sub. Nts., 7/15/11                   400,000           366,500
                                                                     -----------
                                                                      4,560,063

- --------------------------------------------------------------------------------
Marine--0.2%
CP Ships Ltd., 10.375% Sr. Nts.,
7/15/12                                               600,000           633,000
- --------------------------------------------------------------------------------
Millenium Seacarriers, Inc., Units (each
unit consists of $1,000 principal amount
of 12% first priority ship mtg. sr. sec. nts ,
7/15/05 and one warrant to purchase
five shares of common stock) 1,9,10,14                250,000           125,000


STATEMENT OF INVESTMENTS  Continued


                                                     Principal     Market Value
                                                       Amount       See Note 1
- --------------------------------------------------------------------------------
Marine Continued
Navigator Gas Transport plc,
10.50% First Priority Ship Mtg.
Nts., 6/30/07 6,9                                   $  175,000      $   53,813
                                                                    ------------
                                                                       811,813

- --------------------------------------------------------------------------------
Road & Rail--0.2%
Kansas City Southern Railway Co.
(The), 7.50% Sr. Nts., 6/15/09                         400,000         424,000
- --------------------------------------------------------------------------------
Stena AB, 9.625% Sr. Nts., 12/1/12 6                   250,000         259,375
                                                                    ------------
                                                                       683,375

- --------------------------------------------------------------------------------
Information Technology--1.5%
- --------------------------------------------------------------------------------
Communications Equipment--0.0%
CellNet Data Systems, Inc.,
14% Sr. Unsec. Disc. Nts., 10/1/07 1,9,10              400,000              --
- --------------------------------------------------------------------------------
Orion Network Systems, Inc.,
12.50% Sr. Disc. Nts., 1/15/07 1                       675,000         177,187
                                                                    ------------
                                                                       177,187

- --------------------------------------------------------------------------------
Computers & Peripherals--0.1%
Seagate Technology Hdd Holdings,
8% Sr. Nts., 5/15/09 6                                 200,000         208,000
- --------------------------------------------------------------------------------
Electronic Equipment & Instruments--0.8%
ChipPAC International Co. Ltd.,
12.75% Sr. Unsec. Sub. Nts.,
Series B, 8/1/09                                       600,000         633,000
- --------------------------------------------------------------------------------
Communications & Power
Industries, Inc., 12% Sr. Sub. Nts.,
Series B, 8/1/05 1                                     250,000         211,250
- --------------------------------------------------------------------------------
Fisher Scientific International, Inc.:
8.125% Sr. Sub. Nts., 5/1/12                           300,000         312,000
9% Sr. Unsec. Sub. Nts., 2/1/08                        400,000         419,000
9% Sr. Unsec. Sub. Nts., 2/1/08 1                      105,000         109,987
- --------------------------------------------------------------------------------
Flextronics International Ltd.,
9.875% Sr. Unsec. Sub. Nts., 7/1/10                    500,000         541,250
- --------------------------------------------------------------------------------
Ingram Micro, Inc., 9.875% Sr.
Unsec. Sub. Nts., 8/15/08                              700,000         742,000
- --------------------------------------------------------------------------------
Insilco Corp., 12% Sr. Sub. Nts.,
8/15/07 9,10                                           400,000          10,000
- --------------------------------------------------------------------------------
PerkinElmer, Inc., 8.875% Sr. Sub.
Nts., 1/15/13 6                                        300,000         297,000
                                                                    ------------
                                                                     3,275,487

- --------------------------------------------------------------------------------
Internet Software & Services--0.0%
Equinix, Inc., 13% Sr. Unsec. Nts.,
12/1/07 1,9                                            200,000          33,000
- --------------------------------------------------------------------------------
Exodus Communications, Inc.,
10.75% Sr. Nts., 12/15/09 1,9,10 [EUR]                 400,000          18,889
- --------------------------------------------------------------------------------
FirstWorld Communications, Inc.,
0%/13% Sr. Disc. Nts., 4/15/08 1,9,10,12               250,000             313
- --------------------------------------------------------------------------------
Globix Corp., 9.075% Sr. Nts., 4/26/08                  59,016          42,492


                                                     Principal     Market Value
                                                       Amount       See Note 1
- --------------------------------------------------------------------------------
Internet Software & Services Continued
PSINet, Inc.:
10.50% Sr. Unsec. Nts.,
12/1/06 1,9,10 [EUR]                                   100,000      $    6,952
11% Sr. Nts., 8/1/09 1,9,10                            275,784           9,652
                                                                    ------------
                                                                       111,298

- --------------------------------------------------------------------------------
Office Electronics--0.0%
ASAT Finance LLC, 12.50% Sr. Unsec.
Nts., 11/1/06                                          162,500         122,688
- --------------------------------------------------------------------------------
Semiconductor Equipment & Products--0.6%
Amkor Technology, Inc.:
9.25% Sr. Unsec. Nts., 5/1/06                          400,000         344,000
9.25% Sr. Unsec. Sub. Nts., 2/15/08                    250,000         212,500
- --------------------------------------------------------------------------------
Fairchild Semiconductor Corp.:
10.375% Sr. Unsec. Nts., 10/1/07                       500,000         527,500
10.50% Sr. Unsec. Sub. Nts., 2/1/09                    300,000         325,500
- --------------------------------------------------------------------------------
Micron Technology, Inc.,
6.50% Sub. Nts., 9/30/05                             1,000,000         865,000
                                                                    ------------
                                                                     2,274,500

- --------------------------------------------------------------------------------
Materials--4.8%
- --------------------------------------------------------------------------------
Chemicals--0.8%
Compass Minerals Group, Inc.,
10% Sr. Sub. Nts., 8/15/11                             450,000         495,000
- --------------------------------------------------------------------------------
Equistar Chemicals LP, 8.75% Sr.
Unsec. Nts., 2/15/09                                   600,000         525,712
- --------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc:
10.125% Sr. Unsec. Sub. Nts.,
7/1/09 [EUR]                                           200,000         159,509
Zero Coupon Sr. Unsec. Disc.
Nts., 13.09%, 12/31/09 11                              600,000         138,000
- --------------------------------------------------------------------------------
Huntsman International LLC,
9.875% Sr. Nts., 3/1/09                                300,000         301,500
- --------------------------------------------------------------------------------
ISP Holdings, Inc., 10.625% Sr.
Sec. Nts., 12/15/09                                    200,000         175,000
- --------------------------------------------------------------------------------
Lyondell Chemical Co.:
9.50% Sec. Nts., 12/15/08                              300,000         280,500
9.625% Sr. Sec. Nts., Series A, 5/1/07 5               400,000         386,000
9.875% Sec. Nts., Series B, 5/1/07                     400,000         386,000
- --------------------------------------------------------------------------------
OM Group, Inc., 9.25% Sr. Sub.
Nts., 12/15/11                                         200,000         109,000
- --------------------------------------------------------------------------------
PCI Chemicals Canada,
10% Sr. Sec. Nts., 12/31/08                            113,061          79,708
- --------------------------------------------------------------------------------
Pioneer Cos., Inc., 4.90% Sr. Sec.
Nts., 12/31/06 2                                        37,688          26,240
- --------------------------------------------------------------------------------
Sterling Chemicals, Inc.:
10% Sr. Sec. Nts., 12/19/07                            159,000         103,350
11.25% Sr. Sub. Nts., 8/15/06 9,10                     540,000              --
- --------------------------------------------------------------------------------
Unifrax Investment Corp.,
10.50% Sr. Nts., 11/1/03 1                              50,000          50,313
                                                                    ------------
                                                                     3,215,832

                                                      Principal     Market Value
                                                        Amount       See Note 1
- -------------------------------------------------------------------------------
Construction Materials--0.0%
Formica Corp., 10.875% Sr. Unsec.
Sub. Nts., Series B, 3/1/09 1,9,10                     $200,000      $   49,000
- -------------------------------------------------------------------------------
Containers & Packaging--1.7%
Ball Corp.:
6.875% Sr. Nts., 12/15/12 6                             300,000         303,000
7.75% Sr. Unsec. Nts., 8/1/06 1                         125,000         131,875
8.25% Sr. Unsec. Sub. Nts., 8/1/08                      125,000         132,187
- -------------------------------------------------------------------------------
Graphic Packaging Corp.,
8.625% Sub. Nts., 2/15/12                               500,000         528,750
- -------------------------------------------------------------------------------
Jefferson Smurfit Corp.,
8.25% Sr. Nts., 10/1/12 6                               250,000         256,250
- -------------------------------------------------------------------------------
MDP Acquisitions plc,
9.625% Sr. Nts., 10/1/12 6                              400,000         418,000
- -------------------------------------------------------------------------------
Owens-Brockway Glass
Container, Inc.:
8.75% Sr. Sec. Nts., 11/15/12 6                         600,000         612,000
8.75% Sr. Sec. Nts., 11/15/12 6                         400,000         408,000
8.875% Sr. Sec. Nts., 2/15/09                           200,000         207,000
- -------------------------------------------------------------------------------
Packaging Corp. of America,
9.625% Sr. Unsec. Sub. Nts., 4/1/09                     750,000         808,125
- -------------------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07                         750,000         780,000
10.875% Sr. Sub. Nts., 4/1/08                           250,000         252,500
- -------------------------------------------------------------------------------
Silgan Holdings, Inc.,
9% Sr. Sub. Debs., 6/1/09                               200,000         209,500
- -------------------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12                                 600,000         618,000
9.25% Sr. Unsec. Nts., 2/1/08                           200,000         212,500
9.75% Sr. Unsec. Nts., 2/1/11                           600,000         645,000
- -------------------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Sub. Nts.,
6/15/12 6                                               500,000         497,500
                                                                     -----------
                                                                      7,020,187

- -------------------------------------------------------------------------------
Metals & Mining--1.5%
AK Steel Corp.:
7.75% Sr. Unsec. Nts., 6/15/12 6                      1,200,000       1,215,000
7.875% Sr. Unsec. Nts., 2/15/09                         500,000         507,500
- -------------------------------------------------------------------------------
Better Minerals & Aggregates Co.,
13% Sr. Unsec. Sub. Nts., 9/15/09                       100,000          36,500
- -------------------------------------------------------------------------------
California Steel Industries Corp.,
8.50% Sr. Unsec. Nts., Series B,
4/1/09                                                  200,000         202,500
- -------------------------------------------------------------------------------
Centaur Mining & Exploration
Ltd., 11% Sr. Nts., 12/1/07 1,9                          94,344           1,887
- -------------------------------------------------------------------------------
Century Aluminum Co.,
11.75% Sr. Sec. Nts., 4/15/08                           500,000         487,500
- -------------------------------------------------------------------------------
Great Lakes Carbon Corp.,
7.94% Sr. Sub. Nts., Series B, 5/15/08                  447,000         319,605
- -------------------------------------------------------------------------------
International Utility Structures,
Inc., 13% Unsec. Sub. Nts., 2/1/08 1                     71,000          14,200
- -------------------------------------------------------------------------------
Jorgensen (Earle M.) Co.,
9.75% Sr. Sec. Nts., 6/1/12                             500,000         511,250



                                                      Principal    Market Value
                                                         Amount      See Note 1
- --------------------------------------------------------------------------------
Metals & Mining Continued
Kaiser Aluminum & Chemical Corp.:
10.875% Sr. Nts., Series B,
10/15/06 9,10                                        $  500,000      $  337,500
12.75% Sr. Sub. Nts., 2/1/03 9,10                       800,000          64,000
- --------------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts.,
12/1/07                                                 500,000         360,000
- --------------------------------------------------------------------------------
National Steel Corp., 9.875% First
Mtg. Bonds, Series D, 3/1/09 9,10                       800,000         315,000
- --------------------------------------------------------------------------------
Oregon Steel Mills, Inc.,
10% Nts., 7/15/09 6                                     400,000         408,000
- --------------------------------------------------------------------------------
P&L Coal Holdings Corp.,
9.625% Sr. Sub. Nts., Series B,
5/15/08                                                 403,000         427,684
- --------------------------------------------------------------------------------
Steel Dynamics, Inc.,
9.50% Sr. Nts., 3/15/09                                 200,000         210,500
- --------------------------------------------------------------------------------
UCAR Finance, Inc.,
10.25% Sr. Nts., 2/15/12                                300,000         240,000
- --------------------------------------------------------------------------------
United States Steel LLC,
10.75% Sr. Nts., 8/1/08                                 800,000         792,000
                                                                     -----------
                                                                      6,450,626

- --------------------------------------------------------------------------------
Paper & Forest Products--0.8%
Abitibi-Consolidated, Inc.,
8.55% Nts., 8/1/10                                      200,000         222,350
- --------------------------------------------------------------------------------
Ainsworth Lumber Co. Ltd.:
12.50% Sr. Nts., 7/15/07 13                             400,000         418,000
13.875% Sr. Sec. Nts., 7/15/07                          400,000         430,000
- --------------------------------------------------------------------------------
Doman Industries Ltd.,
8.75% Sr. Nts., 3/15/04 9                               900,000         117,000
- --------------------------------------------------------------------------------
Fort James Corp.,
6.875% Sr. Nts., 9/15/07                                500,000         477,500
- --------------------------------------------------------------------------------
Georgia-Pacific Corp.,
8.125% Sr. Unsec. Nts., 5/15/11                       1,450,000       1,384,750
- --------------------------------------------------------------------------------
U.S. Timberlands Co. LP,
9.625% Sr. Nts., 11/15/07                               300,000         183,000
                                                                     -----------
                                                                      3,232,600

- --------------------------------------------------------------------------------
Telecommunication Services--2.6%
- --------------------------------------------------------------------------------
Diversified Telecommunication Services--1.2%
360networks, Inc., 13% Sr. Unsec.
Nts., 5/1/08 1,9,10 [EUR]                               250,000              26
- --------------------------------------------------------------------------------
Adelphia Business Solutions, Inc.,
12% Sr. Sub. Nts., 11/1/07 1,9,10                       200,000           1,500
- --------------------------------------------------------------------------------
COLO.com, Inc., 13.875% Sr. Nts.,
3/15/10 1,9,10                                          344,725           3,447
- --------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd.,
11.20% Sr. Unsec. Disc. Debs.,
11/15/07                                                250,000         177,500
- --------------------------------------------------------------------------------
Concentric Network Corp.,
12.75% Sr. Unsec. Nts., 12/15/07 1,9,10                  80,000             500


STATEMENT OF INVESTMENTS  Continued

                                                     Principal     Market Value
                                                        Amount       See Note 1
- --------------------------------------------------------------------------------
Diversified Telecommunication Services Continued
Deutsche Telekom International
Finance BV, 8.50% Unsub. Nts.,
6/15/10                                             $  305,000       $  351,873
- --------------------------------------------------------------------------------
Dex Media East LLC,
9.875% Sr. Nts., 11/15/09 6                            200,000          215,000
- --------------------------------------------------------------------------------
Diamond Cable Communications
plc, 11.75% Sr. Disc. Nts., 12/15/05 9,10              500,000           47,500
- --------------------------------------------------------------------------------
Focal Communications Corp.:
0%/12.125% Sr. Unsec. Disc. Nts.,
2/15/08 1,9,10,12                                       80,000            2,000
11.875% Sr. Unsec. Nts., Series B,
1/15/10 1,9                                             75,000            1,875
- --------------------------------------------------------------------------------
France Telecom SA,
9.25% Sr. Unsec. Nts., 3/1/11                        1,040,000        1,204,646
- --------------------------------------------------------------------------------
Intermedia Communications, Inc.,
0%/12.25% Sr. Disc. Nts., Series B,
3/1/09 1,9,10,12                                       200,000           27,000
- --------------------------------------------------------------------------------
IPC Acquisition Corp.,
11.50% Sr. Sub. Nts., 12/15/09                         400,000          346,000
- --------------------------------------------------------------------------------
Level 3 Communications, Inc.,
0%/10.50% Sr. Disc. Nts., 12/1/08 12                   700,000          334,250
- --------------------------------------------------------------------------------
Metromedia Fiber Network, Inc.,
10% Sr. Unsec. Nts., Series B,
11/15/08 1,9,10                                        400,000            7,000
- --------------------------------------------------------------------------------
NorthPoint Communications Group,
Inc., 12.875% Nts., 2/15/10 9,10                       250,000           38,750
- --------------------------------------------------------------------------------
NTL Communications Corp.,
0%/9.75% Sr. Unsec. Nts., Series B,
4/15/09 9,10,12 [GBP]                                  775,000           99,814
- --------------------------------------------------------------------------------
Qwest Corp., 8.875% Nts., 3/15/12 6                    300,000          292,500
- --------------------------------------------------------------------------------
Sprint Capital Corp., 8.375% Nts.,
3/15/12                                                450,000          448,602
- --------------------------------------------------------------------------------
Telewest Communications plc:
0%/9.25% Sr. Disc. Nts., 4/15/09 9,12                  600,000           87,000
0%/9.875% Sr. Disc. Nts.,
4/15/09 1,9,12 [GBP]                                   200,000           49,907
- --------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts.,
12/1/07 1,9,10                                         500,000               50
- --------------------------------------------------------------------------------
Verizon Global Funding Corp.,
7.375% Sr. Nts., 9/1/12                                915,000        1,054,983
- --------------------------------------------------------------------------------
Viatel, Inc., 11.25% Sr. Sec. Nts.,
4/15/08 1,9,10                                         500,000               --
- --------------------------------------------------------------------------------
Winstar Communications, Inc.,
12.75% Sr. Nts., 4/15/10 1,9,10                        250,000               25
- --------------------------------------------------------------------------------
XO Communications, Inc.:
0%/12.25% Sr. Unsec. Disc. Nts.,
6/1/09 1,9,10,12                                       400,000            2,500
9% Sr. Unsec. Nts., 3/15/08 1,9,10                     250,000            1,563
9.625% Sr. Nts., 10/1/07 1,9,10                        200,000            1,250
10.75% Sr. Unsec. Nts., 11/15/08 1,9,10                300,000            1,875
                                                                     -----------
                                                                      4,798,936

                                                     Principal     Market Value
                                                        Amount       See Note 1
- --------------------------------------------------------------------------------
Wireless Telecommunication Services--1.4%
Alamosa Delaware, Inc.,
12.50% Sr. Unsec. Nts., 2/1/11                      $  300,000       $   91,500
- --------------------------------------------------------------------------------
American Cellular Corp.,
9.50% Sr. Sub. Nts., 10/15/09 9                        750,000          146,250
- --------------------------------------------------------------------------------
AT&T Corp., 8.50% Sr. Nts.,
11/15/31 2                                             500,000          553,009
- --------------------------------------------------------------------------------
Crown Castle International Corp.:
0%/10.375% Sr. Disc. Nts., 5/15/11 12                  500,000          327,500
10.625% Sr. Unsec. Disc. Nts.,
11/15/07 12                                            500,000          452,500
- --------------------------------------------------------------------------------
IPCS, Inc., 0%/14% Sr. Unsec.
Disc. Nts., 7/15/10 12                                 300,000           13,500
- --------------------------------------------------------------------------------
Leap Wireless International, Inc.:
0%/14.50% Sr. Unsec. Disc. Nts.,
4/15/10 9,12                                           700,000           66,500
12.50% Sr. Nts., 4/15/10 1,9                           100,000           14,500
- --------------------------------------------------------------------------------
Microcell Telecommunications,
Inc., 11.125% Sr. Disc. Nts.,
Series B, 10/15/07 1,9 [CAD]                           300,000            5,697
- --------------------------------------------------------------------------------
Nextel Communications, Inc.:
9.375% Sr. Unsec. Nts., 11/15/09                     1,300,000        1,183,000
10.65% Sr. Disc. Nts., 9/15/07                         750,000          720,000
- --------------------------------------------------------------------------------
Nextel Partners, Inc.,
11% Sr. Unsec. Nts., 3/15/10                           250,000          213,750
- --------------------------------------------------------------------------------
Orbcomm Global LP (Escrow),
8/15/04 9,10                                           200,000               --
- --------------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr.
Sub. Nts., Series B, 5/15/08                           300,000          181,500
- --------------------------------------------------------------------------------
SBA Communications Corp.:
0%/12% Sr. Unsec. Disc. Nts.,
3/1/08 12                                              800,000          428,000
10.25% Sr. Unsec. Nts., 2/1/09                         200,000          109,000
- --------------------------------------------------------------------------------
TeleCorp PCS, Inc.:
0%/11.625% Sr. Unsec. Sub. Disc.
Nts., 4/15/09 12                                       304,000          288,040
10.625% Sr. Unsec. Sub. Nts.,
7/15/10                                                293,000          316,440
- --------------------------------------------------------------------------------
Tritel PCS, Inc.:
0%/12.75% Sr. Unsec. Sub. Disc.
Nts., 5/15/09 12                                       221,000          206,635
10.375% Sr. Sub. Nts., 1/15/11                         270,000          290,250
- --------------------------------------------------------------------------------
Triton PCS, Inc., 8.75% Sr. Unsec.
Sub. Nts., 11/15/11                                    200,000          163,000
- --------------------------------------------------------------------------------
US Unwired, Inc., 0%/13.375% Sr.
Unsec. Sub. Disc. Nts., Series B,
11/1/09 12                                             900,000           58,500
                                                                     -----------
                                                                      5,829,071

                                                    Principal     Market Value
                                                       Amount       See Note 1
- --------------------------------------------------------------------------------
Utilities--1.7%
- --------------------------------------------------------------------------------
Electric Utilities--1.1%
AES Corp. (The):
8.75% Sr. Unsec. Unsub. Nts.,
6/15/08                                         $    500,000      $    295,000
8.875% Sr. Unsec. Nts., 2/15/11                      500,000           292,500
- --------------------------------------------------------------------------------
AES Drax Holdings Ltd., 10.41% Sr.
Sec. Sub. Nts., Series B, 12/31/20                   300,000           163,500
- --------------------------------------------------------------------------------
Caithness Coso Funding Corp.,
9.05% Sr. Sec. Nts., Series B,
12/15/09                                             371,259           365,690
- --------------------------------------------------------------------------------
Calpine Corp., 8.50% Sr. Unsec.
Nts., 2/15/11                                      1,900,000           836,000
- --------------------------------------------------------------------------------
Central Termica Guemes SA,
3% Unsec. Unsub. Bonds, 9/26/10 2                     90,000             9,900
- --------------------------------------------------------------------------------
CMS Energy Corp.:
8.50% Sr. Nts., 4/15/11                              250,000           217,867
9.875% Sr. Unsec. Nts., 10/15/07                     400,000           380,421
- --------------------------------------------------------------------------------
Edison Mission Energy,
10% Sr. Unsec. Nts., 8/15/08                         800,000           388,000
- --------------------------------------------------------------------------------
FirstEnergy Corp., 7.375% Sr.
Unsub. Nts., Series C, 11/15/31                      884,000           859,942
- --------------------------------------------------------------------------------
Funding Corp./Beaver Valley
Funding Corp., 9% Second Lease
Obligation Bonds, 6/1/17                             199,000           220,820
- --------------------------------------------------------------------------------
Mirant Americas Generation LLC,
7.625% Sr. Unsec. Nts., 5/1/06                       200,000           106,000
- --------------------------------------------------------------------------------
Westar Energy, Inc.,
9.75% Sr. Unsec. Nts., 5/15/07                       600,000           546,556
                                                                  --------------
                                                                     4,682,196

- --------------------------------------------------------------------------------
Gas Utilities--0.5%
AmeriGas Partners LP/
AmeriGas Eagle Finance Corp.:
8.875% Sr. Nts., 5/20/11 6                           200,000           209,000
8.875% Sr. Unsec. Nts., 5/20/11                      300,000           313,500
- --------------------------------------------------------------------------------
El Paso Energy Corp.,
7.625% Nts., 7/15/11                                 200,000           134,222
- --------------------------------------------------------------------------------
El Paso Energy Partners LP,
10.625% Sr. Sub. Nts., 12/1/12 6                     350,000           359,625
- --------------------------------------------------------------------------------
Leviathan Gas Pipeline Partners
LP/Leviathan Finance Corp.,
10.375% Sr. Unsec. Sub. Nts.,
Series B, 6/1/09 1                                   400,000           408,000
- --------------------------------------------------------------------------------
NiSource Finance Corp.,
7.875% Sr. Unsec. Nts., 11/15/10                     501,000           551,428
- --------------------------------------------------------------------------------
Williams Cos., Inc. (The),
7.125% Nts., 9/1/11                                  400,000           264,000
                                                                  --------------
                                                                     2,239,775


                                                   Principal      Market Value
                                                      Amount        See Note 1
- --------------------------------------------------------------------------------
Multi-Utilities--0.1%
Consumers Energy Co.,
7.375% Nts., 9/15/23                            $    250,000      $    242,739
- --------------------------------------------------------------------------------
Dynegy Holdings, Inc.,
8.75% Sr. Nts., 2/15/12                              250,000            88,750
                                                                  --------------
                                                                       331,489
                                                                  --------------
Total Corporate Bonds and Notes
(Cost $175,707,408)                                                156,545,493

                                                      Shares
- --------------------------------------------------------------------------------
Preferred Stocks--0.6%
AmeriKing, Inc., 13% Cum. Sr.
Exchangeable, Non-Vtg. 1,13                            4,253                43
- --------------------------------------------------------------------------------
Criimi Mae, Inc., 10.875% Cum.
Cv., Series B, Non-Vtg                                46,000           966,000
- --------------------------------------------------------------------------------
Crown American Realty Trust,
11% Cum., Series A, Non-Vtg.                           2,000           110,700
- --------------------------------------------------------------------------------
Doane Pet Care Co.,
14.25% Jr. Sub. Debs., Non-Vtg. 1,10                   5,000           151,250
- --------------------------------------------------------------------------------
e.spire Communications, Inc.,
12.75% Jr. Redeemable, Non-Vtg. 1,10,13                  216                22
- --------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc.,
11.75% Cum. Exchangeable,
Series B, Non-Vtg. 10                                  5,000           101,250
- --------------------------------------------------------------------------------
Earthwatch, Inc., 12% Cv.,
Series C, Non-Vtg. 1                                   6,026             6,026
- --------------------------------------------------------------------------------
ICG Holdings, Inc.,
14.25% Exchangeable, Non-Vtg. 1,10,13                    151                 2
- --------------------------------------------------------------------------------
Nebco Evans Holdings, Inc.,
11.25% Sr. Redeemable
Exchangeable, Non-Vtg. 1,10,13                         6,061                --
- --------------------------------------------------------------------------------
Nextel Communications, Inc.,
13% Cum., Series D, Non-Vtg. 13                            2               184
- --------------------------------------------------------------------------------
Paxson Communications Corp.,
13.25% Cum. Jr. Exchangeable,
Non-Vtg. 13                                               34           177,650
- --------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum.,
Series B, Non-Vtg. 13                                    597           150,742
- --------------------------------------------------------------------------------
Sovereign Real Estate Investment
Trust, 12% Non-Cum., Series A 1                        4,600           511,750
                                                                  --------------
Total Preferred Stocks (Cost $4,555,254)                             2,175,619

- --------------------------------------------------------------------------------
Common Stocks--0.2%
Adelphia Business Solutions, Inc. 10                     363                 8
- --------------------------------------------------------------------------------
Celcaribe SA 1                                        24,390               244
- --------------------------------------------------------------------------------
Contour Energy Co. 1,10                                5,400                97
- --------------------------------------------------------------------------------
Covad Communications Group, Inc. 10                   16,528            15,536
- --------------------------------------------------------------------------------
Criimi MAE, Inc. 10                                   71,447           728,045
- --------------------------------------------------------------------------------
Geotek Communications, Inc. 1,10                          90                --


STATEMENT OF INVESTMENTS  Continued

                                                                   Market Value
                                                        Shares       See Note 1
- --------------------------------------------------------------------------------
Common Stocks Continued
Geotek Communications, Inc.,
Series B (Escrowed) 1,10                                   210          $    --
- --------------------------------------------------------------------------------
Globix Corp. 10                                          6,880           13,760
- --------------------------------------------------------------------------------
Horizon Natural Resources Co. 1,10                       6,667               67
- --------------------------------------------------------------------------------
ICO Global Communication
Holdings Ltd. 10                                         6,016            7,640
- --------------------------------------------------------------------------------
Orbital Sciences Corp. 10                                  457            1,929
- --------------------------------------------------------------------------------
Pioneer Cos., Inc. 1,10                                  7,312           12,796
- --------------------------------------------------------------------------------
Prandium, Inc. 10                                       24,165            7,249
- --------------------------------------------------------------------------------
Premier Holdings Ltd. 1,10                              18,514               --
- --------------------------------------------------------------------------------
Southern Pacific Funding Corp.,
Liquidating Trust 1,10                                  83,868               --
- --------------------------------------------------------------------------------
Star Gas Partners LP                                       187            3,459
- --------------------------------------------------------------------------------
Sterling Chemicals, Inc. 10                                647           22,645
- --------------------------------------------------------------------------------
TVMAX Holdings, Inc. 1,10                                1,000               10
- --------------------------------------------------------------------------------
Viatel Holding Ltd. (Bermuda) 1,10                       1,958              999
- --------------------------------------------------------------------------------
Wilshire Financial Services
Group, Inc. 10                                           6,273           20,701
- --------------------------------------------------------------------------------
WRC Media Corp. 1,10                                     1,082               11
                                                                        --------
Total Common Stocks (Cost $2,144,247)                                   835,196

                                                         Units
- --------------------------------------------------------------------------------
Rights, Warrants and Certificates--0.3%
ASAT Finance LLC Wts., Exp
11/1/06 1,10                                               250              312
- --------------------------------------------------------------------------------
Banco Central Del Uruguay Rts.,
Exp. 1/2/21 10                                         185,000               --
- --------------------------------------------------------------------------------
Charles River Laboratories
International, Inc. Wts.,
Exp. 10/1/09 1,10                                          350           64,750
- --------------------------------------------------------------------------------
Chesapeake Energy Corp. Wts.:
Exp. 1/23/03 1,10                                        1,668               --
Exp. 1/23/03 1,10                                          953               --
Exp. 5/1/05 10                                             416               --
Exp. 9/1/04 10                                             534               --
- --------------------------------------------------------------------------------
Citigroup, Inc. Wts., Exp. 12/31/50 10                   2,404            2,524
- --------------------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 1,10                     400                4
- --------------------------------------------------------------------------------
Comunicacion Celular SA Wts.,
Exp. 11/15/03 1,10                                         200                2
- --------------------------------------------------------------------------------
Concentric Network Corp. Wts.,
Exp. 12/15/07 1,10                                         100                1
- --------------------------------------------------------------------------------
Covergent Communications,
Inc. Wts., Exp. 4/1/08 1,10                                400                4
- --------------------------------------------------------------------------------
Equinix, Inc. Wts., Exp. 12/1/07 1,10                      200                2
- --------------------------------------------------------------------------------
HF Holdings, Inc. Wts., Exp
9/27/09 1,10                                               530               53
- --------------------------------------------------------------------------------
Horizon PCS, Inc. Wts., Exp
10/1/10 1,10                                             1,000               50

                                                                   Market Value
                                                         Units       See Note 1
- --------------------------------------------------------------------------------
Rights, Warrants and Certificates Continued
ICG Communications, Inc. Wts.,
Exp. 9/15/05 1,10                                          825       $        8
- --------------------------------------------------------------------------------
ICO Global Communication
Holdings Ltd. Wts.:
Exp. 5/16/06 1,10                                        1,509                2
Exp. 5/16/06 1,10                                            2               --
- --------------------------------------------------------------------------------
Imperial Credit Industries, Inc. Wts.,
Exp. 1/31/08 1,10                                        2,135               --
- --------------------------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/15/07 1,10                      270                3
- --------------------------------------------------------------------------------
International Utility Structures,
Inc. Wts., Exp. 2/1/03 10                                   50               --
- --------------------------------------------------------------------------------
IPCS, Inc. Wts., Exp. 6/15/10 1,10                         300              112
- --------------------------------------------------------------------------------
KMC Telecom Holdings, Inc. Wts.,
Exp. 4/15/08 1,10                                          725                7
- --------------------------------------------------------------------------------
Leap Wireless International, Inc.
Wts., Exp. 4/15/10 1,10                                    275                3
- --------------------------------------------------------------------------------
Long Distance International, Inc.
Wts., Exp. 4/13/08 1,10                                    200               --
- --------------------------------------------------------------------------------
Loral Space & Communications
Ltd. Wts., Exp. 1/15/07 1,10                               150                1
- --------------------------------------------------------------------------------
Mexico Value Rts., Exp. 6/30/03 1,10                    20,071                6
- --------------------------------------------------------------------------------
Microcell Telecommunications,
Inc. Wts., Exp. 6/1/06 6,10                                600              146
- --------------------------------------------------------------------------------
Millenium Seacarriers, Inc. Wts.,
Exp. 7/15/05 1,10                                          250                3
- --------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc.
All Country Asia Free (except
for Japan) Provisional Index Wts.,
Exp. 6/5/03 10                                         124,270        1,110,079
- --------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 1,10                       450              731
- --------------------------------------------------------------------------------
Occidente y Caribe Celular SA
Wts., Exp. 3/15/04 1,10                                    800                8
- --------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts.,
Exp. 9/19/10 10                                          5,710            4,397
- --------------------------------------------------------------------------------
PLD Telekom, Inc. Wts.,
Exp. 6/1/06 (cv. into Metromedia
International Group, Inc.) 1,10                            300                3
- --------------------------------------------------------------------------------
PLD Telekom, Inc., 14% Sr. Cv.
Disc. Nts. Wts., Exp. 3/31/03
(cv. into Metromedia
International Group Inc.) 1,10                             300                3
- --------------------------------------------------------------------------------
Real Time Data Co. Wts.,
Exp. 5/31/04 1,10                                       36,431               --
- --------------------------------------------------------------------------------
Republic Technologies
International LLC Wts.,
Exp. 7/15/09 1,10                                          200                2
- --------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts.,
Exp. 12/31/07 10                                         1,050               --



                                                                   Market Value
                                                         Units       See Note 1
- --------------------------------------------------------------------------------
Rights, Warrants and Certificates Continued
Telus Corp. Wts., Exp. 9/15/05 1,10                        269      $       135
- --------------------------------------------------------------------------------
Verado Holdings, Inc., Cl. B Wts.,
Exp. 4/15/08 1,10                                          175               88
                                                                    ------------
Total Rights, Warrants and Certificates
(Cost $1,360,921)                                                     1,183,439

                                                     Principal
                                                        Amount
- --------------------------------------------------------------------------------
Structured Notes--4.4%
Credit Suisse First Boston Corp.
(Nassau Branch), U.S. Dollar/
Philippine Peso Linked Nts.,
12.50%, 3/15/12 2 [PHP]                             47,430,000          856,912
- --------------------------------------------------------------------------------
Credit Suisse First Boston Corp.
(New York Branch), Russian
Obligatzii Federal'nogo Zaima
Linked Nts.:
Series 27006, 10.028%,
1/22/03 1,2 [RUR]                                    5,003,930          151,997
Series 27006, 10.028%,
1/22/03 1,2 [RUR]                                      277,180            8,419
Series 27007, 10.028%,
2/5/03 1,2 [RUR]                                     7,647,050          232,092
Series 27007, 10.028%,
2/5/03 1,2 [RUR]                                       277,180            8,413
Series 27008, 10.028%,
5/21/03 1,2 [RUR]                                    3,315,240           99,945
Series 27008, 10.028%,
5/21/03 1,2 [RUR]                                      277,180            8,356
Series 27009, 10.028%,
6/4/03 1,2 [RUR]                                     3,783,430          113,977
Series 27009, 10.028%,
6/4/03 1,2 [RUR]                                       277,180            8,350
Series 27009, 10.028%,
6/4/03 1,2 [RUR]                                     2,561,555           77,167
Series 27010, 10.028%,
9/17/03 1,2 [RUR]                                    2,047,150           61,286
Series 27010, 10.028%,
9/17/03 1,2 [RUR]                                      277,180            8,298
Series 27011, 10.028%,
10/8/03 1,2 [RUR]                                    3,646,190          108,849
Series 27011, 10.028%,
10/8/03 1,2 [RUR]                                      277,180            8,275
Series 28001, 10.028%,
1/21/04 1,2 [RUR]                                      277,180            8,210
- --------------------------------------------------------------------------------
Credit Suisse First Boston
International, U.S. Dollar/
South African Rand Linked Nts.,
1.332%, 5/23/22 1,2                                    825,000          809,490
- --------------------------------------------------------------------------------
Deutsche Bank AG:
Brazilian Real Linked Nts.,
22%, 2/8/04                                          1,340,000        1,226,100
Colombian Peso Linked Nts.,
1.824%, 4/22/04 2                                      320,000          333,440


                                                     Principal     Market Value
                                                        Amount       See Note 1
- --------------------------------------------------------------------------------
Structured Notes Continued
Indonesian Rupiah Linked Nts.,
14.50%, 12/15/10                                   $   512,575      $   510,362
Mexican Peso Linked Nts.,
1.56%, 4/9/12 2                                      2,110,050        2,056,877
- --------------------------------------------------------------------------------
JPMorgan Chase Bank:
High Yield Index Credit-Linked
Trust Nts., 8.75%, 11/15/07                          8,035,000        8,095,262
Polish Zloty/Euro Linked Nts.,
1.369%, 4/28/03                                      1,000,000        1,007,600
- --------------------------------------------------------------------------------
JPMorgan Chase Bank, EMBI Plus/
Egyptian Pounds Linked Certificate
of Deposit:
0.42%, 3/11/03                                         710,000          680,200
0.60%, 4/4/03                                          490,000          469,265
- --------------------------------------------------------------------------------
JPMorgan Chase Bank, EMBI Plus/
Peruvian New Sol Linked Certificate
of Deposit:
0.33%, 12/19/03                                        460,000          453,081
0.38%, 12/19/03                                        460,000          454,315
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc./
Redwood Capital I Ltd., Catastrophe
Linked Bonds, 7.306%, 1/1/03 2,6                       400,000          400,000
- --------------------------------------------------------------------------------
Russia (Government of) Federal
Loan Obligatzii Federal'nogo Zaima
Bonds, Series 27010, 10.028%,
9/17/03 1,2 [RUR]                                    3,590,420          107,488
                                                                   -------------
Total Structured Notes (Cost $18,311,881)                            18,364,026


                          Date         Strike        Contracts
- --------------------------------------------------------------------------------
 Options Purchased--0.0%
- --------------------------------------------------------------------------------

 Japanese Yen
 Call 1 (Cost
 $102,600)             2/18/03      116.33JPY      446,424,000           55,803

                                                     Principal
                                                        Amount
- --------------------------------------------------------------------------------
 Joint Repurchase Agreements--6.9%
 Undivided interest of 14.39% in joint repurchase
 agreement (Market Value $198,591,000) with BNP
 Paribas Securities Corp., 1.07%, dated 12/31/02, to
 be repurchased at $28,571,698 on 1/2/03,
 collateralized by U.S. Treasury Bills, 6/26/03,
 with a value of $202,605,732
 (Cost $28,570,000)                               $ 28,570,000       28,570,000

- --------------------------------------------------------------------------------
 Total Investments, at Value
 (Cost $587,879,664)                                     136.8%     566,578,308
- --------------------------------------------------------------------------------
 Liabilities in Excess
 of Other Assets                                         (36.8)    (152,313,795)
                                                  ------------------------------
 Net Assets                                              100.0%   $ 414,264,513
                                                  ==============================


STATEMENT OF INVESTMENTS  Continued

Footnotes to Statement of Investments
Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:

ARP Argentine Peso            ITL Italian Lira
AUD Australian Dollar         JPY Japanese Yen
CAD Canadian Dollar           NOK Norwegian Krone
DEM German Mark               PHP Philippines Peso
EUR Euro                      RUR Russian Ruble
FRF French Franc              SEK Swedish Krona
GBP British Pound Sterling


1. Identifies issues considered to be illiquid or restricted--See Note 9 of
Notes to Financial Statements.
2. Represents the current interest rate for a variable or increasing rate
security.
3. 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. These securities amount to $5,062,286 or 1.22% of the Fund's net assets
as of December 31, 2002.
4. When-issued security to be delivered and settled after December 31, 2002.
5. Securities with an aggregate market value of $1,948,020 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
6. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $26,869,529 or 6.49% of the Fund's net
assets as of December 31, 2002.
7. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:

                                              Principal (000s)
Expiration       Exercise       Premium       Market Value
                                               Subject to Call
Date          Price      Received         See Note 1

 Euro                                                    7,895
2/12/03         $1.043       $59,288           $141,084

8. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of Notes to Financial Statements.
9. Issuer is in default.
10. Non-income producing security.
11. Zero coupon bond reflects effective yield on the date of purchase.
12. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
13. Interest or dividend is paid-in-kind.
14. Units may be comprised of several components, such as debt and
equity and/or warrants to purchase equity at some point in the future. For
units, which represent debt securities, principal amount disclosed represents
total underlying principal.

See accompanying Notes to Financial Statements.


STATEMENT OF ASSETS AND LIABILITIES  December 31, 2002

Assets

Investments, at value (cost $587,879,664)--see accompanying
statement                                   $  566,578,308
- -----------------------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $15,066)
                                                        14,210
- -----------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts
                                      162,455
- -----------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns
                                                 7,358,062
Shares of beneficial interest
sold
503,866
Swap contracts
                                  15,468
Other
6,238

        ---------------
Total
assets
574,638,607

- -----------------------------------------------------------------------------------------------------------------------
Liabilities
Bank
overdraft
802,345
- -----------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency
contracts                                                          110,885
- -----------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $59,288)--see accompanying
statement                              141,084
- -----------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $157,886,453 purchased on a when-issued
basis)                            158,243,859
Closed foreign currency
contracts
629,576
Shares of beneficial interest
redeemed
303,327
Daily variation on futures
contracts
65,893
Shareholder reports

31,252
Service plan
fees
3,589
Transfer and shareholder servicing agent fees
                                                              465
Trustees'
compensation
433
Other
                                         41,386

- ---------------
Total
liabilities
                   160,374,094


- -----------------------------------------------------------------------------------------------------------------------
Net
Assets
 $  414,264,513

===============

- -----------------------------------------------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of beneficial
interest                                                              $
90,625
- -----------------------------------------------------------------------------------------------------------------------
Additional paid-in
capital
438,687,789
- -----------------------------------------------------------------------------------------------------------------------
Undistributed net investment
income
26,988,087
- -----------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions                             (29,949,132)
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of assets and
liabilities
  denominated in foreign
currencies
(21,552,856)

                ---------------
Net
Assets
$  414,264,513

===============

- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share
Non-Service shares:
Net asset value, redemption price per share and offering price per share (based
on
net assets of $406,126,470 and 88,880,949 shares of beneficial interest
outstanding)                             $4.57
- -----------------------------------------------------------------------------------------------------------------------
Service shares:
Net asset value, redemption price per share and offering price per share (based
on
net assets of $8,138,043 and 1,743,847 shares of beneficial interest
outstanding)                                $4.67

See accompanying Notes to Financial Statements.


STATEMENT OF OPERATIONS  For the Year Ended December 31, 2002

Investment Income
Interest (net of foreign withholding taxes of
$546)                                            $  28,590,743
- -------------------------------------------------------------------------------------------------------------
Dividends
301,586

- ---------------
Total investment
income
28,892,329

- -------------------------------------------------------------------------------------------------------------
Expenses
Management
fees
2,771,643
- -------------------------------------------------------------------------------------------------------------
Distribution and service plan fees-Service shares
                                                   5,687
- -------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Non-Service shares
                                                            10,506
Service
shares
551
- -------------------------------------------------------------------------------------------------------------
Shareholder
reports
72,386
- -------------------------------------------------------------------------------------------------------------
Custodian fees and
expenses
63,301
- -------------------------------------------------------------------------------------------------------------
Trustees' compensation
                                                          12,920
- -------------------------------------------------------------------------------------------------------------
Other
                     59,923

- ---------------
Total
expenses
2,996,917
Less reduction to custodian
expenses
(5,600)
Less voluntary reimbursement of
expenses                                                             (44,031)
Less voluntary waiver of transfer and shareholder servicing agent fees--Service
shares                  (430)

- ---------------
Net
expenses
                  2,946,856

- -------------------------------------------------------------------------------------------------------------
Net Investment
Income
25,945,473

- -------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (including premiums on options
exercised)                                             (6,626,164)
Closing of futures
contracts
2,001,088
Closing and expiration of option contracts
written                                                    37,312
Foreign currency
transactions
2,145,866

- ---------------
Net realized loss
                                             (2,441,898)

- -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments
                                                                     (791,244)
Translation of assets and liabilities denominated in foreign
currencies                            4,829,044

                          ---------------
Net
change
4,037,800

- ---------------
Net realized and unrealized
gain                                                                   1,595,902

- -------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations                                             $27,541,375

See accompanying Notes to Financial Statements.


STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December
31,
2002            2001
- ---------------------------------------------------------------------------------------------------------------
Operations
Net investment income
$  25,945,473    $ 29,031,053
- -------------------------------------------------------------------------------------------------------------
Net realized loss
                          (2,441,898)    (16,488,698)
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation                                              4,037,800
2,675,923

- ------------------------------
Net increase in net assets resulting from
operations                              27,541,375      15,218,278

- -------------------------------------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Non-Service shares
 (28,654,014)    (20,045,483)
Service
shares
(2,128)             --

- -------------------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions:
Non-Service
shares
55,824,134      51,951,764
Service shares
                                       7,864,978           3,983

- -------------------------------------------------------------------------------------------------------------
Net Assets
Total increase
             62,574,345      47,128,542
- -------------------------------------------------------------------------------------------------------------
Beginning of
period
351,690,168     304,561,626

- ------------------------------
End of period [including undistributed net investment income
of $26,988,087 and $27,951,457, respectively]
$ 414,264,513    $351,690,168

- ------------------------------
See accompanying Notes to Financial Statements.



FINANCIAL HIGHLIGHTS


Non-Service shares    Year Ended December 31,                  2002
2001          2000          1999          1998
- ----------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period                          $4.62
$4.69         $4.97        $ 5.12        $ 5.12
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                           .29
..41           .41           .45           .39
Net realized and unrealized gain (loss)                         .03
(.19)         (.28)         (.31)         (.24)

- --------------------------------------------------------------
Total from investment operations                                .32
..22           .13           .14           .15
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                           (.37)
(.29)         (.41)         (.29)         (.09)
Distributions from net realized gain                             --
- --            --            --          (.06)

- --------------------------------------------------------------
Total dividends and/or distributions to shareholders           (.37)
(.29)         (.41)         (.29)         (.15)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                $4.57
$4.62         $4.69         $4.97         $5.12

==============================================================

- ----------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1                             7.44%
4.85%         2.63%         2.83%         2.90%
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)                   $406,126
$351,686      $304,562      $282,086      $279,200
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                          $374,519
$330,711      $289,923      $278,668      $250,227
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                          6.89%
8.78%         9.23%         9.08%         8.17%
Expenses                                                       0.79%
0.79%         0.79%         0.78%         0.80% 3
Expenses, net of reduction to custodian expenses
and/or voluntary reimbursement of expenses                     0.78%
0.79%         0.79%         0.78%         0.80%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                          65%
104%          104%           81%          134%

1. Assumes an 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 of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.



Service shares    Year Ended December
31,                                         2002        2001 1


Per Share Operating Data
Net asset value, beginning of period
$ 4.73        $ 4.64
- -----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
                                 .03           .15
Net realized and unrealized gain
(loss)                                            .28          (.06)

- ---------------------
Total from investment
operations                                                   .31           .09
- -----------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment
income                                              (.37)           --
Distributions from net realized
gain                                                --            --

- ---------------------
Total dividends and/or distributions to
shareholders                              (.37)           --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of
period                                                   $4.67         $4.73

=====================

- -----------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value
2                                                7.03%         1.94%

- -----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands)
$8,138            $4
- -----------------------------------------------------------------------------------------------------
Average net assets (in thousands)
$2,307            $2
- -----------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income
                     5.40%         8.17%
Expenses
1.06%         0.92%
Expenses, net of reduction to custodian expenses and/or voluntary
reimbursement of expenses and/or waiver of transfer agent
fees                    1.03%         0.92%
- -----------------------------------------------------------------------------------------------------
Portfolio turnover
rate                                                             65%
104%

1. For the period from March 19, 2001 (inception of offering) to December 31,
2001.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), 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 of less than one full year.

See accompanying Notes to Financial Statements.

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), an 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 on debt securities. The Trust's
investment advisor is OppenheimerFunds, Inc. (the Manager).
   The Fund offers two classes of shares. Both classes are sold at their
offering price, which is the net asset value per share, to separate investment
accounts of participating insurance companies as an underlying investment for
variable life insurance policies, variable annuity contracts or other
investment products. The class of shares designated as Service shares is
subject to a distribution and service plan. All classes of shares have
identical rights and voting privileges. Earnings, net assets and net asset
value per share may differ by minor amounts due to each class having its own
expenses directly attributable to that class.
   The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. In the absence of a sale, the security is valued at the last
sale price on the prior trading day, if it is within the spread of the closing
bid and asked prices, and if not, at the closing bid price. Securities
(including restricted securities) for which quotations are not readily
available are valued primarily using dealer-supplied valuations, a portfolio
pricing service authorized by the Board of Trustees, or at their fair value.
Fair value is determined in good faith under consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
Structured Notes. The Fund invests in foreign currency-linked structured notes
whose market values and redemption prices are linked to foreign currency
exchange rates. The Fund also invests in "index-linked" notes whose principal
and/or interest payments depend on the performance of an underlying index. The
structured notes are leveraged, which increases the volatility of each note's
market value relative to the change in the underlying foreign currency exchange
rate or underlying index. Fluctuations in value of these securities are
recorded as unrealized gains and losses in the accompanying financial
statements. The Fund records a realized gain or loss when a structured note is
sold or matures. As of December 31, 2002, the market value of these securities
comprised 4.4% of the Fund's net assets and resulted in unrealized gains in the
current period of $52,145. 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 when-issued basis can take
place a month or more after the trade date. Normally the settlement date occurs
within six months after the trade date; however, the Fund may, from time to
time, purchase securities whose settlement date extends beyond six months 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 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, 2002, the Fund had
entered into when-issued purchase commitments of $157,886,453.
   In connection with its ability to purchase securities on a when-issued
basis, the Fund may enter into forward roll transactions with respect to
mortgage-related securities. Forward roll transactions require the sale of
securities for delivery in the current month, and a simultaneous agreement with
the same counterparty to repurchase similar (same type, coupon and maturity)
but not identical securities on a specified future date. The forward roll may
not extend for a period of greater than one year. The Fund generally records
the incremental difference between the forward purchase and sell of each
forward roll as interest income.

   Risks to the Fund of entering into forward roll transactions include the
potential inability of the counterparty to meet the terms of the agreement; the
potential of the Fund to receive inferior securities to what was sold to the
counterparty at redelivery; counterparty credit risk; and the potential pay
down speed variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
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, 2002,
securities with an aggregate market value of $5,669,605, representing 1.37% 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.
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint
repurchase agreement accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each agreement requires that the market value of
the collateral be sufficient to cover payments of interest and principal;
however, in the event of default by the other party to the agreement, retention
of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily
to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
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 capital loss carryforwards, if any, to shareholders.

As of December 31, 2002, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:

                           Expiring
                          --------------------------
                           2006          $ 1,014,382
                           2007            5,399,072
                           2008              253,735
                           2009            9,904,928
                           2010            6,861,637
                                      --------------
                           Total         $23,433,754
                                      --------------

 As of December 31, 2002, the Fund had approximately $3,121,000 of post-October
 losses available to offset future capital gains, if any. Such losses, if
 unutilized, will expire in 2011. Additionally, the Fund had approximately
 $121,000 of post-October foreign currency losses which were deferred. If
 unutilized by the Fund in the following fiscal year, such losses will expire.



NOTES TO FINANCIAL STATEMENTS  Continued


- --------------------------------------------------------------------------------
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 Dividends and 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 dividends and distributions made
during the fiscal year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax purposes.
Also, due to timing of dividends and distributions, the fiscal year in which
amounts are distributed may differ from the fiscal year in which the income or
net 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, 2002, amounts have been reclassified to reflect an
increase in undistributed net investment income of $1,747,299. Accumulated net
realized loss on investments was increased by the same amount. Net assets of
the Fund were unaffected by the reclassifications.

The tax character of distributions paid during the years ended December 31, 2002
and December 31, 2001 was as follows:

                                         Year Ended               Year Ended
                                  December 31, 2002        December 31, 2001
     -----------------------------------------------------------------------
     Distributions paid from:
     Ordinary income                    $28,656,142              $20,045,483
     Long-term capital gain                      --                       --
     Return of capital                           --                       --
                                        ------------------------------------
     Total                              $28,656,142              $20,045,483
                                        ====================================

As of December 31, 2002, the components of distributable earnings on a tax basis
were as follows:

     Undistributed net investment income       $ 26,988,087
     Accumulated net realized loss              (29,949,132)
     Net unrealized depreciation                (21,552,856)
                                               -------------
     Total                                     $(24,513,901)
                                               =============
- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:

                                                            Year Ended December
31, 2002     Year Ended December 31, 2001 1

Shares            Amount           Shares            Amount
- ----------------------------------------------------------------------------------------------------------------------------

Non-Service shares
Sold                                                        39,611,608     $
174,444,145       21,317,660      $ 98,459,684
Dividends and/or distributions reinvested                    6,617,555
28,654,014        4,374,282        20,045,483
Redeemed                                                   (33,471,553)
(147,274,025)     (14,476,879)      (66,553,403)

- -----------------------------------------------------------------
Net increase                                                12,757,610     $
55,824,134       11,215,063      $ 51,951,764

- -----------------------------------------------------------------
Service shares
Sold                                                         1,855,564     $
8,365,056            1,191      $      5,626
Dividends and/or distributions reinvested
479             2,128               --                --
Redeemed                                                      (113,038)
(502,206)            (349)           (1,643)

- -----------------------------------------------------------------
Net increase                                                 1,743,005     $
7,864,978              842      $      3,983

- -----------------------------------------------------------------
1. For the year ended December 31, 2001, for Non-Service shares and for the
period from March 19, 2001 (inception of offering) to December 31, 2001, for
Service shares.

- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2002, were
$349,832,766 and $279,938,676, respectively.

As of December 31, 2002, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $591,578,548 was composed of:

         Gross unrealized appreciation             $ 20,633,092
         Gross unrealized depreciation              (45,633,332)
                                                   -------------
         Net unrealized depreciation               $(25,000,240)
                                                   =============

The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts,
investments in passive foreign investment companies, and forward foreign
currency exchange contracts.

- --------------------------------------------------------------------------------
4. 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. OFI
will reduce the management fee by 0.10% as long as the fund's trailing 12-month
performance at the end of the quarter is in the fifth Lipper peer-group
quintile; and by 0.05% as long as it is in the fourth quintile. If the Fund
emerges from a "penalty box" position for a quarter but then slips back in the
next quarter, OFI will reinstate the waiver. The waiver is voluntary and may be
terminated by the Manager at any time. The waiver waterminated December 17,
2002.

NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates Continued
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a $22.50 per account fee.
   Additionally, funds offered in variable annuity separate accounts are
subject to minimum fees of $5,000 for assets of less than $10 million and
$10,000 for assets of $10 million or more. The Fund is subject to the minimum
fee in the event that the per account fee does not equal or exceed the
applicable minimum fee. OFS has voluntarily agreed to limit transfer and
shareholder servicing agent fees up to an annual rate of 0.35% of average net
assets of the Fund. This undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan for Service Shares. The Fund has adopted a
Distribution and Service Plan for Service shares to pay OppenheimerFunds
Distributor, Inc., the Distributor, for distribution-related services for the
Fund's Service shares. Under the Plan, payments are made quarterly at an annual
rate of up to 0.25% of the average annual net assets of the Service shares of
the Fund. For the year ended December 31, 2002, payments under the Service Plan
totaled $5,687.
- --------------------------------------------------------------------------------
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 as a receivable or payable and in the Statement of
Operations with the change in unrealized appreciation or depreciation.
   The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Such realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.

As of December 31, 2002, the Fund had outstanding foreign currency contracts as
follows:


                                       Expiration    Contract Amount
Valuation as of         Unrealized           Unrealized
Contract Description                        Dates             (000s)
December 31, 2002       Appreciation         Depreciation
- ----------------------------------------------------------------------------------------------------------------------------------

Contracts to Purchase
Euro [EUR]                        2/7/03 - 5/6/03           8,675EUR
$9,072,095           $159,273             $     --
Indonesia Rupiah [IDR]                    1/24/03
4,459,415IDR              498,259                834                   --

- -------------------------------


160,107                   --

- -------------------------------

Contracts to Sell
British Pound Sterling [GBP]      3/6/03 -3/20/03             860GBP
1,377,817                 --               41,917
Canadian Dollar [CAD]                     2/21/03
645CAD              407,448                 --                   57
Euro [EUR]                                 4/7/03
645EUR              674,174                 --               45,301
Japanese Yen [JPY]                2/7/03 - 4/7/03         487,320JPY
4,115,637              2,348               15,327
Philippines Peso [PHP]                    4/25/03
50,992PHP              938,283                 --                8,283

- -------------------------------

    2,348              110,885

- -------------------------------
Total Unrealized Appreciation and
Depreciation
$162,455             $110,885

===============================
- --------------------------------------------------------------------------------
6. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a particular price on a stipulated future
date at a negotiated price. Futures contracts are traded on a commodity
exchange. The Fund may buy and sell futures contracts that relate to broadly
based securities indices "financial futures" or debt securities "interest rate
futures" in order to gain exposure to or to seek to protect against changes in
market value of stock and bonds or 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 decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes 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 recognizes 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. Realized
gains and losses are reported on the Statement of Operations as closing and
expiration of futures contracts.
   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, 2002, the Fund had outstanding futures contracts as follows:

Unrealized
                                                            Expiration
Number of       Valuation as of         Appreciation
Contract Description                                             Dates
Contracts     December 31, 2002        (Depreciation)
- ----------------------------------------------------------------------------------------------------------------------------------

Contracts to Purchase
Euro-Bundesobligation
3/6/03               7          $    834,042            $  17,336
Euro-Schatz
3/6/03              67             7,427,527               58,357
Japan (Government of) Bonds, 10 yr.
3/11/03               2             2,394,202               11,460
NASDAQ 100 Index
3/20/03               7               690,900              (28,770)
Standard & Poor's 500
3/20/03               5             1,098,625              (22,813)
United Kingdom Long Gilt
3/27/03               2               387,503                6,036
U.S. Long Bonds
3/20/03             162            18,255,375              395,219
U.S. Treasury Nts., 5 yr.
3/20/03              32             3,624,000               90,266

     ----------

527,091

          ----------
Contracts to Sell
DAX Index
3/21/03               3               228,599               17,000
FTSE 100 Index
3/21/03               1                62,971                 (515)
U.S. Treasury Nts., 2 yr.
3/27/03             288            61,974,000             (633,966)
U.S. Treasury Nts., 10 yr.
3/20/03              60             6,902,813             (225,016)

- ----------

                                              (842,497)

- ----------

                                                   $(315,406)

==========

NOTES TO FINANCIAL STATEMENTS  Continued
- -------------------------------------------------------------------------------
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. Realized 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, 2002 was as follows:

Call Options                            Put Options

- ---------------------------------   -------------------------------------
                                                         Principal
(000s)/                   Principal (000s)/
                                                                Number of
Amount of           Number of          Amount of

Contracts        Premiums           Contracts           Premiums
- ---------------------------------------------------------------------------------------------------------------------------------

Options outstanding as of December 31, 2001                        14,109
$ 329,907                  --          $      --
Options written
9,208,428         247,410                 954             45,331
Options closed or expired
(1,311,673)       (165,284)                 --                 --
Options exercised
(15,864)       (352,745)               (954)           (45,331)

- -------------------------------------------------------------------
Options outstanding as of December 31, 2002                     7,895,000
$  59,288                  --          $      --

===================================================================
- --------------------------------------------------------------------------------
8. Credit Swap Transactions
The Fund may enter into a credit swap transaction to seek to maintain a total
return on a particular investment or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as a notional principal amount. The Fund records an increase or
decrease to interest income, in the amount due to or owed by the Fund at
termination or settlement. Credit swaps are subject to credit risks (if the
counterparty fails to meet its obligations).

During the year ended December 31, 2002, the Fund entered into a transaction to
hedge credit risk. The Fund pays an annual 2% interest fee on the notional
amount in exchange for the counterparty paying in a potential credit event.
Information regarding the credit swap is as follows:

                                                      Expiration
Notional            Valuation as of      Unrealized
Contract Description                                        Date
Amount          December 31, 2002    Appreciation
- ---------------------------------------------------------------------------------------------------------------------------------

J.P. Morgan Chase Bank, Jordon
(Kingdom of ) Credit Nts.                                 6/6/06
250,000                    $15,468         $15,468

- --------------------------------------------------------------------------------
9. Illiquid or Restricted Securities
As of December 31, 2002, 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, 2002 was
$20,806,332, which represents 5.02% of the Fund's net assets, none of which is
considered restricted. Information concerning restricted securities is as
follows:


Acquisition                        Valuation as of          Unrealized
Security
Dates            Cost      December 31, 2002        Depreciation
- --------------------------------------------------------------------------------
Stocks and/or Warrants
Geotek Communications, Inc.                                     4/6/00
$    --              $     --                 $ --
Geotek Communications, Inc., Series B (Escrowed)
1/4/01             840                    --                  840
Real Time Data Co. Wts.
6/30/99             364                    --                  364

Currency
Argentine Peso
1/15/02           2,407                 1,589                  818
Russian Ruble                                        11/20/02-12/18/02
12,659                12,621                   38


PXOVAF.001.0503                 PART 2 OF 2

EX-99

                       OPPENHEIMER VARIABLE ACCOUNT FUNDS

                                    FORM N-1A

                                     PART C

                                OTHER INFORMATION
Item 23.  Exhibits

(a)

      (i)   Fourteenth Amended and Restated Declaration of Trust dated 05/1/03:
            Filed herewith.

      (ii)  Form of Amendment No. 1 dated 02/24/03 to the Amended and Restated
            Declaration of Trust dated 08/27/02: Previously filed with
            Registrant's Post-Effective Amendment No. 40 (2/11/03), and
            incorporated herein by reference.

      (iii) Thirteenth Amended and Restated Declaration of Trust dated 8/27/02:
            Previously filed with Registrant's Post-Effective Amendment No. 38
            (10/08/02), and incorporated herein by reference.

(b)   Amended By-Laws dated 10/24/00: Previously filed with Registrant's
      Post-Effective Amendment No. 36 (4/17/01), and incorporated herein by
      reference.


(c)

(i)          Oppenheimer Money Fund/VA specimen share certificate: Previously
             filed with Registrant's Post-Effective Amendment No. 37 (4/24/02),
             and incorporated herein by reference.

(ii)         Oppenheimer Bond Fund/VA specimen share certificate: Previously
             filed with Registrant's Post-Effective Amendment No. 37 (4/24/02),
             and incorporated herein by reference.
(iii)        Oppenheimer Capital Appreciation Fund/VA specimen share
             certificate: Previously filed with Registrant's Post-Effective
             Amendment No. 37 (4/24/02), and incorporated herein by reference.
(iv)         Oppenheimer High Income Fund/VA specimen share certificate:
             Previously filed with Registrant's Post-Effective Amendment No. 37
             (4/24/02), and incorporated herein by reference.
(v)          Oppenheimer Aggressive Growth Fund/VA specimen share certificate:
             Previously filed with Registrant's Post-Effective Amendment No. 37
             (4/24/02), and incorporated herein by reference.
(vi)         Oppenheimer Multiple Strategies Fund/VA specimen share certificate:
             Previously filed with Registrant's Post-Effective Amendment No. 37
             (4/24/02), and incorporated herein by reference.
(vii)        Oppenheimer Global Securities Fund/VA specimen share certificate:
             Previously filed with Registrant's Post-Effective Amendment No. 37
             (4/24/02), and incorporated herein by reference.
(viii)       Oppenheimer Strategic Bond Fund/VA specimen share certificate:
             Previously filed with Registrant's Post-Effective Amendment No. 37
             (4/24/02), and incorporated herein by reference.
(ix)         Oppenheimer Main Street Growth & Income Fund/VA specimen share
             certificate: Previously filed with Registrant's Post-Effective
             Amendment No. 37 (4/24/02), and incorporated herein by reference.
(x)          Oppenheimer Main Street Small Cap Fund/VA specimen share
             certificate: Previously filed with Registrant's Post-Effective
             Amendment No. 37 (4/24/02), and incorporated herein by reference.
(xi)         Oppenheimer Money Fund/VA Service class specimen share certificate:
             Previously filed with Registrant's Post-Effective Amendment No. 37
             (4/24/02), and incorporated herein by reference.
(xii)        Oppenheimer Bond Fund/VA Service class specimen share Previously
             filed with Registrant's Post-Effective Amendment No. 37 (4/24/02),
             and incorporated herein by reference.
(xiii)       Oppenheimer Capital Appreciation Fund/VA Service class specimen
             share certificate: Previously filed with Registrant's
             Post-Effective Amendment No. 37 (4/24/02), and incorporated herein
             by reference.
(xiv)        Oppenheimer High Income Fund/VA Service class specimen share
             certificate: Previously filed with Registrant's Post-Effective
             Amendment No. 37
            (4/24/02), and incorporated herein by reference.
(xv)        Oppenheimer Aggressive Growth Fund/VA Service class specimen share
            certificate: Previously filed with Registrant's Post-Effective
            Amendment No. 37 (4/24/02), and incorporated herein by reference.
(xvi)       Oppenheimer Multiple Strategies Fund/VA Service class specimen share
            certificate: Previously filed with Registrant's Post-Effective
            Amendment No. 37 (4/24/02), and incorporated herein by reference.
(xvii)      Oppenheimer Global Securities Fund/VA Service class specimen share
            certificate: Previously filed with Registrant's Post-Effective
            Amendment No. 37 (4/24/02), and incorporated herein by reference.
(xviii)     Oppenheimer Strategic Bond Fund/VA Service class specimen share
            certificate: Previously filed with Registrant's Post-Effective
            Amendment No. 37 (4/24/02), and incorporated herein by reference.
(xix)       Oppenheimer Main Street Growth & Income Fund/VA Service class
            specimen share certificate: Previously filed with Registrant's
            Post-Effective Amendment No. 37 (4/24/02), and incorporated herein
            by reference.
(xx)        Oppenheimer Main Street Small Cap Fund/VA Service class specimen
            share certificate: Previously filed with Registrant's Post-Effective
            Amendment No. 37 (4/24/02), and incorporated herein by reference.
(xxi)       Oppenheimer Value Fund/VA Service class specimen share certificate:
            Previously filed with Registrant's Post-Effective Amendment No. 38
            (10/08/02), and incorporated herein by reference.

(xxii)      Oppenheimer Global Securities Fund/VA Class 3 specimen share
            certificate: Previously filed with Registrant's Post-Effective
            Amendment No. 40 (2/11/03), and incorporated herein by reference.
(xxiii)     Oppenheimer Main Street Fund/VA Service class specimen share
            certificate: Filed herewith.
      (xxiv) Oppenheimer Main Street Fund/VA Non-Service class specimen share
            certificate: Filed herewith.

(d)
(i)   Investment Advisory Agreement for Oppenheimer Money Fund/VA dated 9/1/94:
      Filed with Registrant's Post-Effective Amendment No. 26 (2/13/95), and
      incorporated herein by reference.
(ii)  Investment Advisory Agreement for Oppenheimer High Income Fund/VA dated
      9/1/94: Filed with Registrant's Post-Effective Amendment No. 26 (2/13/95),
      and incorporated herein by reference.
(iii) Investment Advisory Agreement for Oppenheimer Bond Fund/VA dated 9/1/94:
      Filed with Registrant's Post-Effective Amendment No. 26 (2/13/95), and
      incorporated herein by reference.
(iv)  Amended and Restated Investment Advisory Agreement for Oppenheimer
      Aggressive Growth Fund/VA dated 5/1/99: Previously filed with Registrant's
      Post-Effective Amendment No. 34 (4/29/99), and incorporated herein by
      reference.
(v)   Investment Advisory Agreement for Oppenheimer Capital Appreciation Fund/VA
      dated 9/1/94: Filed with Registrant's Post-Effective Amendment No. 26
      (2/13/95), and incorporated herein by reference.
(vi)  Investment Advisory Agreement for Oppenheimer Multiple Strategies Fund/VA
      dated 9/1/94: Filed with Registrant's Post-Effective Amendment No. 26
      (2/13/95), and incorporated herein by reference.
(vii) Investment Advisory Agreement for Oppenheimer Global Securities Fund/VA
      dated 9/1/94: Filed with Registrant's Post-Effective Amendment No. 26
      (2/13/95), and incorporated herein by reference.
(viii) Investment Advisory Agreement for Oppenheimer Strategic Bond Fund/VA
      dated 9/1/94: Filed with Registrant's Post-Effective Amendment No. 26
      (2/13/95), and incorporated herein by reference.
(ix)  Investment Advisory Agreement for Oppenheimer Main Street Growth & Income
      Fund/VA dated 5/1/95: Filed with Registrant's Post-Effective Amendment No.
      29 (4/22/96), and incorporated herein by reference.
(x)   Investment Advisory Agreement for Oppenheimer Main Street Small Cap
      Fund/VA dated 5/1/98: Filed with Registrant's Post-Effective Amendment No.
      31 (1/30/98), and incorporated herein by reference.

(xi)  Investment Advisory Agreement for Oppenheimer Value Fund/VA dated
      10/22/02: Filed with Registrant's Post-Effective Amendment No. 39
      (12/20/02) and incorporated herein by reference.


(e)
(i)   General Distributor's Agreement for Service shares of Oppenheimer Money
      Fund /VA dated 5/1/98: Filed with Post-Effective Amendment No. 32
      (4/29/98), and incorporated herein by reference.
(ii)  General Distributor's Agreement for Service shares of Oppenheimer Bond
      Fund/VA dated 5/1/98: Filed with Post-Effective Amendment No. 32
      (4/29/98), and incorporated herein by reference.
(iii) General Distributor's Agreement for Service shares of Oppenheimer Capital
      Appreciation Fund/VA dated 5/1/98: Filed with Post-Effective Amendment No.
      32 (4/29/98), and incorporated herein by reference.
(iv)  General Distributor's Agreement for Service shares of Oppenheimer High
      Income Fund/VA dated 5/1/98: Filed with Post-Effective Amendment No. 32
      (4/29/98), and incorporated herein by reference.
(v)   General Distributor's Agreement for Service shares of Oppenheimer
      Aggressive Growth Fund/VA dated 5/1/98: Filed with Post-Effective
      Amendment No. 32 (4/29/98), and incorporated herein by reference.
(vi)  General Distributor's Agreement for Service shares of Oppenheimer Multiple
      Strategies Fund/VA dated 5/1/98: Filed with Post-Effective Amendment No.
      32 (4/29/98), and incorporated herein by reference.
(vii) General Distributor's Agreement for Service shares of Oppenheimer Global
      Securities Fund/VA dated 5/1/98: Filed with Post-Effective Amendment No.
      32 (4/29/98), and incorporated herein by reference.
(viii) General Distributor's Agreement for Service shares of Oppenheimer
      Strategic Bond Fund/VA dated 5/1/98: Filed with Post-Effective Amendment
      No. 32 (4/29/98), and incorporated herein by reference.
(ix)  General Distributor's Agreement for Service shares of Oppenheimer Main
      Street Growth & Income Fund/VA dated 5/1/98: Filed with Post-Effective
      Amendment 32 (4/29/98), and incorporated herein by reference.
(x)   General Distributor's Agreement for Service shares of Oppenheimer Main
      Street Small Cap Fund/VA dated 5/1/98: Filed with Post-Effective Amendment
      No. 32 (4/29/98), and incorporated herein by reference.

(xi)  General Distributor's Agreement for Service shares of Oppenheimer Value
      Fund/VA dated 10/22/02: Filed with Registrant's Post-Effective Amendment
      No. 39 (12/20/02) and incorporated herein by reference.


(f)   Form of Deferred Compensation Plan for Disinterested Trustees\Directors:
      Filed with Post-Effective Amendment No. 40 to the Registration Statement
      of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/27/98, and
      incorporated herein by reference.

(g)   Global Custody Agreement dated August 16, 2002 between Registrant and
      JPMorgan Chase Bank: Filed herewithPreviously filed with Post-Effective
      Amendment No. 9 to the Registration Statement of Oppenheimer International
      Bond Fund (Reg. No. 33-58383), 11/21/02, and incorporated herein by
      reference.

(h)   Not applicable.

(i)
(i)   Opinion and Consent of Counsel, 3/14/85: Previously filed with
      Registrant's Pre-Effective Amendment No. 1 (3/20/85), refiled with
      Registrant's Post-Effective Amendment No. 27 (4/27/95) pursuant to Item
      102 of Regulation S-T, and incorporated herein by reference.
(ii)  Opinion and Consent of Counsel, 4/28/86: Previously filed with
      Registrant's Post-Effective Amendment No. 5 (8/12/86), refiled with
      Registrant's Post-Effective Amendment No. 27 (4/27/95) pursuant to Item
      102 of Regulation S-T, and incorporated herein by reference.
(iii) Opinion and Consent of Counsel, 7/31/86: Previously filed with
      Registrant's Post-Effective Amendment No. 5 (8/12/86), refiled with
      Registrant's Post-Effective Amendment No. 27 (4/27/95) pursuant to Item
      102 of Regulation S-T, and incorporated herein by reference.
(iv)  Opinion and Consent of Counsel, 1/21/87: Previously filed with
      Registrant's Post-Effective Amendment No. 7 (2/6/87), refiled with
      Registrant's Post-Effective Amendment No. 27 (4/27/95), pursuant to Item
      102 of Regulation S-T, and incorporated herein by reference.
(v)   Opinion and Consent of Counsel, dated July 31, 1990: Previously filed with
      Registrant's Post-Effective Amendment No. 15 (9/19/90), refiled with
      Registrant's Post-Effective Amendment No. 27 (4/27/95) pursuant to Item
      102 of Regulation S-T, and incorporated herein by reference.
(vi)  Opinion and Consent of Counsel dated April 23, 1993: Previously filed with
      Registrant's Post-Effective Amendment No. 22 (4/30/93), refiled with
      Registrant's Post-Effective Amendment No. 27 (4/27/95) pursuant to Item
      102 of Regulation S-T, and incorporated herein by reference.
(vii) Opinion and Consent of Counsel dated April 18, 1995: Filed with
      Post-Effective Amendment No. 29 (4/22/96), and incorporated herein by
      reference.

(viii) Opinion and Consent of Counsel dated May 1, 1998: Previously filed with
      Registrant's Post-Effective Amendment No. 35 (4/26/00), and incorporated
      herein by reference.

(j)   Independent Auditors' Consent: To be filed by Post-Effective
      AmendmentFiled herewith.


(k)   Not applicable.


(l)   Investment Letter dated 3/14/85 from Monarch Life Insurance Company to
      Registrant: Previously filed with Registrant's Post-Effective Amendment
      No. 37 (4/24/02), and incorporated herein by reference.


(m)

(i)   Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer Money Fund/VA dated 2/29/00: Previously
      filed with Registrant's Post-Effective Amendment No. 35 (4/26/00), and
      incorporated herein by reference.
(ii)  Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer Bond Fund/VA dated 2/29/00: Previously filed
      with Registrant's Post-Effective Amendment No. 35 (4/26/00), and
      incorporated herein by reference.
(iii) Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer Capital Appreciation Fund/VA dated 2/29/00:
      Previously filed with Registrant's Post-Effective Amendment No. 35
      (4/26/00), and incorporated herein by reference.
(iv)  Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer High Income Fund/VA dated 2/29/00:
      Previously filed with Registrant's Post-Effective Amendment No. 35
      (4/26/00), and incorporated herein by reference.
(v)   Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer Aggressive Growth Fund/VA dated 2/29/00:
      Previously filed with Registrant's Post-Effective Amendment No. 35
      (4/26/00), and incorporated herein by reference.
(vi)  Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer Multiple Strategies Fund/VA dated 2/29/00:
      Previously filed with Registrant's Post-Effective Amendment No. 35
      (4/26/00), and incorporated herein by reference.
(vii) Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer Global Securities Fund/VA dated 2/29/00:
      Previously filed with Registrant's Post-Effective Amendment No. 35
      (4/26/00), and incorporated herein by reference.
(viii) Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer Strategic Bond Fund/VA dated 2/29/00:
      Previously filed with Registrant's Post-Effective Amendment No. 35
      (4/26/00), and incorporated herein by reference.
(ix)  Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer Main Street Growth & Income Fund/VA dated
      2/29/00: Previously filed with Registrant's Post-Effective Amendment No.
      35 (4/26/00), and incorporated herein by reference.
(x)   Amended and Restated Distribution and Service Plan and Agreement for
      Service shares of Oppenheimer Main Street Small Cap Fund/VA dated 2/29/00:
      Previously filed with Registrant's Post-Effective Amendment No. 35
      (4/26/00), and incorporated herein by reference.
(xi)  Distribution and Service Plan and Agreement for Service shares of
      Oppenheimer Value Fund /VA: Filed with Registrant's Post-Effective
      Amendment No. 39 (12/20/02) and incorporated herein by reference.

(n)   Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
      10/22/02: Previously filed with Post-Effective Amendment No. 2022 to the
      Registration Statement of Oppenheimer Global Growth & Income Fund (Reg.
      No. 33-33799), 11/20/Cash Reserves (Reg. No. 33-23223), 9/27/0102, and
      incorporated herein by reference.

o)    Powers of Attorney for all Trustees/Directors and Officers except for
      Beverly L. Hamilton, Robert J. Malone, Edward L. Cameron, F. William
      Marshall, Jr., and John Murphy (including Certified Board Resolutions):
      Previously filed with Pre-Effective Amendment No. 2 to the Registration
      Statement of Oppenheimer Select Managers (Reg. No. 333-49774), 2/8/01, and
      incorporated herein by reference.

      (i)   Powers of Attorney for Edward L. Cameron, F. William Marshall Jr.
            and John Murphy: Previously filed with Post-Effective Amendment No.
            45 to the Registration Statement of Oppenheimer High Yield Fund
            (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference.

      (ii)  Powers of Attorney for Beverly L. Hamilton and Robert J. Malone:
            Previously filed with Post-Effective Amendment No. 46 to the
            Registration Statement of Oppenheimer High Yield Fund (Reg. No.
            2-62076), 8/23/02, and incorporated herein by reference


(p)   Amended and Restated Code of Ethics of the Oppenheimer Funds dated May 15,
      2002 under Rule 17j-1 of the Investment Company Act of 1940: Previously
      filed with Post-Effective Amendment No. 29 to the Registration Statement
      of Oppenheimer Discovery Fund (Reg. No. 33-371), 11/22/02, and
      incorporated herein by reference.

Item 24.  Persons Controlled by or Under Common Control with the Fund

None.

Item 25.  Indemnification

      Reference is made to the provisions of Article Seventh of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.

      Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

Item 26. - Business and Other Connections of the Investment Adviser

(a)   OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
      certain subsidiaries and affiliates act in the same capacity to other
      investment companies, including without limitation those described in
      Parts A and B hereof and listed in Item 26(b) below.

(b)   There is set forth below information as to any other business, profession,
      vocation or employment of a substantial nature in which each officer and
      director of OppenheimerFunds, Inc. is, or at any time during the past two
      fiscal years has been, engaged for his/her own account or in the capacity
      of director, officer, employee, partner or trustee.

- ---------------------------------------------------------------------------------
Name and Current Position
with OppenheimerFunds, Inc.    Other Business and Connections During the Past
                               Two Years
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Timothy L. Abbuhl,             None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Amy B. Adamshick,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles E. Albers,             None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Erik Anderson,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Janette Aprilante,             Secretary   of   OppenheimerFunds,   Distributor,
Vice President & Secretary     Inc.,  Centennial Asset  Management  Corporation,
                               Oppenheimer    Partnership    Holdings,     Inc.,
                               Oppenheimer   Real   Asset   Management,    Inc.,
                               Shareholder     Financial     Services,     Inc.,
                               Shareholder  Services,  Inc.; Assistant Secretary
                               of HarbourView Asset Management Corporation,  OFI
                               Private  Investments,   Inc.,  Oppenheimer  Trust
                               Company and OFI  Institutional  Asset Management,
                               Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Patricia Avelino,              None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Hany S. Ayad,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bruce L. Bartlett,             None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Michael Banta,            None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Joanne Bardell,                None
Assistant Vice President

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lerae A. Barela,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark Bartling,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin Baum,                    None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jeff Baumgartner,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Connie Bechtolt,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Behal                   VicesPresident ofeOppenheimerFundsrDistributor,   Kathleen Beichert,
Assistant Vice President       Inc.gement Corporation. Formerly.                 Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gerald Bellamy,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Erik S. Berg,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Victoria Best,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Rajeev Bhaman,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Craig Billings,                Formerly President of Lorac Technologies, Inc.
Assistant Vice President       (June 1997-July 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark Binning,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert J. Bishop,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tracey Blinzer,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John R. Blomfield,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Chad Boll,                     None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin Bonner,                  Formerly Manager, Sales Support for Prudential
Vice President                 Insurance Company (August 1995-September 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Bonomo,                 None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lowell Scott Brooks,           Vice President of OppenheimerFunds Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard Buckmaster,            None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Paul Burke,                    None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark Burns,                    Formerly a Marketing Manager with Alliance
Assistant Vice President       Capital Management (October 1999-April 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bruce Burroughs                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Claudia Calich,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael A. Carbuto,            None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Debra Casey,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ronald G. Chibnik,             Formerly Director of technology for Sapient
Assistant Vice President       Corporation (July, 2000-August 2001); software
                               architect for Sapient Corporation (March
                                1997-July 2000).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brett Clark,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
H.C. Digby Clements,           None
Vice   President:    Rochester
Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Peter V. Cocuzza,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Laura Coulston,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Julie C. Cusker,               None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George Curry,                  None.
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Damian,                   Formerly senior analyst/director for Citigroup
Vice President                 Asset Management (November 1999-September 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
O. Leonard Darling, Chairman of the Board and a director (since June Vice
Chairman, Executive Vice 1999) and Senior Managing Director (since President,
Chief Investment December 1998) of HarbourView Asset Management Officer &
Director Corporation; a director (since July 2001) of
                               Oppenheimer Acquisition Corp.; a director (since
                               March 2000) of OFI Private Investments, Inc.;
                               Chairman of the Board, Senior Managing Director
                               and director (since February 2001) of OFI
                               Institutional Asset Management, Inc.; Trustee
                               (since 1993) of Awhtolia College - Greece.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John M. Davis,                 Assistant Vice President of OppenheimerFunds
Assistant Vice President       Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ruggero de'Rossi,              Vice President of HarbourView Asset Management
Vice President                 Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Craig P. Dinsell,              None
Executive Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Randall C. Dishmon,            Formerly an Associate with Booz Allen & Hamilton
Assistant Vice President       (1998-June 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Randall C. Dishmon,            Formerly an Associate with Booz Allen & Hamilton
Assistant Vice President       (1998-June 2001).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Rebecca K. Dolan               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steven D. Dombrower,           Vice President of OppenheimerFunds Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bruce C. Dunbar,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard Edmiston,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Daniel R. Engstrom,            None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Armand B. Erpf,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James Robert Erven             Formerly an Assistant Vice President/Senior
Assistant Vice President       Trader with Morgan Stanley Investment Management
                               (1999-April 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George R. Evans,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Edward N. Everett,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kathy Faber,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David Falicia,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Scott T. Farrar,               Vice President of OFI Private Investments, Inc.
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Katherine P. Feld,             Vice President of OppenheimerFunds, Distributor,
Vice President, Senior Counsel Inc.; Vice President, Assistant Secretary and
                               Director of Centennial Asset Management
                               Corporation; Vice President of Oppenheimer Real
                             Asset Management, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Emmanuel Ferreira,             Formerly a portfolio manager with Lashire
Vice President                 Investments (July 1999-December 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ronald H. Fielding,            Vice President of OppenheimerFunds Distributor,
Senior Vice President;         Inc.; Director of ICI Mutual Insurance Company;
Chairman: Rochester Division   Governor of St. John's College; Chairman of the
                               Board of Directors of International Museum of
                               Photography at George Eastman House.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Ronald H. Fielding,            Vice President of OppenheimerFunds Distributor,
Senior Vice President;         Inc.; Director of ICI Mutual Insurance Company;
Chairman: Rochester Division   Governor of St. John's College; Chairman of the
                               Board of Directors of International Museum of
                               Photography at George Eastman House.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian Finley,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Forrest,                  None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
J. Hayes Foster,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
P. Lyman Foster, Senior Vice President of OppenheimerFunds Senior Vice President
Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David Foxhoven,                Assistant Vice President of OppenheimerFunds
Assistant Vice President       Legacy Program.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Colleen M. Franca,             None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Crystal French,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Hazem Gamal,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dan P. Gangemi,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dan Gagliardo,                 Formerly an Assistant Vice President with
Assistant Vice President       Mitchell Hutchins (January 2000-October 2000).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Subrata Ghose,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles W. Gilbert,            None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Alan C. Gilston,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Sharon M. Giordano-Auleta,     None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jill E. Glazerman,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Paul M. Goldenberg,            None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mike Goldverg,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bejamin J. Gord,               Vice President of HarbourView Asset Management
Vice President                 Corporation. Formerly Executive Director with
                               Miller Anderson Sherrerd, a division of Morgan
                               Stanley Investment Management. (April 1992-March
                               2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Laura Granger,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Grill,                  None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Satish Gupta,                  None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Guy,                    None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David Hager,                   None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Haley,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Marilyn Hall,                  None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ping Han,                      None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kelly Haney,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Neil Hanson,                   None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Shari Harley,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steve Hauenstein,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas B. Hayes,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Saba Hekmat,                   Formerly Director, Credit Research Analyst at
Assistant Vice President       MetLife Investments (July 1996-October 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Henry,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Catherine Heron,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dennis Hess,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dorothy F. Hirshman,           None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Daniel Hoelscher,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Scott T. Huebl,                Assistant Vice President of OppenheimerFunds
Vice President                 Legacy Program.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Margaret Hui,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Huttlin,                  None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Edward Hrybenko,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James G. Hyland,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steve P. Ilnitzki,             None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kathleen T. Ives,              Vice President of OppenheimerFunds Distributor,
Vice   President  &  Assistant Inc.; Vice President and Assistant Secretary of
Counsel                        Shareholder Services, Inc.; Assistant Secretary
                               of OppenheimerFunds Legacy Program and
                               Shareholder Financial Services, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William Jaume,                 Senior Vice President and Chief Compliance
Vice President                 Officer (since April 2000) of HarbourView Asset
                               Management Corporation; and of OFI Institutional
                               Asset Management, Inc. (since February 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Frank V. Jennings,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Jennings,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Michael Johnson,          Formerly Vice President, Senior
Assistant Vice President       Analyst/Portfolio Manager at Aladdin Capital
                               Holdings Inc. (February 2001-May 2002) prior to
                               which he was Vice President and Senior Analyst at
                               Merrill Lynch Investment Managers (October
                               1996-February 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

John Michael Johnson,          Formerly Vice President, Senior
Assistant Vice President       Analyst/Portfolio Manager at Aladdin Capital
                               Holdings Inc. (February 2001-May 2002) prior to
                               which he was Vice President and Senior Analyst at
                               Merrill Lynch Investment Managers (October
                               1996-February 2001).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lewis A. Kamman,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles Kandilis,              Formerly managing director of Kandilis Capital
Assistant Vice President       Management (September 1993-August 2002); CFO of
                               Kandi Corp. (October 1989-August 1993).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jennifer E. Kane,              None.
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lynn O. Keeshan,               None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas W. Keffer,              None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Cristina J. Keller,            Vice President of OppenheimerFunds Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Keogh,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Garrett K. Kolb,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Walter G. Konops,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Avram D. Kornberg,             None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James Kourkoulakos,            None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian Kramer,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tracey Lange,                  None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Latino,                   Formerly a Senior Trader/Portfolio Engineer at
Assistant Vice President       Jacobs Levy Equity Management (June 1996-August

                               2002)..

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Guy E. Leaf,                   Formerly a Vice President of Merrill Lynch
Vice President                 (January 2000-September 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christopher M. Leavy,          None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dina C. Lee,                   None
Assistant   Vice  President  &
Assistant Counsel
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dana Lehrer,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Laura Leitzinger,              Vice President of Shareholder Financial
Vice President                 Services, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael S. Levine,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gang Li,                       None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Shanquan Li,                   None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mitchell J. Lindauer,          None
Vice   President  &  Assistant
General Counsel
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bill Linden,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Malissa B. Lischin,            Assistant Vice President of OppenheimerFunds
Assistant Vice President       Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Reed Litcher,                  None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David P. Lolli,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Daniel G. Loughran             None
Vice   President:    Rochester
Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Patricia Lovett,               Vice President of Shareholder Financial
Vice President                 Services, Inc. and Senior Vice President of
                               Shareholder Services, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steve Macchia,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Magee,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jerry Madzij,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Angelo G. Manioudakis          Senior Vice President of HarbourView Asset
Senior Vice President          Management Corporation. Formerly Executive
                               Director and portfolio manager for Miller,
                               Anderson & Sherrerd, a division of Morgan Stanley
                               Investment Management (August 1993-April 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Angelo G. Manioudakis          Senior Vice President of HarbourView Asset
Senior Vice President          Management Corporation. Formerly Executive
                               Director and portfolio manager for Miller,
                               Anderson & Sherrerd, a division of Morgan Stanley
                               Investment Management (August 1993-April 2002).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Marianne Manzolillo,           None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
LuAnn Mascia,                  None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Philip T. Masterson,           None
Vice   President  &  Assistant
Counsel
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Elizabeth McCormack,           Assistant Secretary of HarbourView Asset
Assistant Vice President       Management Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles L. McKenzie,           Senior Vice President of HarbourView Asset
Senior Vice President          Management Corporation and OFI Institutional
                               Asset Management Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Joseph McGovern,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lisa Migan,                    None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Andrew J. Mika,                None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Joy Milan,                     None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Denis R. Molleur,              None
Vice    President   &   Senior
Counsel
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Nikolaos D. Monoyios,          None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles Moon,                  Vice President of HarbourView Asset Management
Vice President                 Corporation. Formerly an Executive Director and
                               Portfolio Manager with Miller Anderson &
                               Sherrerd, a division of Morgan Stanley Investment
                               Management (June 1999-March 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Stacey Morrell,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Murphy,                   Director of OppenheimerFunds Distributor, Inc.,
Chairman,   President,   Chief Centennial Asset Management Corporation,
Executive Officer & Director   HarbourView Asset Management Corporation, OFI
                               Private Investments, Inc., OFI Institutional
                               Asset Management, Inc. and Tremont Advisers,
                               Inc.; Director (Class A) of Trinity Investments
                               Management Corporation; President and Director
                               of Oppenheimer Acquisition Corp., Oppenheimer
                               Partnership Holdings, Inc., Oppenheimer Real
                               Asset Management, Inc.; Chairman and Director of
                               Shareholder Financial Services, Inc. and
                               Shareholder Services, Inc.; Executive Vice
                               President of MassMutual Life Insurance Company;
                               director of DLB Acquisition Corp.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas J. Murray,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kenneth Nadler,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christina Nasta,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

David Negri,                   Senior Vice President of HarbourView Asset
Senior Vice President          Management Corporation.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard Nichols,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Barbara Niederbrach,           None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William Norman,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Raymond C. Olson,              Assistant Vice President and Treasurer of
Assistant Vice President       OppenheimerFunds Distributor, Inc.; Treasurer of
                               Centennial Asset Management Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Frank J. Pavlak,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David P. Pellegrino,           None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Allison C. Pells,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Susan Pergament,               None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian Petersen,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James F. Phillips,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gary Pilc,
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Peter E. Pisapia,              Formerly, Associate Counsel at SunAmerica Asset
Assistant   Vice  President  & Management Corp. (December 2000-December 2002).
Assistant Counsel
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Raghaw Prasad,                 Formerly Associate Vice President with
Assistant Vice President       Prudential Securities New York (January
                               2001-November 2001) prior to which he was a
                               Director/Analytics with Prudential Investments
                               New Jersey (April 1997-November 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jane C. Putnam,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael E. Quinn,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Heather Rabinowitz,            None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Julie S. Radtke,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Norma J. Rapini,               None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Thomas P. Reedy,               Vice President (since April 1999) of HarbourView
Vice President                 Asset Management Corporation.

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian N. Reid,                 Formerly an Assistant Vice President with Eaton
Assistant Vice President       Vance Management (January 2000-January 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Marc Reinganum,                Formerly (until August 2002) Vaughn Rauscher
Vice President                 Chair in Financial Investments and Director,
                               Finance Institute of Southern Methodist
                               University, Texas.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kristina Richardson,           None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Claire Ring,                   None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David Robertson,               Senior Vice President of OppenheimerFunds
Senior Vice President          Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Rob Robis,                     None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Antoinette Rodriguez,          None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Stacey Roode,                  Formerly, Assistant Vice President of Human
Vice President                 Resources of OFI (200-July 2002)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jeffrey S. Rosen,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard H. Rubinstein,         None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James H. Ruff,                 President and Director of OppenheimerFunds
Executive Vice President       Distributor, Inc. and Centennial Asset
                               Management Corporation; Executive Vice President
                               of OFI Private Investments, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Andrew Ruotolo                 Director, Treasurer and Chief Financial Officer
Executive  Vice  President and of Oppenheimer Acquisition Corp.; President and
Director                       director of Shareholder Services, Inc. and
                               Shareholder Financial Services, Inc.; Director
                               (Class A) of Trinity Investment Management
                               Corporation; Chairman of the Board, Chief
                               Executive Officer, President and Director or OFI
                               Trust Company.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Rohit Sah,                     None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Valerie Sanders,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Karen Sandler,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tricia Scarlata,               Formerly, Marketing Manager of OppenheimerFunds,
Assistant Vice President       Inc. (April 2001-August 2002); Client Service
                               Support Manager for Sanford C. Bernstein
                               (December 1999-April 2001)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Rudi Schadt,                   Formerly a consultant for Arthur Andersen
Vice President                 (August 2001-February 2002); director, senior
                               quantitative analyst at Brinson Partners
                               (September 2000,April 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jeffrey R. Schneider,          None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ellen P. Schoenfeld,           None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maria Schulte,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David Schultz,                 Chief Executive Officer, President & Senior
Senior Vice President          Managing Director & Director of OFI
                               Institutional Asset Management, Inc. and
                               HarbourView Asset Management Corporation;
                               Director (Class A) and Chairman of Trinity
                               Investment Management Corporation; Director of
                               Oppenheimer Trust Company.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Scott A. Schwegel,             None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Allan P. Sedmak                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jennifer L. Sexton,            Vice President of OFI Private Investments, Inc.
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Martha A. Shapiro,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Navin Sharma,                  Formerly, Manager at BNP Paribas Cooper Neff
Vice President                 Advisors (May 2001-April 2002) prior to which he
                               was Development Manager at Reality
                               Online/Reuters America Inc. (June 2000-May 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steven J. Sheerin,             Formerly consultant with Pricewaterhouse Coopers
Vice President                 (November 2000-May 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bonnie Sherman,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David C. Sitgreaves,           None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Edward James Sivigny           Formerly a Director for ABN Amro Securities
Assistant Vice President       (July 2001-July 2002) prior to which he was
                               Associate Director for Barclays Capital
                                (1998-July 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Edward James Sivigny           Formerly a Director for ABN Amro Securities
Assistant Vice President       (July 2001-July 2002) prior to which he was
                               Associate Director for Barclays Capital
                                (1998-July 2001).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Enrique H. Smith,              Formerly a business analyst with Goldman Sachs
- -----------------              -----------------------------------------------
Assistant Vice President       (August 1999-August 2001).
- ------------------------       --------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard A. Soper,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Louis Sortino,                 None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Keith J. Spencer,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Marco Antonio Spinar,          Formerly, Director of Business Operations at AOL
Assistant Vice President       Time Warner, AOL Time Warner Book Group (June
                              2000-December 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Marco Antonio Spinar,          Formerly, Director of Business Operations at AOL
Assistant Vice President       Time Warner, AOL Time Warner Book Group (June
                              2000-December 2001).

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard A. Stein,              None
Vice   President:    Rochester
Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Arthur P. Steinmetz,           Senior Vice President of HarbourView Asset
Senior Vice President          Management Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jayne M. Stevlingson,          None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gregory J. Stitt,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John P. Stoma,                 Senior Vice President of OppenheimerFunds
Senior Vice President          Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Wayne Strauss,                 None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Stricker,              None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Deborah A. Sullivan,           Since December 2001, Secretary of Oppenheimer
Assistant Vice President,      Trust Company.
Assistant Counsel
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mary Sullivan,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin L. Surrett,              None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Sussman,               Nonen B. Switzer,
Vice President                 Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Anthony A. Tanner,             None
Vice   President:    Rochester
Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Martin Telles,                 None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Paul Temple,                   Formerly a Vice President of Merrill Lynch
Vice President                 (October 2001-January 2002) prior to which he
                               was a Vice President with OppenheimerFunds, Inc.
                               (May 2000-October 5, 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Vincent Toner,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Eamon Tubridy,                 None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Keith Tucker,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James F. Turner,               Formerly portfolio manager for Technology
Vice President                 Crossover Ventures (May 2000-March 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Cameron Ullyat,                None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Angela Utaro,                  None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tanya Valency,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark S. Vandehey,              Vice President of OppenheimerFunds Distributor,
Vice President                 Inc., Centennial Asset Management Corporation
                               and Shareholder Services, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Maureen Van Norstrand,         None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Vincent Vermette,              Assistant Vice President of OppenheimerFunds
Assistant Vice President       Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Phillip F. Vottiero,           None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Samuel Sloan Walker,           Vice President of HarbourView Asset Management
Vice President                 Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Teresa M. Ward,                Vice President of OppenheimerFunds Distributor,
Vice President                 Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jerry A. Webman,               Senior Vice President of HarbourView Asset
Senior Vice President          Management Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christopher D. Weiler,         None
Assistant Vice President:
Rochester Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Barry D. Weiss,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Melissa Lynn Weiss,            Formerly an Associate at Hoguet Newman & Regal,
Vice President                 LLP (January 1998-May 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christine Wells,               None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Joseph J. Welsh,               Vice President of HarbourView Asset Management
Vice President                 Corporation.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Diederick Wermolder,           Director of OppenheimerFunds International Ltd.;
Vice President                 Senior Vice President (Managing Director of the
                               International Division) of OFI Institutional
                             Asset Management, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Catherine M. White,            Assistant Vice President of OppenheimerFunds
Assistant Vice President       Distributor, Inc. Formerly, Assistant Vice
                               President with Gruntal & Co. LLC (September 1998
                               - October 2000); member of the American Society
                               of Pension Actuaries (ASPA) since 1995.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William L. Wilby,              Formerly Senior Vice President of HarbourView
Senior Vice President          Asset Management Corporation (May 1999-July
                               2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Donna M. Winn,                 President, Chief Executive Officer and Director
Senior Vice President          of OFI Private Investments, Inc.; Director and
                               President of OppenheimerFunds Legacy Program;
                               Senior Vice President of OppenheimerFunds
                                Distributor, Inc.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kenneth Winston,               Formerly, principal at Richards & Tierney, Inc.
Senior Vice President          (until June 2001).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Philip Witkower,               None
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian W. Wixted,               Treasurer of HarbourView Asset Management
Senior Vice President and      Corporation; OppenheimerFunds International
Treasurer                      Ltd., Oppenheimer Partnership Holdings, Inc.,
                               Oppenheimer Real Asset Management Corporation,
                               Shareholder Services, Inc., Shareholder
                               Financial Services, Inc., OFI Private
                               Investments, Inc. and OFI Institutional Asset
                               Management, Inc.; Treasurer and Chief Financial
                               Officer of Oppenheimer Trust Company; Assistant
                               Treasurer of Oppenheimer Acquisition Corp. and
                               OppenheimerFunds Legacy Program.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Carol Wolf,                    Serves on the Board of the Colorado Ballet.
Senior Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kurt Wolfgruber,               Director of Tremont Advisers, Inc. (as of
Senior Vice President          January 2002).
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Caleb C. Wong,                 None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Edward C. Yoensky,             None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jill Zachman,                  None
Vice   President:    Rochester
Division
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lucy Zachman,                  None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert G. Zack                 General Counsel and Director of OppenheimerFunds
Senior Vice President and      Distributor, Inc.; General Counsel of Centennial
General Counsel                Asset Management Corporation; Senior Vice
                               President and General Counsel of HarbourView
                               Asset Management Corporation and OFI
                               Institutional Asset Management, Inc.; Senior
                               Vice President, General Counsel and Director of
                               Shareholder Financial Services, Inc.,
                               Shareholder Services, Inc., OFI Private
                               Investments, Inc. and Oppenheimer Trust Company;
                               Vice President and Director of Oppenheimer
                               Partnership Holdings, Inc.; Secretary of OAC
                               Acquisition Corp.; Director and Assistant
                               Secretary of OppenheimerFunds International
                               Ltd.; Director of Oppenheimer Real Asset
                               Management, Inc.; Vice President of
                               OppenheimerFunds Legacy Program.
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Neal A. Zamore,                None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark D. Zavanelli,             None
Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Alex Zhou,                     None
Assistant Vice President
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Arthur J. Zimmer,              Senior Vice President (since April 1999) of
Senior Vice President          HarbourView Asset Management Corporation.
- ---------------------------------------------------------------------------------

The Oppenheimer Funds include the following:

Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Limited Term New York Municipal Fund (Rochester Portfolio Series) Oppenheimer
Bond Fund (a series of Oppenheimer Integrity Funds) Oppenheimer California
Municipal Fund Oppenheimer Capital Appreciation Fund Oppenheimer Capital Income
Fund Oppenheimer Capital Preservation Fund Oppenheimer Cash Reserves Oppenheimer
Champion Income Fund Oppenheimer Concentrated Growth Fund Oppenheimer
Convertible Securities Fund (Bond Fund Series) Oppenheimer Developing Markets
Fund Oppenheimer Discovery Fund Oppenheimer Emerging Growth Fund Oppenheimer
Emerging Technologies Fund Oppenheimer Enterprise Fund Oppenheimer Europe Fund
Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund Oppenheimer Gold
& Special Minerals Fund Oppenheimer Growth Fund Oppenheimer High Yield Fund
Oppenheimer International Bond Fund Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund Oppenheimer Limited-Term Government
Fund Oppenheimer Limited Term Municipal Fund (a series of Oppenheimer Municipal
Fund) Oppenheimer Main Street Fund (a series of Oppenheimer Main
   Street Funds, Inc.)
Oppenheimer Main Street Opportunity Fund
Oppenheimer Main Street Small Cap Fund
Oppenheimer MidCap Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multiple Strategies Fund
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust (3 series):
     Oppenheimer New Jersey Municipal Fund
     Oppenheimer Pennsylvania Municipal Fund
     Oppenheimer Rochester National Municipals

Oppenheimer Municipal Bond Fund
Oppenheimer AMT-Free New York Municipals
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds (3 series)

     Oppenheimer Quest Balanced Value Fund
     Oppenheimer Quest Opportunity Value Fund
     Oppenheimer Small Cap Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Real Estate Fund
Oppenheimer Select Managers (6 series):
     Gartmore Millennium Growth Fund II
     Jennison Growth Fund
     Mercury Advisors Focus Growth Fund
     Mercury Advisors S&P 500 Index Fund
     QM Active Balanced Fund
     Salomon Brothers Capital Fund
Oppenheimer Senior Floating Rate Fund
Oppenheimer Series Fund, Inc. (2 series):
     Oppenheimer Disciplined Allocation Fund
     Oppenheimer Value Fund
Oppenheimer Special Value Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Tremont Market Neutral Fund LLC Oppenheimer Tremont Opportunity Fund
LLC Oppenheimer Trinity Core Fund Oppenheimer Trinity Large Cap Growth Fund
Oppenheimer Trinity Value Fund Oppenheimer U.S. Government Trust Oppenheimer
Variable Account Funds (11 series):
     Oppenheimer Aggressive Growth Fund/VA Oppenheimer Bond Fund/VA Oppenheimer
     Capital Appreciation Fund/VA Oppenheimer Global Securities Fund/VA
     Oppenheimer High Income Fund/VA Oppenheimer Main Street Fund/VA Oppenheimer
     Main Street Small Cap Fund/VA Oppenheimer Money Fund/VA Oppenheimer
     Multiple Strategies Fund/VA Oppenheimer Strategic Bond Fund/VA Oppenheimer
     Value Fund/VA
Panorama Series Fund, Inc. (4 series):
     Growth Portfolio
     Government Securities Portfolio
     Oppenheimer International Growth Fund/VA
     Total Return Portfolio
Rochester Fund Municipals

The address of the Oppenheimer funds listed above, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., Oppenheimer
Real Asset Management, Inc. and OppenheimerFunds Legacy Program is 6803 South
Tucson Way, Centennial, Colorado 80112-3924.

The address of OppenheimerFunds, Inc., OppenheimerFunds Distributor, Inc.,
HarbourView Asset Management Corporation, Oppenheimer Partnership Holdings,
Inc., Oppenheimer Acquisition Corp., OFI Private Investments, Inc., OFI
Institutional Asset Management, Inc. and Oppenheimer Trust Company is 498
Seventh Avenue, New York, New York 10018.

The address of Tremont Advisers, Inc. is 555 Theodore Fremd Avenue, Suite
206-C, Rye, New York 10580.

The address of OppenheimerFunds International Ltd. is Bloc C, Irish Life
Center, Lower Abbey Street, Dublin 1, Ireland.

The address of Trinity Investment Management Corporation is 301 North Spring
Street, Bellefonte, Pennsylvania 16823.

Item 27. Principal Underwriter

(a)   OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
      service shares. It is also the Distributor of each of the other registered
      open-end investment companies for which OppenheimerFunds, Inc. is the
      investment adviser, as described in Part A and B of this Registration
      Statement and listed in Item 26(b) above (except Oppenheimer Multi-Sector
      Income Trust and Panorama Series Fund, Inc.) and for MassMutual
      Institutional Funds.

(b)   The directors and officers of the Registrant's principal underwriter are:

- ---------------------------------------------------------------------------------
Name & Principal                Position & Office         Position and Office
Business Address                with Underwriter          with Registrant
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert Agan(1)                  Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Janette Aprilante(1)            Secretary                 None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Jason R. Bach                   Vice President            None
3264 Winthrop Cricle
Marietta, GA 30067

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

James Barker                    Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kathleen Beichert(1)            Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gabriella Bercze(2)             Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Douglas S. Blankenship          Vice President            None
17011 Woodbark
Spring, TX 77379
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tracey Blinzler(1)              Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin Bonner(1)                 Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
L. Scott Brooks(2) Vice President None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin E. Brosmith               Senior Vice President     None
170 Phillip Court
Lake Bluff, IL 60044
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jeffrey W. Bryan(2)             Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Susan Burton                    Vice President            None
412 Towne Green Circle
Addison, TX 75001
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kathleen Mary Byron             Vice President            None
6 Dahlia Drive
Irvine, CA 92618
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Andrew Chonofsky                Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert A. Coli                  Vice President            None
12 White Tail Lane
Bedminster, NJ 07921
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jill E. Crockett(2)             Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jeffrey D. Damia(2)             Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Davis(2)                   Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Stephen J. Demetrovits(2)       Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Joseph A. DiMauro               Vice President            None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steven Dombrower(w)             Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George P. Dougherty             Vice President            None
4090 Redbud Circle
Doylestown, PA 18901
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Cliff H. Dunteman               Vice President            None
1196 Fieldstone Dr.
Crystal Lake, IL 60014-1642
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Eiler(2)                   Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kent M. Elwell                  Vice President            None
35 Crown Terrace
Yardley, PA 19067
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gregg A. Everett                Vice President            None
7124 Trysail Circle
Tampa, FL 33607
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George R. Fahey                 Vice President            None
9 Townview Court
Flemington, NJ 08822
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Eric C. Fallon                  Vice President            None
10 Worth Circle
Newton, MA 02458
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Katherine P. Feld(2)            Vice President            Assistant Secretary
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark J. Ferro(2)                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ronald H. Fielding(3)           Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Patrick W. Flynn (1)            Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John E. Forrest(2)              Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John ("J) Fortuna(2)            Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
P. Lyman Foster(2) Senior Vice President None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Luiggino J. Galleto             Vice President            None
10302 Riesling Court
Charlotte, NC 28277
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michelle M. Gans                Vice President            None
2700 Polk Street, Apt. #9
San Francisco, CA 94109
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lucio Giliberti                 Vice President            None
6 Cyndi Court
Flemington, NJ 08822
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Raquel Granahan(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ralph Grant(2)                  Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael D. Guman                Vice President            None
3913 Pleasant Avenue
Allentown, PA 18103
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Clifford W. Heidinger           Vice President            None
90 Gates Street
Portsmouth, NH 03801
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Phillipe D. Hemery              Vice President            None
184 Park Avenue
Rochester, NY 14607
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Elyse R. Jurman Herman          Vice President            None
1194 Hillsboro Mile, Villa 51
Hillsboro Beach, FL  33062
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Wendy G. Hetson                 Vice President            None
4 Craig Street
Jericho, NY 11753
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kristen L. Heyburn              Vice President            None
2315 Mimosa Drive #2
Houston, TX 77019
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William E. Hortz(2)             Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Edward Hrybenko(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian F. Husch(2)               Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard L. Hymes(2)             Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kathleen T. Ives(1)             Vice President            Assistant Secretary
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Eric K. Johnson                 Vice President            None
28 Oxford Avenue
Mill Valley, CA 94941
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark D. Johnson                 Vice President            None
15792 Scenic Green Court
Chesterfield, MO 63017
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John S. Kavanaugh               Vice President            None
2 Cervantes, Apt. #301
San Francisco, CA 94123
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christina J. Keller(2)          Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian G. Kelly                  Vice President            None
60 Larkspur Road
Fairfield, CT 06430
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Keogh(2)                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lisa Klassen(1)                 Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard Klein                   Senior Vice President     None
4820 Fremont Avenue So.
Minneapolis, MN 55409
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Richard Knott(2)                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dean Kopperud(2)                Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brent A. Krantz                 Senior Vice President     None
P. O. Box 1313
Seahurst, WA 98062
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David T. Kuzia                  Vice President            None
9697 S. Golden Eagle Dr.
Highlands, CO 80126
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tracey Lange(2)                 Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Paul R. LeMire                  Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Dawn Lind                       Vice President            None
21 Meadow Lane
Rockville Centre, NY 11570
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Malissa Lischin(2)              Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James V. Loehle                 Vice President            None
30 Wesley Hill Lane
Warwick, NY 10990
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Montana Low                     Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John J. Lynch                   Vice President            None
5341 Ellsworth
Dallas, TX 75206
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark Macken                     Vice President            None
462 Lincoln Avenue
Sayville, NY 11782
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Magee(2)                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Steven C. Manns                 Vice President            None
1941 W. Wolfram
Chicago, IL 60657
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Todd A. Marion                  Vice President            None
3 St. Marks Place
Cold Spring Harbor, NY 11724
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
LuAnn Mascia(2)                 Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Theresa-Marie Maynier           Vice President            None
2421 Charlotte Drive
Charlotte, NC 28203
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Anthony P. Mazzariello          Vice President            None
704 Beaver Road
Leetsdale, PA 15056
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John C. McDonough               Vice President            None
3812 Leland Street
Chevy Chase, MD 20815
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kent C. McGowan                 Vice President            None
18424 12th Avenue West
Lynnwood, WA 98037
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Mark Mezzanotte                 Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Robert Moser                    Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

John V. Murphy(2)               Director                  President, Principal
                                                          Executive Officer,
                                                          Chairman & Manager

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Wendy Jean Murray               Vice President            None
32 Carolin Road
Upper Montclair, NJ 07043
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christina Nasta(2)              Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kevin P. Neznek(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Chad V. Noel                    Vice President            None
2408 Eagleridge Drive
Henderson, NV 89014
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Bradford Norford                Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Raymond C. Olson(1)             Assistant Vice President  None
                                & Treasurer
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian C. Perkes                 Vice President            None
8734 Shady Shore Drive
Frisco, TX 75034
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Charles K. Pettit               Vice President            None
22 Fall Meadow Drive
Pittsford, NY 14534
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Gazell Pettway                  Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Elaine Puleo-Carter(2)          Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Christopher L. Quinson          Vice President            None
19 Cayuga Street
Rye, NY 10580
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Minnie Ra                       Vice President            None
100 Dolores Street, #203
Carmel, CA 93923
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Heather Rabinowitz(2)           Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gary D. Rakan                   Vice President            None
25031 Woodridge Triangle
Farmington, MI 48335
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Dusting Raring                  Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael A. Raso                 Vice President            None
16 N. Chatsworth Ave., Apt. 301
Larchmont, NY 10538
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Douglas Rentschler              Vice President            None
677 Middlesex Road
Grosse Pointe Park, MI 48230
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Louis H. Reynolds(2)            Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michelle Simone Richter(2)      Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ruxandra Risko(2)               Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David R. Robertson(2)           Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Kenneth A. Rosenson             Vice President            None
24753 Bantage Point Terr.
Malibu, CA 90265
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James H. Ruff(2)                President & Director      None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William R. Rylander             Vice President            None
85 Evergreen Road
Vernon, CT 06066
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas Sabow(2)                 Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

John Saunders                   Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Tonya Sax                       Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Alfredo Scalzo                  Vice President            None
9616 Lake Chase Island Way
Tampa, FL 33626
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Thomas Schmitt                  Vice President            None

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Sciortino               Vice President            None
785 Beau Chene Drive
Mandeville, LA 70471
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Eric Sharp                      Vice President            None
862 McNeill Circle
Woodland, CA 95695
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Debbie Simon(2)                 Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Douglas Bruce Smith             Vice President            None
808 South 194th Street
Seattle,WA 98148

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Bryan Stein(2)                  Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
John Stoma(2)                   Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian C. Summe                  Vice President            None
239 N. Colony Drive
Edgewood, KY 41017
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael Sussman(2)              Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George T. Sweeney               Senior Vice President     None
5 Smoke House Lane
Hummelstown, PA 17036
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
 Scott McGregor Tatum           Vice President            None
 704 Inwood
Southlake, TX 76092
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
James Taylor(2)                 Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Martin Telles(2)                Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
David G. Thomas                 Vice President            None
1328 N. Cleveland Street
Arlington, VA 22201
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Bryan K.Toma                    Vice President            None
14575 S. Gallery
Olathe, KS 66062

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Floyd A. Tucker                 Vice President            None
1930 W. Barry Ave., #2
Chicago, IL 60657
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Tanya Valency(2)                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Mark Vandehey(1)                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Vincent Vermete                 Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Teresa Ward(1)                  Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Michael J. Weigner              Vice President            None
4905 W. San Nicholas Street
Tampa, FL 33629
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Donn Weise                      Vice President            None
3249 Earlmar Drive
Los Angeles, CA 90064
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Catherine White(2)              Assistant Vice President  None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas Wilson(2)                Vice President            None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Donna Winn(2)                   Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Philip Witkower(2)              Senior Vice President     None
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Cary Patrick Wozniak            Vice President            None
18808 Bravata Court
San Diego, CA 92128
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Gregor D. Yuska                 Vice President            None
16035 Canterbury Estates Dr.
Ellisville, MO 63021
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------

Robert G. Zack(2)               General Counsel &         Secretary
                                Director

- ---------------------------------------------------------------------------------

(1) 6803 South Tucson Way, Centennial, CO 80112-3924 (2) 498 Seventh Avenue, New
York, NY 10018 (3) 350 Linden Oaks, Rochester, NY 14623

(c) Not applicable.

Item 28. Location of Accounts and Records

The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its
offices at 6803 South Tucson Way, Centennial, Colorado 80112.

Item 29. Management Services

Not applicable

Item 30. Undertakings

Not applicable.

                                   SIGNATURES


Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Arapahoe and State of Colorado on the 28th day of April, 2003.



                                    Oppenheimer Variable Account Funds

                                    By:  /s/ John V. Murphy*
                                   ---------------------------------------------
                                    John V. Murphy, President,
                                    Principal Executive Officer & Trustee

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:

Signatures                          Title                      Date

/s/ James C. Swain*

- -----------------------      Chairman & Trustee       April 28, 2003

James C. Swain

/s/ John V. Murphy*          President, Principal        April 28, 2003


- ------------------------     Executive Officer           April 28, 2003
John V. Murphy               and Trustee


/s/ Brian W. Wixted*         Treasurer and Principal     April 28, 2003


- -------------------------    Financial and
Brian W. Wixted              Accounting Officer


/s/ William L. Armstrong*    Trustee                     April 28,  2003


- -------------------------------
William L. Armstrong


/s/ Robert G. Avis*          Trustee                      April 28, 2003


- ----------------------
Robert G. Avis


/s/ George Bowen*            Trustee                     April 28, 2003


- ----------------------
George Bowen


/s/ Edward L. Cameron*       Trustee                     April 28, 2003


- ------------------------

Edward L. Cameron

/s/ Jon S. Fossel*           Trustee                     April 28, 2003


- --------------------
Jon S. Fossel


/s/ Sam Freedman*            Trustee                     April 28, 2003


- ----------------------
Sam Freedman

/s/ Beverly L. Hamilton*

- ------------------------------   Trustee                 April 28, 2003

Beverly L. Hamilton


/s/ Robert J. Malone*

- --------------------------       Trustee                April 28, 2003

Robert J. Malone

/s/ F. William Marshall, Jr.*    Trustee                April 28, 2003


- --------------------------------
F. William Marshall, Jr.


*By: /s/ Robert G. Zack
- -----------------------------------------
Robert G. Zack, Attorney-in-Fact



                       OPPENHEIMER VARIABLE ACCOUNT FUNDS


                        Post-Effective Amendment No.41


                            Registration No. 2-93177

                                  EXHIBIT INDEX


Exhibit No.       Description

23 (a)(i) Fourteenth Amended and Restated Declaration of Trust, dated 5/1/03.

23 (c)(xxiii)  Oppenheimer  Main Street  Fund/VA  Service class  specimen  share
certificate.

23(c)(xxiv)  Oppenheimer  Main Street Fund/VA  Non-Service  class specimen share
certificate.

23(g) Global Custody Agreement

23(j) Independent Auditors' Consent.

EX-23

                                                                 Exhibit 23(j)

                        INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Post-Effective  Amendment No. 41 to Registration
Statement No.  2-93177 of Oppenheimer  Variable  Account Funds on Form N-1A of
our reports dated  January 23, 2003,  appearing in the Statement of Additional
Information,  which  is  part  of  such  Registration  Statement,  and  to the
reference to us under the headings "Independent  Auditors" in the Statement of
Additional Information and "Financial  Highlights" in the Prospectuses,  which
are also part of such Registration Statement.




/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP

Denver, Colorado
April 25, 2003

EX-99.133

                                                            Exhibit 23(c)(xxiii)


                       OPPENHEIMER MAIN STREET FUND/VA
             Share Certificate for Service Shares (8-1/2" x 11")
             ---------------------------------------------------

I.    FACE OF CERTIFICATE (All text and other matter lies within
      -------------------
                  8-1/4" x 10-3/4" decorative border, 5/16" wide)

                  (upper left corner): NUMBER [of shares]

                  (upper right) SERVICE SHARES

                  (centered
                  below boxes)      Oppenheimer        Variable        Account
Funds

                  A MASSACHUSETTS BUSINESS TRUST
                  SERIES: OPPENHEIMER MAIN STREET FUND/VA


(at left)   THIS IS TO CERTIFY THAT       (at right) SEE REVERSE FOR
                                               CERTAIN DEFINITIONS

                                                (box with number)
                                                  CUSIP 383811863

      (at left)       is the owner of

      (centered)  FULLY PAID SERVICE SHARES OF BENEFICIAL
INTEREST OF

                        OPPENHEIMER MAIN STREET FUND/VA

            a  series  of  OPPENHEIMER  VARIABLE  ACCOUNT  FUNDS  (hereinafter
            called the "Fund"),  transferable only on the books of the Fund by
            the holder hereof in person or by duly authorized  attorney,  upon
            surrender   of   this   certificate   properly   endorsed.    This
            certificate  and the  shares  represented  hereby  are  issued and
            shall be held subject to all of the provisions of the  Declaration
            of  Trust of the Fund to all of which  the  holder  by  acceptance
            hereof   assents.    This   certificate   is   not   valid   until
            countersigned by the Transfer Agent.

            WITNESS the facsimile  seal of the Fund and the  signatures of its
            duly authorized officers.


      (signature              Dated:            (signature
      at left of seal)                          at right of seal)

      /s/ Brian W. Wixted                       /s/ Robert G. Zack
      -----------------------             -------------------
      TREASURER                                       SECRETARY

                             (centered at bottom)
                        1-1/2" diameter facsimile seal
                                 with legend
                      OPPENHEIMER VARIABLE ACCOUNT FUNDS
                                     SEAL
                                     1984
                        COMMONWEALTH OF MASSACHUSETTS


(at lower right, printed
 vertically)                        Countersigned
                                    OPPENHEIMERFUNDS SERVICES (A DIVSION
OF OPPENHEIMERFUNDS, INC.)
                                    Denver (Colo.)      Transfer Agent

                                    By ____________________________
                                          Authorized Signature


II.   BACK OF CERTIFICATE (text reads from top to bottom of 11"   dimension)
      -------------------

      The following  abbreviations,  when used in the  inscription on the face
of this  certificate,  shall be  construed  as though they were written out in
full according to applicable laws or regulations.

TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
                        rights of survivorship and not
                        as tenants in common

UNIF GIFT/TRANSFER MIN ACT - __________  Custodian _______________
                                    (Cust)                  (Minor)

                                    UNDER UGMA/UTMA ___________________
                                                       (State)


Additional abbreviations may also be used though not on above list.

For  Value  Received   ................   hereby   sell(s),   assign(s),   and
transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)

______________________________________________________________        (Please
print or type name and address of assignee)

- ------------------------------------------------------

__________________________________________________________  Service  Shares of
the beneficial interest  represented by the within Certificate,  and do hereby
irrevocably  constitute  and appoint  ___________________________  Attorney to
transfer  the said  shares on the  books of the  within  named  Fund with full
power of substitution in the premises.

Dated: ______________________

                                    Signed: __________________________
                                          -----------------------------
                                    (Both must sign if joint tenancy)

                              Signature(s) __________________________
                              guaranteed        Name of Firm or Bank
                              by:         _____________________________
                                                Signature of Officer

(text  printed  NOTICE:  The  signature(s)  to this  assignment  vertically to
right must  correspond  with the name(s) as of above  paragraph)  written upon
the  face  of the  certificate  in  every  particular  without  alteration  or
enlargement or any change whatever.

(text printed in   Signatures  must  be  guaranteed  by a U.S.  box to left of
commercial bank or trust company, signature(s)   a         Federally-chartered
savings and loan association,  a foreign bank having a U.S. firm of a national
securities exchange.



N1a/ovaf/orgdocs/sharecerts/msfva.service0503

                                                             Exhibit 23(c)(xxiv)


                       OPPENHEIMER MAIN STREET FUND/VA

            Share Certificate for Non-Service Shares (8-1/2" x 11")
- -           -------------------------------------------------------


I.    FACE OF CERTIFICATE (All text and other matter lies within
      -------------------
                  8-1/4" x 10-3/4" decorative border, 5/16" wide)

                  (upper left corner): NUMBER [of shares]


                  (upper right) NON-SERVICE SHARES


                  (centered
                  below boxes)      Oppenheimer        Variable        Account
Funds

                  A MASSACHUSETTS BUSINESS TRUST
                  SERIES: OPPENHEIMER MAIN STREET FUND/VA


(at left)   THIS IS TO CERTIFY THAT       (at right) SEE REVERSE FOR
                                               CERTAIN DEFINITIONS

                                                (box with number)
                                                  CUSIP 683811889

      (at left)       is the owner of


      (centered)  FULLY PAID NON-SERVICE SHARES OF BENEFICIAL     INTEREST OF


                        OPPENHEIMER MAIN STREET FUND/VA
            a  series  of  OPPENHEIMER  VARIABLE  ACCOUNT  FUNDS  (hereinafter
            called the "Fund"),  transferable only on the books of the Fund by
            the holder hereof in person or by duly authorized  attorney,  upon
            surrender   of   this   certificate   properly   endorsed.    This
            certificate  and the  shares  represented  hereby  are  issued and
            shall be held subject to all of the provisions of the  Declaration
            of  Trust of the Fund to all of which  the  holder  by  acceptance
            hereof   assents.    This   certificate   is   not   valid   until
            countersigned by the Transfer Agent.

            WITNESS the facsimile  seal of the Fund and the  signatures of its
            duly authorized officers.

      (signature              Dated:            (signature
      at left of seal)                          at right of seal)

      /s/ Brian W. Wixted                       /s/ Robert G. Zack
      -----------------------             -------------------
      TREASURER                                       SECRETARY


                             (centered at bottom)
                        1-1/2" diameter facsimile seal
                                 with legend
                      OPPENHEIMER VARIABLE ACCOUNT FUNDS
                                     SEAL
                                     1984
                        COMMONWEALTH OF MASSACHUSETTS


(at lower right, printed
 vertically)                        Countersigned
                                    OPPENHEIMERFUNDS SERVICES (A DIVSION
OF OPPENHEIMERFUNDS, INC.)
                                    Denver (Colo.)      Transfer Agent

                                    By ____________________________
                                          Authorized Signature


II.   BACK OF CERTIFICATE (text reads from top to bottom of 11"   dimension)
      -------------------

      The following  abbreviations,  when used in the  inscription on the face
of this  certificate,  shall be  construed  as though they were written out in
full according to applicable laws or regulations.

TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
                        rights of survivorship and not
                        as tenants in common

UNIF GIFT/TRANSFER MIN ACT - __________  Custodian _______________
                                    (Cust)                  (Minor)

                                    UNDER UGMA/UTMA ___________________
                                                       (State)


Additional abbreviations may also be used though not on above list.

For  Value  Received   ................   hereby   sell(s),   assign(s),   and
transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)

______________________________________________________________        (Please
print or type name and address of assignee)

- ------------------------------------------------------


__________________________________________________________         Non-Service
Shares of the beneficial interest  represented by the within Certificate,  and
do  hereby  irrevocably  constitute  and  appoint  ___________________________
Attorney  to transfer  the said  shares on the books of the within  named Fund
with full power of substitution in the premises.


Dated: ______________________

                                    Signed: __________________________
                                          -----------------------------
                                    (Both must sign if joint tenancy)

                              Signature(s) __________________________
                              guaranteed        Name of Firm or Bank
                              by:         _____________________________
                                                           Signature        of
                              Officer

(text  printed  NOTICE:  The  signature(s)  to this  assignment  vertically to
right must  correspond  with the name(s) as of above  paragraph)  written upon
the  face  of the  certificate  in  every  particular  without  alteration  or
enlargement or any change whatever.

(text printed in   Signatures  must  be  guaranteed  by a U.S.  box to left of
commercial bank or trust company,  signature(s) a Federally-chartered  savings
and  loan  association,  a  foreign  bank  having  a U.S.  firm of a  national
securities exchange.


N1a/ovaf/orgdocs/sharecerts/msfva.non-service0503

EX-99.A

                                                              Exhibit 23(a)(i)

             FOURTEENTH AMENDED AND RESTATED DECLARATION OF TRUST

                                      OF


                      OPPENHEIMER VARIABLE ACCOUNT FUNDS



      This  FOURTEENTH  AMENDED AND RESTATED  DECLARATION OF TRUST, is made as
of the 1st day of May,  2003,  by and among  the  individuals  executing  this
Fourteenth Restated Declaration of Trust as the Trustees.

      WHEREAS,  (i) by  Declaration  of  Trust  dated  August  28,  1984,  the
Trustees  established a Trust initially named Oppenheimer Variable Life Funds,
a trust  fund under the laws of the  Commonwealth  of  Massachusetts,  for the
investment and reinvestment of funds  contributed  thereto,  (ii) by the First
Restated  Declaration of Trust dated March 11, 1986, the Trustees  amended and
restated said  Declaration of Trust to create two new Series of Shares,  (iii)
by the  Second  Restated  Declaration  of Trust  dated  August 15,  1986,  the
Trustees  further amended and restated said Declaration of Trust to change the
Trust's name to Oppenheimer  Variable  Account Funds and to make certain other
changes,  (iv) by the Third  Restated  Declaration  of Trust dated October 21,
1986, the Trustees  amended and restated said Declaration of Trust to create a
new Series of Shares,  (v) by the Fourth  Restated  Declaration of Trust dated
June 4, 1990, the Trustees  amended and restated said  Declaration of Trust to
create a new  Series of  Shares,  (vi) by the Fifth  Restated  Declaration  of
Trust  dated  February  25,  1993,  the  Trustees  amended and  restated  said
Declaration  of Trust to  create a new  Series of  Shares,  (vii) by the Sixth
Restated  Declaration of Trust dated  February 28, 1995, the Trustees  amended
and  restated  said  Declaration  of Trust to create a new  Series of  Shares,
(viii) by the Seventh  Restated  Declaration of Trust dated December 16, 1997,
the Trustees  amended and restated said Declaration of Trust to create two new
Series of Shares,  (ix) by the Eighth Restated  Declaration of Trust dated May
1, 1998,  the  Trustees  amended and  restated  said  Declaration  of Trust to
create a new class of Shares  for each  Series  and to change the names of two
Series, (x) by the Ninth Restated  Declaration of Trust dated May 1, 1999, the
Trustees  amended and restated such  Declaration  of Trust to change the names
of all ten series,  (xi) by the Tenth Restated  Declaration of Trust dated May
1, 2000,  the  Trustees  amended and  restated  such  Declaration  of Trust to
change the name of the Class  previously  designated  as "Class 2" to "Service
Shares",  (xii) by the Eleventh Restated  Declaration of Trust dated September
20, 2000,  such  Declaration  of Trust was amended and restated to incorporate
changes  approved at the  Shareholder  meeting held  September  20, 2000,  and
(xiii) by the Twelfth  Amended and Restated  Declaration of Trust dated May 1,
2001,  the  Trustees  changed  the  name  of  one  series,  and  (xiv)  by the
Thirteenth  Amended and Restated  Declaration  of Trust dated August 27, 2002,
the Trustees  amended and restated such  Declaration  of Trust to create a new
Series  and to change the  registered  agent for  service  of process  and the
address of the Trust;

     WHEREAS, the Trustees desire to further amend such Declaration of Trust, as
amended and restated; to create a new class of shares for the Oppenheimer Global
Securities Fund/VA Series and to change the name of the Series "Oppenheimer Main
Street Growth &  Income Fund/VA" to "Oppenheimer  Main Street  Fund/VA;" and
pursuant to part 12 of ARTICLE NINTH, the Trustees have revised and restated the
first  paragraph of part 3 of ARTICLE  FOURTH to clarify its  provisions  and to
correct certain minor errors therein without changing the substance of said part
3 except for the establishment and designation of said new Class of Shares.

      NOW,  THEREFORE,  the Trustees  declare that all money and property held
or  delivered  to the Trust  shall be held and managed  under this  Fourteenth
Amended and Restated Declaration of Trust IN TRUST as herein set forth below.

      ARTICLE FIRST - NAME
      -------------   ----

      This Trust shall be known as OPPENHEIMER  VARIABLE  ACCOUNT  FUNDS.  The
address  of  Oppenheimer  Variable  Account  Funds is 6803 South  Tucson  Way,
Centennial,  Colorado 80112. The Registered Agent of Service for Process is CT
Corporation System, 101 Federal Street, Boston, MA 02110.

      ARTICLE SECOND - DEFINITIONS
      --------------   -----------

      Whenever  used  herein,  unless  otherwise  required  by the  context or
specifically provided:

      1.    All terms used in this  Declaration  of Trust that are  defined in
the 1940 Act  (defined  below)  shall have the  meanings  given to them in the
1940 Act.

      2.    "1940 Act"  refers to the  Investment  Company Act of 1940 and the
Rules and Regulations of the Commission  thereunder,  all as amended from time
to time.

      3.    "Board" or "Board of Trustees" or the  "Trustees"  means the Board
of Trustees of the Trust.

4. "By-Laws" means the By-Laws of the Trust as amended from time to time.

5.  "Class"  means a class of a series of shares  of the Trust  established  and
designated under or in accordance with the provisions of Article FOURTH.

6. "Commission" means the Securities and Exchange Commission.

7.  "Declaration  of  Trust"  shall  mean  this  Twelfth  Amended  and  Restated
Declaration of Trust as it may be amended or restated from time to time.

8.    "Majority Vote of  Shareholders"  shall mean, with respect to any matter
on which the Shares of the Trust or of a Series or Class thereof,  as the case
may be,  may be  voted,  the "vote of a  majority  of the  outstanding  voting
securities"  (as defined in the 1940 Act or the rules and  regulations  of the
Commission  thereunder) of the Trust or such Series or Class,  as the case may
be.

9. "Net asset value" means, with respect to any Share of any Series,  (i) in the
case of a Share of a Series  whose  Shares are not  divided  into  Classes,  the
quotient  obtained by dividing the value of the net assets of that Series (being
the value of the assets belonging to that Series less the liabilities  belonging
to that  Series) by the total number of Shares of that Series  outstanding,  and
(ii) in the case of a Share of a Class of Shares of a Series  whose  Shares  are
divided into  Classes,  the  quotient  obtained by dividing the value of the net
assets of that  Series  allocable  to such Class  (being the value of the assets
belonging to that Series allocable to such Class less the liabilities  belonging
to such  Class) by the total  number of Shares of such  Class  outstanding;  all
determined  in accordance  with the methods and  procedures,  including  without
limitation those with respect to rounding, established by the Trustees from time
to time.

10. "Series" refers to series of shares of the Trust  established and designated
under or in accordance with the provisions of Article FOURTH.

11. "Shareholder" means a record owner of Shares of the Trust.

12.  "Shares"  refers  to the  transferable  units of  interest  into  which the
beneficial  interest  in the  Trust or any  Series or Class of the Trust (as the
context may require)  shall be divided from time to time and includes  fractions
of Shares as well as whole Shares.

13.  "Trust"  refers  to  the  Massachusetts  business  trust  created  by  this
Declaration of Trust, as amended or restated from time to time.

14. "Trustees"  refers to the individual  trustees in their capacity as trustees
hereunder of the Trust and their  successor or successors  for the time being in
office as such trustees.

      ARTICLE THIRD - PURPOSE OF TRUST
      -------------   ----------------

      The purpose or purposes  for which the Trust is formed and the  business
or objects to be transacted, carried on and promoted by it are as follows:

      1.    To  hold,   invest  or  reinvest  its  funds,  and  in  connection
therewith  to hold  part or all of its  funds  in  cash,  and to  purchase  or
otherwise  acquire,  hold for  investment or otherwise,  sell,  lend,  pledge,
mortgage,  write options on, lease, sell short, assign,  negotiate,  transfer,
exchange  or  otherwise  dispose  of or  turn  to  account  or  realize  upon,
securities   (which  term   "securities"   shall  for  the  purposes  of  this
Declaration of Trust,  without limitation of the generality thereof, be deemed
to include any stocks,  shares, bonds,  financial futures contracts,  indexes,
debentures,  notes,  mortgages  or other  obligations,  and any  certificates,
receipts,  warrants  or other  instruments  representing  rights  to  receive,
purchase or subscribe for the same, or  evidencing or  representing  any other
rights or interests  therein,  or in any property or assets) created or issued
by any issuer (which term "issuer" shall for the purposes of this  Declaration
of Trust,  without limitation of the generality  thereof, be deemed to include
any persons, firms, associations,  corporations,  syndicates, business trusts,
partnerships, investment companies, combinations,  organizations, governments,
or  subdivisions  thereof)  and in  financial  instruments  (whether  they are
considered as securities or commodities);  and to exercise, as owner or holder
of any securities or financial instruments,  all rights, powers and privileges
in  respect  thereof;  and  to  do  any  and  all  acts  and  things  for  the
preservation,  protection,  improvement and enhancement in value of any or all
such securities or financial instruments.

      2.    To borrow money and pledge  assets in  connection  with any of the
objects or  purposes  of the Trust,  and to issue  notes or other  obligations
evidencing  such  borrowings,  to the extent  permitted by the 1940 Act and by
the Trust's fundamental investment policies under the 1940 Act.


      3.    To issue  and sell its  Shares  in such  Series  and  Classes  and
amounts  and on such  terms and  conditions,  for such  purposes  and for such
amount  or  kind  of  consideration  (including  without  limitation  thereto,
securities)  now or  hereafter  permitted by the laws of the  Commonwealth  of
Massachusetts and by this Declaration of Trust, as the Trustees may determine.


      4.    To purchase  or  otherwise  acquire,  hold,  dispose  of,  resell,
transfer,  reissue,  redeem or cancel its Shares, or to classify or reclassify
any unissued  Shares or any Shares  previously  issued and  reacquired  of any
Series  or Class  into  one or more  Series  or  Classes  that  may have  been
established  and designated from time to time, all without the vote or consent
of the  Shareholders  of the  Trust,  in any  manner  and to the extent now or
hereafter permitted by this Declaration of Trust.

      5.    To  conduct  its  business  in all  its  branches  at one or  more
offices in New York, Colorado and elsewhere in any part of the world,  without
restriction or limit as to extent.

      6.    To carry out all or any of the  foregoing  objects and purposes as
principal  or agent,  and alone or with  associates  or to the  extent  now or
hereafter  permitted by the laws of  Massachusetts,  as a member of, or as the
owner or  holder  of any  securities  or  other  instruments  of,  or share of
interest  in, any issuer,  and in  connection  therewith or make or enter into
such deeds or  contracts  with any  issuers and to do such acts and things and
to exercise such powers,  as a natural person could lawfully make, enter into,
do or exercise.


      7.    To do any and all such  further  acts and things  and to  exercise
any and all such further  powers as may be  necessary,  incidental,  relative,
conducive,  appropriate or desirable for the  accomplishment,  carrying out or
attainment of all or any of the foregoing purposes or objects.

         The  foregoing  objects  and  purposes  shall,  except  as  otherwise
expressly  provided,  be in no way limited or  restricted  by reference to, or
inference  from, the terms of any other clause of this or any other Article of
this  Declaration  of Trust,  and shall each be  regarded as  independent  and
construed as powers as well as objects and purposes,  and the  enumeration  of
specific  purposes,  objects  and powers  shall not be  construed  to limit or
restrict in any manner the meaning of general  terms or the general  powers of
the  Trust  now or  hereafter  conferred  by the laws of the  Commonwealth  of
Massachusetts  nor shall  the  expression  of one  thing be deemed to  exclude
another,  though it be of a  similar  or  dissimilar  nature,  not  expressed;
provided,  however,  that  the  Trust  shall  not  carry on any  business,  or
exercise any powers,  in any state,  territory,  district or country except to
the extent  that the same may  lawfully be carried on or  exercised  under the
laws thereof.


      ARTICLE FOURTH - SHARES
      --------------   ------

      1. The  beneficial  interest in the Trust shall be divided  into Shares,
all with $.001 par value per share,  but the Trustees shall have the authority
from time to time, without obtaining  shareholder  approval,  to create one or
more Series of Shares in addition to the Series  specifically  established and
designated in part 3 of this Article  FOURTH,  and to divide the shares of any
Series into two or more  Classes  pursuant to part 2 of this  Article  FOURTH,
all as they deem  necessary or  desirable,  to establish  and  designate  such
Series  and  Classes,  and  to fix  and  determine  the  relative  rights  and
preferences  as between the different  Series of Shares or Classes as to right
of redemption and the price,  terms and manner of redemption,  liabilities and
expenses to be borne by any Series or Class,  special and  relative  rights as
to dividends and other  distributions and on liquidation,  sinking or purchase
fund provisions, conversion on liquidation,  conversion rights, and conditions
under which the several Series or Classes shall have individual  voting rights
or no voting  rights.  Except as  established  by the Trustees with respect to
such Series or Classes,  pursuant to the  provisions  of this Article  FOURTH,
and except as otherwise  provided  herein,  all Shares of the different Series
and Classes of a Series, if any, shall be identical.

            (a)   The number of authorized  Shares and the number of Shares of
each  Series and each Class of a Series that may be issued is  unlimited,  and
the  Trustees  may issue  Shares of any Series or Class of any Series for such
consideration   and  on  such  terms  as  they  may   determine   (or  for  no
consideration if pursuant to a Share dividend or split-up),  or may reduce the
number of issued  Shares of a Series or Class in  proportion  to the  relative
net asset value of the Shares of such Series or Class,  all without  action or
approval  of the  Shareholders.  All  Shares  when  so  issued  on  the  terms
determined  by the  Trustees  shall be  fully  paid  and  non-assessable.  The
Trustees  may  classify  or  reclassify  any  unissued  Shares  or any  Shares
previously  issued and  reacquired  of any Series  into one or more  Series or
Classes of Series that may be established  and  designated  from time to time.
The Trustees may hold as treasury  Shares (of the same or some other  Series),
reissue for such  consideration  and on such terms as they may  determine,  or
cancel,  at their  discretion from time to time, any Shares  reacquired by the
Trust.

            (b)   The  establishment  and  designation  of any  Series  or any
Class of any Series in addition to that  established  and designated in part 3
of this Article  FOURTH shall be effective  upon either (i) the execution by a
majority of the Trustees of an  instrument  setting  forth such  establishment
and  designation  and the relative  rights and  preferences  of such Series or
such  Class  of  such  Series,  whether  directly  in  such  instrument  or by
reference to, or approval of,  another  document that sets forth such relative
rights and  preferences  of the  Series or any Class of any Series  including,
without  limitation,  any registration  statement of the Trust,  (ii) upon the
execution of an instrument  in writing by an officer of the Trust  pursuant to
the vote of a majority  of the  Trustees,  or (iii) as  otherwise  provided in
either such  instrument.  At any time that there are no Shares  outstanding of
any particular  Series or Class  previously  established and  designated,  the
Trustees may by an instrument  executed by a majority of their number or by an
officer of the Trust pursuant to a vote of a majority of the Trustees  abolish
that  Series or Class and the  establishment  and  designation  thereof.  Each
instrument  referred  to in  this  paragraph  shall  be an  amendment  to this
Declaration  of Trust,  and the Trustees may make any such  amendment  without
shareholder approval.

            (c)   Any  Trustee,  officer or other agent of the Trust,  and any
organization  in which any such person is  interested  may acquire,  own, hold
and  dispose  of Shares of any  Series or Class of any  Series of the Trust to
the same extent as if such  person were not a Trustee,  officer or other agent
of the Trust;  and the Trust may issue and sell or cause to be issued and sold
and may  purchase  Shares of any  Series or Class of any Series to or from any
such person or any such organization  subject only to the general limitations,
restrictions or other provisions  applicable to the sale or purchase of Shares
of such Series or Class generally.

     2. (a) Classes.  The Trustees shall have the exclusive  authority from time
to time,  without obtaining  shareholder  approval,  to divide the Shares of any
Series into two or more  Classes as they deem  necessary  or  desirable,  and to
establish and  designate  such  Classes.  In such event,  each Class of a Series
shall  represent  interests in the designated  Series of the Trust and have such
voting,  dividend,  liquidation  and  other  rights  as may be  established  and
designated  by the  Trustees.  Expenses  and  liabilities  related  directly  or
indirectly  to the  Shares  of a Class of a Series  may be borne  solely by such
Class (as shall be determined by the Trustees)  and, as provided in this Article
FOURTH. The bearing of expenses and liabilities solely by a Class of Shares of a
Series  shall  be  appropriately  reflected  (in the  manner  determined  by the
Trustees) in the net asset value,  dividend and liquidation rights of the Shares
of such Class of a Series.  The  division of the Shares of a Series into Classes
and the terms and  conditions  pursuant  to which the Shares of the Classes of a
Series will be issued must be made in compliance  with the 1940 Act. No division
of Shares of a Series into  Classes  shall  result in the creation of a Class of
Shares having a preference as to dividends or  distributions  or a preference in
the event of any  liquidation,  termination  or winding up of the Trust,  to the
extent such a preference  is  prohibited by Section 18 of the 1940 Act as to the
Trust.  The  fact  that a Series  shall  have  initially  been  established  and
designated  without any specific  establishment or designation of Classes (i.e.,
that all  Shares of such  Series are  initially  of a single  Class),  or that a
Series shall have more than one  established  and  designated  Class,  shall not
limit the authority of the Trustees to establish and designate separate Classes,
or one or more  additional  Classes,  of said  Series  without  approval  of the
holders of the initial Class thereof,  or previously  established and designated
Class or Classes thereof.

     (b) Class  Differences.  The relative rights and preferences of the Classes
of any Series may differ in such other respects as the Trustees may determine to
be appropriate in their sole discretion,  provided that such differences are set
forth in the instrument  establishing  and designating such Classes and executed
by a majority of the Trustees (or by an instrument executed by an officer of the
Trust pursuant to a vote of a majority of the Trustees).

      The  relative  rights and  preferences  of each Class of Shares shall be
the same in all  respects  except  that,  and  unless  and  until the Board of
Trustees  shall  determine  otherwise:  (i)  when a vote  of  Shareholders  is
required under this  Declaration of Trust or when a meeting of Shareholders is
called by the Board of Trustees,  the Shares of a Class shall vote exclusively
on matters  that affect that Class only;  (ii) the  expenses  and  liabilities
related  to a Class  shall be borne  solely by such Class (as  determined  and
allocated  to such  Class  by the  Trustees  from  time  to  time in a  manner
consistent with parts 2 and 3 of this Article  FOURTH);  and (iii) pursuant to
part 10 of  Article  NINTH,  the  Shares of each  Class  shall have such other
rights  and  preferences  as are set  forth  from  time  to  time in the  then
effective  prospectus and/or statement of additional  information  relating to
the Shares.  Dividends  and  distributions  on each Class of Shares may differ
from the  dividends  and  distributions  on any other such Class,  and the net
asset  value of each Class of Shares may  differ  from the net asset  value of
any other such Class.

     3.  Establishment  and Designation of Series:  The Trustees have previously
established  and designated  eleven Series of Shares:  (i) by the Declaration of
Trust dated August 28, 1984,  "Oppenheimer  Money  Fund/VA,"  "Oppenheimer  Bond
Fund/VA" and  "Oppenheimer  Growth  Fund," (the said  "Oppenheimer  Growth Fund"
having subsequently been renamed  "Oppenheimer  Capital  Appreciation Fund/VA by
the Ninth Restated  Declaration  of Trust dated May 1, 1999);  (ii) by the First
Restated  Declaration  of Trust dated March 11, 1986,  "Oppenheimer  High Income
Fund/VA" and  "Oppenheimer  Capital  Appreciation  Fund" (the said  "Oppenheimer
Capital   Appreciation  Fund"  having  subsequently  been  renamed  "Oppenheimer
Aggressive Growth Fund/VA" by the Eighth Restated Declaration of Trust dated May
1, 1998); (iii) "Oppenheimer  Multiple Strategies  Fund/VA,"  established by the
Third Restated  Declaration of Trust dated October 21, 1986;  (iv)  "Oppenheimer
Global  Securities  Fund/VA"  established by the Fourth Restated  Declaration of
Trust dated June 4, 1990; (v) "Oppenheimer  Strategic Bond Fund/VA"  established
by the Fifth Restated  Declaration of Trust dated February 25, 1993; (vi) by the
Sixth Restated Declaration of Trust dated February 28, 1995, "Oppenheimer Growth
&  Income  Fund" (the said  "Oppenheimer  Growth  &  Income Fund" having
subsequently been renamed  "Oppenheimer Main Street Growth & Income Fund/VA"
by the Ninth Restated Declaration of Trust dated May 1, 1999) and hereby renamed
"Oppenheimer  Main Street  Fund/VA" by this Fourteenth  Restated  Declaration of
Trust;  (vii) by the Seventh  Restated  Declaration  of Trust dated December 16,
1997, "Oppenheimer Discovery Fund" (the said "Oppenheimer Discovery Fund" having
been  subsequently  renamed  "Oppenheimer  Small Cap Growth  Fund" by the Eighth
Restated Declaration of Trust dated May 1, 1998 and further renamed "Oppenheimer
Main Street  Small Cap  Fund/VA" by the Twelfth  Restated  Declaration  of Trust
dated May 1, 2001); and (viii)  "Oppenheimer  Value Fund/VA"  established by the
Thirteenth  Amended and Restated  Declaration of Trust dated August 27, 2002. By
the Ninth  Restated  Declaration  of Trust  dated May 1, 2000,  all shares  then
established and designated were renamed by adding the designation "/VA" to them.

     Establishment and Designation of Classes:

The Shares of  Oppenheimer  Money  Fund/VA,  Oppenheimer  High  Income  Fund/VA,
Oppenheimer Bond Fund/VA,  Oppenheimer  Global Securities  Fund/VA,  Oppenheimer
Aggressive Growth Fund/VA, Oppenheimer Capital Appreciation Fund/VA, Oppenheimer
Multiple Strategies  Fund/VA,  Oppenheimer  Strategic Bond Fund/VA,  Oppenheimer
Main Street  Growth  &  Income  Fund/VA,  Oppenheimer  Main Street Small Cap
Fund/VA and  Oppenheimer  Value  Fund/VA have  previously  been divided into two
Classes as follows:  (i) one class of the Shares of each Series authorized since
the  establishment and designation of that Series has no class designation other
than the name of the Series set forth above; and (ii) one class of the Shares of
each Series as  established  and  designated  upon the division of the Shares of
each Series into two Classes by the Eighth  Restated  Declaration of Trust dated
May 1,  1998 ( "Class 2  shares")  and  renamed  "Service  Shares"  by the Tenth
Restated  Declaration of Trust dated May 1, 2000 and Service Shares subsequently
established and designated by later amendment s to this Declaration of Trust.

      The Trustees of the Trust  hereby  establish  and  designate a new third
class of Shares of each Series which shall be known as "Class 3" Shares.

      Termination  of Series and Classes:  The Trustees  terminated the Series
of Shares,  "Oppenheimer Real Asset Fund," that was established by the SEVENTH
Restated  Declaration  of Trust dated  December 16, 1997,  for which no shares
were ever issued.

      Further Actions:  Actions  previously taken by the Trustees to establish
and  designate  Series and  Classes  of Shares and the rights and  preferences
thereof  shall not limit the  authority  of the  Trustees set forth in parts 1
and 2 of this ARTICLE  FOURTH to establish and designate any further Series or
Classes of Shares.

     Rights and Preferences: In addition to the rights and preferences described
in parts 1 and 2 of this ARTICLE FOURTH with respect to Series and Classes,  the
Series  and  Classes  established  hereby  shall  have the  relative  rights and
preferences  described in this part 3 of this ARTICLE FOURTH.  The Shares of any
further  Series  or  Classes  that  may  from  time to time be  established  and
designated by the Trustees shall (unless the Trustees  otherwise  determine with
respect  to some  further  Series or  Classes  at the time of  establishing  and
designating the same) have the following relative rights and preferences:

     (a) Assets Belonging to Series or Class. All consideration  received by the
Trust  for the  issue or sale of  Shares  of a  particular  Series  or any Class
thereof,  together  with all assets in which such  consideration  is invested or
reinvested,  all income, earnings,  profits, and proceeds thereof, including any
proceeds derived from the sale,  exchange or liquidation of such assets, and any
funds or payments  derived from any  reinvestment  of such  proceeds in whatever
form  the same may be,  shall  irrevocably  belong  to that  Series  (and may be
allocated to any Classes  thereof) for all purposes,  subject only to the rights
of  creditors,  and shall be so recorded upon the books of account of the Trust.
Such consideration,  assets,  income,  earnings,  profits, and proceeds thereof,
including any proceeds  derived from the sale,  exchange or  liquidation of such
assets,  and any  funds  or  payments  derived  from  any  reinvestment  of such
proceeds,  in whatever  form the same may be,  together  with any General  Items
allocated  to that  Series as  provided in the  following  sentence,  are herein
referred to as "assets  belonging  to" that Series.  In the event that there are
any assets, income, earnings,  profits, and proceeds thereof, funds, or payments
which  are not  readily  identifiable  as  belonging  to any  particular  Series
(collectively  "General Items"),  the Trustees shall allocate such General Items
to and among any one or more of the Series  established and designated from time
to time in such manner and on such basis as they, in their sole discretion, deem
fair and  equitable;  and any General Items so allocated to a particular  Series
shall belong to that Series (and be allocable to any Classes thereof). Each such
allocation by the Trustees shall be conclusive and binding upon the Shareholders
of all Series (and any Classes  thereof) for all  purposes.  No  Shareholder  or
former  Shareholder of any Series or Class shall have a claim on or any right to
any assets allocated or belonging to any other Series or Class.

     (b) (1) Liabilities Belonging to Series. The liabilities,  expenses, costs,
charges and reserves  attributable to each Series shall be charged and allocated
to the assets  belonging to each  particular  Series.  Any general  liabilities,
expenses, costs, charges and reserves of the Trust which are not identifiable as
belonging  to any  particular  Series  shall be  allocated  and  charged  by the
Trustees to and among any one or more of the Series  established  and designated
from time to time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable.  The liabilities,  expenses,  costs, charges
and reserves  allocated and so charged to each Series are herein  referred to as
"liabilities   belonging  to"  that  Series.  Each  allocation  of  liabilities,
expenses,  costs,  charges and reserves by the Trustees  shall be conclusive and
binding upon the shareholders of all Series for all purposes.

     (2) Liabilities Belonging to a Class. If a Series is divided into more than
one Class, the liabilities,  expenses,  costs, charges and reserves attributable
to a  Class  shall  be  charged  and  allocated  to  the  Class  to  which  such
liabilities,  expenses, costs, charges or reserves are attributable. Any general
liabilities,  expenses, costs, charges or reserves belonging to the Series which
are not identifiable as belonging to any particular Class shall be allocated and
charged by the Trustees to and among any one or more of the Classes  established
and  designated  from  time  to time in such  manner  and on such  basis  as the
Trustees in their sole  discretion  deem fair and  equitable.  The  liabilities,
expenses, costs, charges and reserves allocated and so charged to each Class are
herein referred to as "liabilities  belonging to" that Class. Each allocation of
liabilities,  expenses,  costs,  charges and reserves by the  Trustees  shall be
conclusive and binding upon the holders of all Classes for all purposes.

     (c) Dividends. Dividends and distributions on Shares of a particular Series
or Class may be paid to the holders of Shares of that Series or Class, with such
frequency  as the  Trustees  may  determine,  which  may be daily  or  otherwise
pursuant to a standing  resolution or resolutions adopted only once or with such
frequency as the Trustees may determine,  from such of the income, capital gains
accrued or realized,  and capital and surplus, from the assets belonging to that
Series, or in the case of a Class,  belonging to such Series and being allocable
to such Class,  as the Trustees may  determine,  after  providing for actual and
accrued  liabilities  belonging  to such  Series or  Class.  All  dividends  and
distributions on Shares of a particular Series or Class shall be distributed pro
rata to the  Shareholders of such Series or Class in proportion to the number of
Shares of such Series or Class held by such Shareholders at the date and time of
record  established for the payment of such dividends or  distributions,  except
that in connection  with any dividend or  distribution  program or procedure the
Trustees  may  determine  that no dividend or  distribution  shall be payable on
Shares as to which the Shareholder's purchase order and/or payment have not been
received by the time or times  established by the Trustees under such program or
procedure.  Such  dividends and  distributions  may be made in cash or Shares of
that Series or Class or a  combination  thereof as determined by the Trustees or
pursuant to any program that the Trustees may have in effect at the time for the
election  by each  Shareholder  of the mode of the  making of such  dividend  or
distribution  to that  Shareholder.  Any such dividend or  distribution  paid in
Shares will be paid at the net asset value  thereof as  determined in accordance
with part 13 of Article SEVENTH. Notwithstanding anything in this Declaration of
Trust to the  contrary,  the Trustees  may at any time declare and  distribute a
dividend  of stock or  other  property  pro rata  among  the  Shareholders  of a
particular  Series or Class at the date and time of record  established  for the
payment of such dividends or distributions.

     (d)  Liquidation.  In the event of the  liquidation  or  dissolution of the
Trust or any Series or Class thereof,  the  Shareholders  of each Series and all
Classes of each Series that have been  established  and designated and are being
liquidated  and  dissolved  shall be entitled to receive,  as a Series or Class,
when and as declared by the Trustees, the excess of the assets belonging to that
Series or, in the case of a Class,  belonging  to that Series and  allocable  to
that Class,  over the  liabilities  belonging to that Series or Class.  Upon the
liquidation  or dissolution of the Trust or any Series or Class pursuant to this
part 3(d) of this Article  FOURTH the  Trustees  shall make  provisions  for the
payment of all outstanding obligations, taxes and other liabilities,  accrued or
contingent, of the Trust or that Series or Class. The assets so distributable to
the Shareholders of any particular  Class and Series shall be distributed  among
such  Shareholders in proportion to the relative net asset value of such Shares.
The  liquidation of the Trust or any  particular  Series or Class thereof may be
authorized  at any time by vote of a  majority  of the  Trustees  or  instrument
executed by a majority of their  number then in office,  provided  the  Trustees
find that it is in the best interest of the Shareholders of such Series or Class
or as  otherwise  provided  in  this  Declaration  of  Trust  or the  instrument
establishing  such Series or Class. The Trustees shall provide written notice to
affected  shareholders  of a termination  effected  under this part 3(d) of this
Article FOURTH.

     (e)  Transfer.  All  Shares of each  particular  Series  or Class  shall be
transferable,  but transfers of Shares of a particular  Class and Series will be
recorded on the Share transfer records of the Trust applicable to such Series or
Class of that Series,  as kept by the Trust or by any transfer or similar agent,
as the case may be, only at such times as  Shareholders  shall have the right to
require the Trust to redeem Shares of such Series or Class of that Series and at
such other times as may be permitted by the Trustees.

     (f) Equality.  Except as provided  herein or in the instrument  designating
and establishing any Series or Class, all Shares of a particular Series or Class
shall represent an equal proportionate  interest in the assets belonging to that
Series,  or in the case of a Class,  belonging  to that Series and  allocable to
that Class, (subject to the liabilities belonging to that Series or that Class),
and each Share of any  particular  Series or Class  shall be equal to each other
Share of that Series or Class;  but the  provisions of this  sentence  shall not
restrict any distinctions  permissible  under this Article FOURTH that may exist
with respect to Shares of the  different  Classes of a Series.  The Trustees may
from time to time divide or combine the Shares of any particular Class or Series
into a greater or lesser number of Shares of that Class or Series  provided that
such  division  or  combination  does not  change the  proportionate  beneficial
interest in the assets belonging to that Series or allocable to that Class or in
any way affect the rights of Shares of any other Class or Series.

     (g)  Fractions.  Any fractional  Share of any Class or Series,  if any such
fractional Share is outstanding,  shall carry proportionately all the rights and
obligations  of a whole Share of that Class and Series,  including  those rights
and obligations with respect to voting,  receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust.

     (h) Conversion  Rights.  Subject to compliance with the requirements of the
1940 Act, the Trustees  shall have the  authority to provide that (i) holders of
Shares of any Series shall have the right to exchange said Shares into Shares of
one or more other  Series of Shares,  (ii)  holders of shares of any Class shall
have the right to exchange  said Shares into Shares of one or more other Classes
of the same or a different  Series,  and/or (iii) the Trust shall have the right
to carry out  exchanges of the aforesaid  kind, in each case in accordance  with
such requirements and procedures as may be established by the Trustees.

     (i)  Ownership of Shares.  The ownership of Shares shall be recorded on the
books of the Trust or of a transfer or similar agent for the Trust,  which books
shall be maintained  separately for the Shares of each Class and Series that has
been established and designated.  No  certification  certifying the ownership of
Shares need be issued except as the Trustees may otherwise  determine  from time
to time. The Trustees may make such rules as they consider  appropriate  for the
issuance of Share certificates, the use of facsimile signatures, the transfer of
Shares and similar  matters.  The record books of the Trust as kept by the Trust
or any transfer or similar agent,  as the case may be, shall be conclusive as to
who are the Shareholders and as to the number of Shares of each Class and Series
held from time to time by each such Shareholder.

     (j)  Investments in the Trust.  The Trustees may accept  investments in the
Trust  from  such  persons  and on such  terms and for such  consideration,  not
inconsistent  with the  provisions  of the 1940  Act,  as they from time to time
authorize or determine.  Such investments may be in the form of cash, securities
or other property in which the appropriate Series is authorized to invest,  hold
or own,  valued as  provided  in part 13,  Article  SEVENTH.  The  Trustees  may
authorize any distributor,  principal underwriter,  custodian, transfer agent or
other person to accept orders for the purchase or sale of Shares that conform to
such  authorized  terms and to reject  any  purchase  or sale  orders for Shares
whether or not conforming to such authorized terms.

      ARTICLE FIFTH - SHAREHOLDERS' VOTING POWERS AND MEETINGS
      -------------   ----------------------------------------

      The  following  provisions  are hereby  adopted  with  respect to voting
Shares of the Trust and certain other rights:

      1.    The  Shareholders  shall  have the  power to vote only (a) for the
election of Trustees when that issue is submitted to Shareholders,  or removal
of Trustees to the extent and as provided in Article  SIXTH,  (b) with respect
to the  amendment of this  Declaration  of Trust to the extent and as provided
in part 12, Article NINTH,  (c) with respect to  transactions  with respect to
the Trust, a Series or Class as provided in part 4(a),  Article NINTH,  (d) to
the same extent as the shareholders of a Massachusetts  business  corporation,
as to whether or not a court action,  proceeding or claim should be brought or
maintained  derivatively  or as a class  action on behalf  of the  Trust,  any
Series, Class or the Shareholders,  (e) with respect to those matters relating
to the Trust as may be  required  by the 1940 Act or  required by law, by this
Declaration  of  Trust,  or the  By-Laws  of  the  Trust  or any  registration
statement  of the Trust  filed with the  Commission  or any  State,  or as the
Trustees  may  consider  desirable,  and (f) with  respect to any other matter
which  the  Trustees,   in  their  sole   discretion,   shall  submit  to  the
Shareholders.

      2.    The Trust will not hold  shareholder  meetings  unless required by
the 1940 Act,  the  provisions  of this  Declaration  of  Trust,  or any other
applicable law. The Trustees may call a meeting of  shareholders  from time to
time.

      3.    As to  each  matter  submitted  to a vote  of  Shareholders,  each
Shareholder  shall be  entitled  to one vote for  each  whole  Share  and to a
proportionate  fractional  vote for each  fractional  Share  standing  in such
Shareholder's  name on the  books  of the  Trust  irrespective  of the  Series
thereof or the Class  thereof and all Shares of all Series and  Classes  shall
vote together as a single Class; provided,  however, that (i) as to any matter
with  respect  to  which a  separate  vote of one or more  Series  or  Classes
thereof  is  required  by  the  1940  Act  or the  provisions  of the  writing
establishing  and designating the Series or Class,  such  requirements as to a
separate  vote by such  Series  or Class  thereof  shall  apply in lieu of all
Shares of all Series and Classes  thereof  voting  together as a single Class;
and (ii) as to any matter  which  affects  only the  interests  of one or more
particular  Series or Classes  thereof,  only the holders of Shares of the one
or more  affected  Series or Classes  thereof  shall be entitled to vote,  and
each such  Series or Class  shall  vote as a separate  Class.  All Shares of a
Series  shall have  identical  voting  rights,  and all Shares of a Class of a
Series shall have identical  voting  rights.  Shares may be voted in person or
by proxy.  Proxies may be given by or on behalf of a Shareholder  orally or in
writing or  pursuant  to any  computerized,  telephonic,  or  mechanical  data
gathering process.

      4.    Except as required by the 1940 Act or other  applicable  law,  the
presence  in person or by proxy of  one-third  of the Shares  entitled to vote
shall be a quorum for the transaction of business at a Shareholders'  meeting,
provided,  however,  that if any action to be taken by the  Shareholders  of a
Series or Class  requires an  affirmative  vote of a majority,  or more than a
majority,  of the Shares  outstanding  and entitled to vote, then with respect
to voting on that  particular  issue the presence in person or by proxy of the
holders of a majority of the Shares  outstanding  and entitled to vote at such
a meeting  shall  constitute  a quorum for the  transaction  of business  with
respect to such issue.  Any number less than a quorum shall be sufficient  for
adjournments.  If at any meeting of the Shareholders  there shall be less than
a quorum  present  with  respect to a  particular  issue to be voted on,  such
meeting may be adjourned,  without further notice,  with respect to such issue
from time to time until a quorum  shall be present with respect to such issue,
but  voting  may take  place  with  respect  to  issues  for which a quorum is
present.  Any  meeting of  Shareholders,  whether or not a quorum is  present,
may be  adjourned  with  respect to any one or more items of business  for any
lawful purpose,  provided that no meeting shall be adjourned for more than six
months  beyond  the  originally  scheduled  date.  Any  adjourned  session  or
sessions  may be  held,  within  a  reasonable  time  after  the  date for the
original  meeting without the necessity of further  notice.  A majority of the
Shares  voted at a  meeting  at which a quorum is  present  shall  decide  any
questions and a plurality shall elect a Trustee,  except when a different vote
is required by any  provision  of the 1940 Act or other  applicable  law or by
this Declaration of Trust or By-Laws.

      5.    Each  Shareholder,  upon  request  to the  Trust  in  proper  form
determined  by the Trust,  shall be  entitled  to require  the Trust to redeem
from the net assets of that  Series  all or part of the Shares of such  Series
and Class  standing in the name of such  Shareholder.  The method of computing
such net  asset  value,  the  time at which  such  net  asset  value  shall be
computed  and the time  within  which the Trust shall make  payment  therefor,
shall be  determined  as  hereinafter  provided  in  Article  SEVENTH  of this
Declaration  of Trust.  Notwithstanding  the  foregoing,  the  Trustees,  when
permitted  or required to do so by the 1940 Act,  may suspend the right of the
Shareholders to require the Trust to redeem Shares.

      6.    No Shareholder  shall, as such holder,  have any right to purchase
or  subscribe  for any Shares of the Trust  which it may issue or sell,  other
than such right, if any, as the Trustees, in their discretion, may determine.

      7.    All  persons  who shall  acquire  Shares  shall  acquire  the same
subject to the provisions of the Declaration of Trust.

      8.    Cumulative  voting  for the  election  of  Trustees  shall  not be
allowed.

      ARTICLE SIXTH - THE TRUSTEES
      -------------   ------------

      1.    The persons who shall act as Trustees  until their  successors are
duly chosen and qualify are the trustees  executing this  Declaration of Trust
or any  counterpart  thereof.  However,  the  By-Laws of the Trust may fix the
number of  Trustees  at a number  greater or lesser than the number of initial
Trustees and may  authorize the Trustees to increase or decrease the number of
Trustees,  to fill any  vacancies  on the Board which may occur for any reason
including  any  vacancies  created  by any  such  increase  in the  number  of
Trustees,  to set and  alter  the  terms  of  office  of the  Trustees  and to
lengthen or lessen  their own terms of office or make their terms of office of
indefinite  duration,  all  subject to the 1940 Act,  as amended  from time to
time, and to this Article SIXTH.  Unless otherwise  provided by the By-Laws of
the Trust, the Trustees need not be Shareholders.

      2.    A Trustee at any time may be removed  either with or without cause
by  resolution  duly  adopted  by  the  affirmative  vote  of the  holders  of
two-thirds  of the  outstanding  Shares,  present in person or by proxy at any
meeting of  Shareholders  called  for such  purpose;  such a meeting  shall be
called by the  Trustees  when  requested  in  writing  to do so by the  record
holders of not less than ten per centum of the outstanding  Shares.  A Trustee
may also be removed by the Board of  Trustees,  as  provided in the By-Laws of
the Trust.

      3.    The Trustees  shall make  available a list of names and  addresses
of all  Shareholders  as recorded on the books of the Trust,  upon  receipt of
the  request in  writing  signed by not less than ten  Shareholders  (who have
been  shareholders for at least six months) holding in the aggregate shares of
the Trust  valued at not less  than  $25,000  at  current  offering  price (as
defined  in the then  effective  Prospectus  and/or  Statement  of  Additional
Information  relating  to the  Shares  under the  Securities  Act of 1933,  as
amended  from  time to time) or  holding  not less  than 1% in  amount  of the
entire amount of Shares issued and  outstanding;  such request must state that
such Shareholders  wish to communicate with other  Shareholders with a view to
obtaining  signatures  to a request for a meeting to take  action  pursuant to
part 2 of this Article SIXTH and be accompanied by a form of  communication to
the  Shareholders.  The  Trustees  may,  in their  discretion,  satisfy  their
obligation  under this part 3 by either making  available the Shareholder list
to such  Shareholders at the principal offices of the Trust, or at the offices
of the Trust's transfer agent,  during regular business hours, or by mailing a
copy  of such  communication  and  form of  request,  at the  expense  of such
requesting Shareholders, to all other Shareholders,  and the Trustees may also
take such other action as may be  permitted  under  Section  16(c) of the 1940
Act.

      ARTICLE SEVENTH - POWERS OF TRUSTEES
      ---------------   ------------------

      The  following   provisions  are  hereby  adopted  for  the  purpose  of
defining,  limiting and regulating  the powers of the Trust,  the Trustees and
the Shareholders.

      1.    As soon as any Trustee is duly elected by the  Shareholders or the
Trustees and shall have  accepted  this Trust,  the Trust estate shall vest in
the new Trustee or Trustees,  together with the continuing  Trustees,  without
any  further  act or  conveyance,  and he or she  shall be  deemed  a  Trustee
hereunder.

      2.    The  death,  declination,  resignation,  retirement,  removal,  or
incapacity of the Trustees,  or any one of them, shall not operate to annul or
terminate  the Trust or any Series but the Trust shall  continue in full force
and effect pursuant to the terms of this Declaration of Trust.

      3.    The assets of the Trust shall be held  separate and apart from any
assets now or hereafter held in any capacity  other than as Trustee  hereunder
by the  Trustees  or any  successor  Trustees.  All of the assets of the Trust
shall at all times be  considered as vested in the  Trustees.  No  Shareholder
shall have, as a holder of beneficial  interest in the Trust,  any  authority,
power or right whatsoever to transact  business for or on behalf of the Trust,
or on behalf of the  Trustees,  in  connection  with the property or assets of
the Trust, or in any part thereof.

      4.    The Trustees in all  instances  shall act as  principals,  and are
and shall be free from the control of the  Shareholders.  The  Trustees  shall
have full power and  authority to do any and all acts and to make and execute,
and to  authorize  the  officers  and agents of the Trust to make and execute,
any and all  contracts  and  instruments  that they may consider  necessary or
appropriate  in  connection  with  the  management  of the  Trust.  Except  as
otherwise  provided  herein or in the 1940 Act, the Trustees  shall not in any
way be bound or  limited  by  present  or future  laws or customs in regard to
Trust  investments,  but shall have full  authority  and power to make any and
all investments which they, in their  uncontrolled  discretion and to the same
extent as if the Trustees  were the sole owners of the assets of the Trust and
the business in their own right,  shall deem proper to accomplish  the purpose
of this Trust.  Subject to any  applicable  limitation in this  Declaration of
Trust or by the By-Laws of the Trust,  and in addition to the powers otherwise
granted herein, the Trustees shall have power and authority:

            (a)   to adopt By-Laws not  inconsistent  with this Declaration of
Trust  providing  for the  conduct of the  business  of the  Trust,  including
meetings of the Shareholders and Trustees,  and other related matters,  and to
amend and repeal  them to the extent  that they do not  reserve  that right to
the Shareholders;

          (b)to elect and remove such officers and appoint and terminate  such
officers as they consider  appropriate  with or without cause,  and to appoint
and terminate  agents and  consultants and hire and terminate  employees,  any
one or more of the  foregoing  of whom may be a Trustee,  and may  provide for
the compensation of all of the foregoing;  to appoint and designate from among
the Trustees or other  qualified  persons such  committees as the Trustees may
determine  and to terminate  any such  committee and remove any member of such
committee;

            (c)   to employ  as  custodian  of any  assets of the Trust one or
more  banks,  trust  companies,  companies  that  are  members  of a  national
securities  exchange,  or any other entity  qualified and eligible to act as a
custodian  under the 1940 Act, as modified by or interpreted by any applicable
order or  orders of the  Commission  or any rules or  regulations  adopted  or
interpretive releases of the Commission thereunder,  subject to any conditions
set forth in this  Declaration  of Trust or in the By-Laws,  and may authorize
such depository or custodian to employ subcustodians or agents;

            (d)   to  retain  one or  more  transfer  agents  and  shareholder
servicing  agents,  or  both,  and  may  authorize  such  transfer  agents  or
servicing agents to employ sub-agents;
            (e)   to provide for the  distribution  of Shares either through a
principal underwriter or the Trust itself or both or otherwise;

             (f)   to set record  dates by  resolution  of the  Trustees or in
the manner provided for in the By-Laws of the Trust;

            (g)   to delegate  such  authority as they  consider  desirable to
any officers of the Trust and to any investment  adviser,  manager,  custodian
or underwriter, or other agent or independent contractor;

            (h)   to  vote  or  give   assent,   or  exercise  any  rights  of
ownership,  with  respect to stock or other  securities  or  property  held in
Trust  hereunder;  and  to  execute  and  deliver  powers  of  attorney  to or
otherwise authorize by standing policies adopted by the Trustees,  such person
or persons as the  Trustees  shall deem  proper,  granting  to such  person or
persons such power and  discretion  with relation to securities or property as
the Trustees shall deem proper;


            (i)   to exercise  powers and rights of  subscription or otherwise
which  in any  manner  arise  out of  ownership  of  securities  held in trust
hereunder;


            (j)   to hold any  security or  property in a form not  indicating
any trust,  whether in bearer,  unregistered or other negotiable form,  either
in its own name or in the name of a  custodian,  subcustodian  or a nominee or
nominees or otherwise;

            (k)   to   consent  to  or   participate   in  any  plan  for  the
reorganization,  consolidation  or merger of any  corporation or concern,  any
security  of which is held in the Trust;  to consent to any  contract,  lease,
mortgage,  purchase,  or sale of property by such corporation or concern,  and
to pay calls or subscriptions  with respect to any security or instrument held
in the Trust;

            (l)   to join with other  holders of any security or instrument in
acting through a committee,  depositary,  voting trustee or otherwise,  and in
that  connection to deposit any security or  instrument  with, or transfer any
security to, any such  committee,  depositary  or trustee,  and to delegate to
them such power and authority  with  relation to any security  (whether or not
so deposited or transferred)  as the Trustees shall deem proper,  and to agree
to pay, and to pay,  such portion of the  expenses  and  compensation  of such
committee, depositary or trustee as the Trustees shall deem proper;

            (m)   to sue or be sued in the name of the Trust;

            (n)   to  compromise,  arbitrate,  or otherwise  adjust  claims in
favor of or against the Trust or any matter in controversy including,  but not
limited to, claims for taxes;

            (o)   to make,  by  resolutions  adopted by the Trustees or in the
manner provided in the By-Laws,  distributions  of income and of capital gains
to Shareholders;

            (p)   to borrow money and to pledge,  mortgage or hypothecate  the
assets of the  Trust or any part  thereof,  to the  extent  and in the  manner
permitted by the 1940 Act;

            (q)   to enter into investment  advisory or management  contracts,
subject  to the 1940  Act,  with any one or more  corporations,  partnerships,
trusts, associations or other persons;

            (r)   to make loans of cash and/or  securities  or other assets of
the Trust;

             (s)   to  change  the name of the Trust or any Class or Series of
the Trust as they consider appropriate without prior shareholder approval;

            (t)   to establish  officers' and Trustees'  fees or  compensation
and fees or  compensation  for  committees  of the  Trustees to be paid by the
Trust or each  Series  thereof in such manner and amount as the  Trustees  may
determine;

            (u)   to invest all or any  portion of the  Trust's  assets in any
one or more registered investment companies,  including investment by means of
transfer  of such assets in exchange  for an  interest  or  interests  in such
investment  company or investment  companies or by any other means approved by
the Trustees;

            (v)   to determine  whether a minimum  and/or maximum value should
apply to  accounts  holding  shares,  to fix such  values  and  establish  the
procedures  to  cause  the  involuntary  redemption  of  accounts  that do not
satisfy such criteria; and

            (w)   to  enter   into   joint   ventures,   general   or  limited
partnerships and any other combinations or associations;

            (x)   to endorse or  guarantee  the  payment of any notes or other
obligations of any person;  to make  contracts of guaranty or  suretyship,  or
otherwise assume liability for payment thereof;

            (y)   to purchase and pay for entirely out of Trust  property such
insurance  and/or bonding as they may deem  necessary or  appropriate  for the
conduct of the business,  including,  without  limitation,  insurance policies
insuring the assets of the Trust and payment of  distributions  and  principal
on  its   portfolio   investments,   and  insurance   policies   insuring  the
Shareholders,  Trustees, officers, employees, agents, consultants,  investment
advisers, managers, administrators,  distributors,  principal underwriters, or
independent  contractors,  or any thereof (or any person connected therewith),
of the Trust  individually  against all claims and liabilities of every nature
arising  by  reason  of  holding,  being or  having  held any such  office  or
position,  or by reason of any action alleged to have been taken or omitted by
any such person in any such  capacity,  including  any action taken or omitted
that may be  determined  to  constitute  negligence,  whether or not the Trust
would have the power to indemnify such person against such liability;

            (z)   to pay pensions for faithful service,  as deemed appropriate
by  the   Trustees,   and  to  adopt,   establish   and  carry  out   pension,
profit-sharing,  share  bonus,  share  purchase,  savings,  thrift  and  other
retirement,  incentive and benefit plans, trusts and provisions, including the
purchasing  of life  insurance  and annuity  contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees,  officers,
employees and agents of the Trust;

            (aa)  to adopt on behalf of the Trust or any Series  with  respect
to any Class thereof a plan of  distribution  and related  agreements  thereto
pursuant to the terms of Rule 12b-1 of the 1940 Act and to make  payments from
the assets of the Trust or the relevant  Series or Class pursuant to said Rule
12b-1 Plan;

            (bb)  to operate  as and carry on the  business  of an  investment
company  and to  exercise  all the powers  necessary  and  appropriate  to the
conduct of such operations;

            (cc)  to  issue,  sell,   repurchase,   redeem,   retire,  cancel,
acquire, hold, resell, reissue,  dispose of, and otherwise deal in Shares and,
subject  to the  provisions  set forth in Article  FOURTH and part 4,  Article
FIFTH, to apply to any such repurchase, redemption,  retirement,  cancellation
or  acquisition  of  Shares  any  funds  or  property  of  the  Trust,  or the
particular Series of the Trust, with respect to which such Shares are issued;

            (dd)  in  general  to carry on any other  business  in  connection
with  or  incidental  to  any  of  the  foregoing  powers,  to  do  everything
necessary,  suitable  or proper for the  accomplishment  of any purpose or the
attainment  of any object or the  furtherance  of any power herein  before set
forth,  either alone or in association with others,  and to do every other act
or thing  incidental or appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects or powers.

      The  foregoing  clauses  shall be construed  both as objects and powers,
and the foregoing  enumeration  of specific  powers shall not be held to limit
or restrict in any manner the general  powers of the  Trustees.  Any action by
one or more of the  Trustees  in their  capacity  as such  hereunder  shall be
deemed an action on behalf of the Trust or the  applicable  Series  and not an
action in an individual capacity.


      5.    No one dealing with the Trustees  shall be under any obligation to
make any inquiry  concerning  the authority of the Trustees,  or to see to the
application  of any payments made or property  transferred  to the Trustees or
upon their order.


      6.    (a)   The  Trustees  shall  have no power to bind any  Shareholder
personally  or to call  upon any  Shareholder  for the  payment  of any sum of
money or assessment  whatsoever  other than such as the Shareholder may at any
time  personally  agree  to  pay  by way of  subscription  to  any  Shares  or
otherwise.  This  paragraph  shall  not limit  the  right of the  Trustees  to
assert  claims  against any  shareholder  based upon the acts or  omissions of
such shareholder or for any other reason.


            (b)   Whenever this  Declaration of Trust calls for or permits any
action to be taken by the  Trustees  hereunder,  such  action  shall mean that
taken  by the  Board  of  Trustees  by vote of the  majority  of a  quorum  of
Trustees  as set  forth  from time to time in the  By-Laws  of the Trust or as
required by the 1940 Act.


      (c)     The  Trustees  shall  possess  and  exercise  any and  all  such
additional  powers as are reasonably  implied from the powers herein contained
such as may be  necessary  or  convenient  in the  conduct of any  business or
enterprise of the Trust, to do and perform anything  necessary,  suitable,  or
proper for the  accomplishment  of any of the purposes,  or the  attainment of
any one or more of the objects, herein enumerated,  or which shall at any time
appear  conducive to or expedient for the  protection or benefit of the Trust,
and to do and perform all other acts and things  necessary  or  incidental  to
the purposes herein before set forth,  or that may be deemed  necessary by the
Trustees.  Without  limiting  the  generality  of  the  foregoing,  except  as
otherwise  provided  herein or in the 1940 Act, the Trustees  shall not in any
way be bound or  limited  by  present  or future  laws or customs in regard to
trust  investments,  but shall have full  authority  and power to make any and
all  investments  that  they,  in  their  discretion,  shall  deem  proper  to
accomplish the purpose of this Trust.

            (d)   The  Trustees  shall  have  the  power,  to the  extent  not
inconsistent  with  the  1940  Act,  to  determine  conclusively  whether  any
moneys,  securities, or other properties of the Trust are, for the purposes of
this  Trust,  to be  considered  as capital  or income and in what  manner any
expenses  or  disbursements  are to be borne as  between  capital  and  income
whether or not in the absence of this  provision such moneys,  securities,  or
other  properties would be regarded as capital or income and whether or not in
the absence of this provision such expenses or disbursements  would ordinarily
be charged to capital or to income.

      7.    The By-Laws of the Trust may divide the Trustees  into classes and
prescribe  the  tenure  of  office  of the  several  classes,  but no class of
Trustee  shall be elected for a period  shorter than that from the time of the
election  following  the  division  into  classes  until the next  meeting  of
Trustees  and  thereafter  for a  period  shorter  than the  interval  between
meetings of Trustees or for a period  longer than five years,  and the term of
office of at least one class shall expire each year.

      8.    The Shareholders shall, for any lawful purpose,  have the right to
inspect the records,  documents,  accounts and books of the Trust,  subject to
reasonable  regulations of the Trustees, not contrary to Massachusetts law, as
to whether and to what  extent,  and at what times and places,  and under what
conditions and regulations, such right shall be exercised.

      9.    Any  officer  elected  or  appointed  by  the  Trustees  or by the
Shareholders or otherwise, may be removed at any time, with or without cause.

      10.   The Trustees shall have power to hold their  meetings,  to have an
office  or  offices   and,   subject  to  the   provisions   of  the  laws  of
Massachusetts,  to keep the books of the Trust outside of said Commonwealth at
such  places as may from time to time be  designated  by them.  Action  may be
taken by the  Trustees  without a meeting by unanimous  written  consent or by
telephone or similar method of communication.

      11.   Securities  held by the Trust shall be voted in person or by proxy
by the  President  or a  Vice-President,  or such  officer or  officers of the
Trust or such other  agent of the Trust as the  Trustees  shall  designate  or
otherwise  authorize  by standing  policies  adopted by the  Trustees  for the
purpose, or by a proxy or proxies thereunto duly authorized by the Trustees.

     12. (a) Subject to the provisions of the 1940 Act, any Trustee,  officer or
employee,  individually, or any partnership or association of which any Trustee,
officer or employee may be a member,  or any corporation or association of which
any Trustee, officer or employee may be an officer, partner, director,  trustee,
employee or stockholder,  or otherwise may have an interest,  may be a party to,
or may be pecuniarily or otherwise interested in, any contract or transaction of
the Trust, and in the absence of fraud no contract or other transaction shall be
thereby affected or invalidated;  provided that in such case a Trustee,  officer
or employee or a  partnership,  corporation  or  association of which a Trustee,
officer  or  employee  is a member,  officer,  director,  trustee,  employee  or
stockholder  is so  interested,  such fact shall be disclosed or shall have been
known to the Trustees including those Trustees who are not so interested and who
are neither  "interested" nor "affiliated" persons as those terms are defined in
the 1940 Act, or a majority  thereof;  and any Trustee who is so interested,  or
who is also a director,  officer,  partner,  trustee, employee or stockholder of
such other  corporation or a member of such partnership or association  which is
so interested,  may be counted in  determining  the existence of a quorum at any
meeting of the Trustees which shall  authorize any such contract or transaction,
and may vote thereat to authorize  any such contract or  transaction,  with like
force and effect as if he were not so interested.

            (b)   Specifically,  but without limitation of the foregoing,  the
Trust  may  enter  into  a  management  or  investment  advisory  contract  or
underwriting  contract and other contracts with, and may otherwise do business
with  any  manager  or  investment  adviser  for the  Trust  and/or  principal
underwriter  of the Shares of the Trust or any  subsidiary or affiliate of any
such  manager or  investment  adviser  and/or  principal  underwriter  and may
permit  any such firm or  corporation  to enter  into any  contracts  or other
arrangements  with  any  other  firm  or  corporation  relating  to the  Trust
notwithstanding  that the  Trustees  of the Trust may be  composed  in part of
partners,  directors,  officers or employees of any such firm or  corporation,
and  officers  of the  Trust  may  have  been  or may be or  become  partners,
directors,  officers or employees of any such firm or corporation,  and in the
absence of fraud the Trust and any such firm or  corporation  may deal  freely
with each other,  and no such  contract or  transaction  between the Trust and
any such  firm or  corporation  shall be  invalidated  or in any way  affected
thereby,  nor shall any Trustee or officer of the Trust be liable to the Trust
or to any Shareholder or creditor  thereof or to any other person for any loss
incurred by it or him solely  because of the existence of any such contract or
transaction;  provided  that  nothing  herein  shall  protect any  director or
officer of the Trust  against any  liability  to the Trust or to its  security
holders  to  which  he  would  otherwise  be  subject  by  reason  of  willful
misfeasance,  bad faith,  gross negligence or reckless disregard of the duties
involved in the conduct of his office.

            (c)   As used in this  paragraph  the  following  terms shall have
the meanings set forth below:

                  (i)   the  term  "indemnitee"  shall  mean  any  present  or
former  Trustee,  officer  or  employee  of the Trust,  any  present or former
Trustee,   partner,   Director  or  officer  of  another  trust,  partnership,
corporation or association  whose securities are or were owned by the Trust or
of which  the  Trust is or was a  creditor  and who  served  or serves in such
capacity   at  the   request   of  the  Trust,   and  the  heirs,   executors,
administrators,  successors  and  assigns  of any of the  foregoing;  however,
whenever  conduct by an  indemnitee  is referred to, the conduct shall be that
of  the  original   indemnitee  rather  than  that  of  the  heir,   executor,
administrator, successor or assignee;

                  (ii)  the  term   "covered   proceeding"   shall   mean  any
threatened,  pending or completed action,  suit or proceeding,  whether civil,
criminal,  administrative or investigative, to which an indemnitee is or was a
party  or is  threatened  to be made a party  by  reason  of the fact or facts
under which he or it is an indemnitee as defined above;

                  (iii) the  term  "disabling   conduct"  shall  mean  willful
misfeasance,  bad faith,  gross negligence or reckless disregard of the duties
involved in the conduct of the office in question;

                  (iv)  the  term  "covered   expenses"  shall  mean  expenses
(including attorney's fees),  judgments,  fines and amounts paid in settlement
actually  and  reasonably  incurred  by an  indemnitee  in  connection  with a
covered proceeding; and

                  (v)   the term  "adjudication  of liability"  shall mean, as
to any covered proceeding and as to any indemnitee,  an adverse  determination
as to the indemnitee  whether by judgment,  order,  settlement,  conviction or
upon a plea of nolo contendere or its equivalent.

            (d)   The  Trust  shall  not  indemnify  any  indemnitee  for  any
covered  expenses in any covered  proceeding if there has been an adjudication
of  liability  against  such  indemnitee  expressly  based  on  a  finding  of
disabling conduct.

            (e)   Except as set forth in paragraph (d) above,  the Trust shall
indemnify  any  indemnitee  for covered  expenses  in any covered  proceeding,
whether or not there is an  adjudication  of liability as to such  indemnitee,
such  indemnification  by  the  Trust  to be to  the  fullest  extent  now  or
hereafter  permitted  by any  applicable  law  unless  the  By-laws  limit  or
restrict the  indemnification  to which any  indemnitee  may be entitled.  The
Board of Trustees may adopt by-law provisions to implement  subparagraphs (c),
(d) and (e) hereof.

            (f)   Nothing  herein  shall be deemed to affect  the right of the
Trust and/or any indemnitee to acquire and pay for any insurance  covering any
or all indemnities to the extent  permitted by applicable law or to affect any
other  indemnification  rights to which any  indemnitee may be entitled to the
extent  permitted by  applicable  law.  Such rights to  indemnification  shall
not,  except as  otherwise  provided by law, be deemed  exclusive of any other
rights to which such  indemnitee  may be entitled  under any statute,  By-Law,
contract or otherwise.

      13.   The Trustees  are  empowered,  in their  absolute  discretion,  to
establish the bases or times,  or both,  for  determining  the net asset value
per  Share of any  Class and  Series  in  accordance  with the 1940 Act and to
authorize the voluntary  purchase by any Class and Series,  either directly or
through  an agent,  of Shares of any  Class  and  Series  upon such  terms and
conditions and for such  consideration as the Trustees shall deem advisable in
accordance with the 1940 Act.

      14.   Payment  of the net asset  value per Share of any Class and Series
properly  surrendered to it for  redemption  shall be made by the Trust within
seven days, or as specified in any applicable law or regulation,  after tender
of such  stock or  request  for  redemption  to the  Trust  for  such  purpose
together with any additional  documentation that may be reasonably required by
the Trust or its transfer  agent to evidence the  authority of the tenderor to
make  such  request,  plus any  period of time  during  which the right of the
holders  of the shares of such  Class of that  Series to require  the Trust to
redeem  such  shares  has  been  suspended.  Any such  payment  may be made in
portfolio  securities  of such  Class of that  Series  and/or in cash,  as the
Trustees shall deem advisable,  and no Shareholder  shall have a right,  other
than as determined by the Trustees, to have Shares redeemed in kind.

      15.   The Trust shall have the right, at any time, without prior notice
to the Shareholder to redeem Shares of the Class and Series held by a
Shareholder held in any account registered in the name of such Shareholder
for its current net asset value, for any reason, including, but not limited
to, (i) the determination that such redemption is necessary to reimburse
either that Series or Class of the Trust or the distributor (i.e., principal
underwriter) of the Shares for any loss either has sustained by reason of the
failure of such Shareholder to make timely and good payment for Shares
purchased or subscribed for by such Shareholder, regardless of whether such
Shareholder was a Shareholder at the time of such purchase or subscription,
(ii) the failure of a Shareholder to supply a tax identification number if
required to do so, (iii) the failure of a Shareholder to pay when due for the
purchase of Shares issued to him and subject to and upon such terms and
conditions as the Trustees may from time to time prescribe, (iv) pursuant to
authorization by a Shareholder to pay fees or make other payments to one or
more third parties, including, without limitation, any affiliate of the
investment adviser of the Trust or any Series thereof, or (v) if the
aggregate net asset value of all Shares of such Shareholder (taken at cost or
value, as determined by the Board) has been reduced below an amount
established by the Board of Trustees from time to time as the minimum amount
required to be maintained by Shareholders.

      ARTICLE EIGHTH - LICENSE
      --------------   -------

      The name  "Oppenheimer"  included  in the name of the  Trust  and of any
Series shall be used pursuant to a  royalty-free,  non-exclusive  license from
OppenheimerFunds,  Inc. ("OFI"),  incidental to and as part of any one or more
advisory,  management or  supervisory  contracts  which may be entered into by
the Trust with OFI.  Such  license  shall  allow OFI to inspect and subject to
the  control of the Board of  Trustees  to control  the nature and  quality of
services  offered by the Trust under such name.  The license may be terminated
by OFI upon termination of such advisory,  management or supervisory contracts
or without  cause upon 60 days'  written  notice,  in which case  neither  the
Trust nor any  Series or Class  shall have any  further  right to use the name
"Oppenheimer"  in its name or otherwise and the Trust,  the  Shareholders  and
its  officers  and  Trustees  shall  promptly  take  whatever  action  may  be
necessary  to  change  its  name  and  the  names  of any  Series  or  Classes
accordingly.

      ARTICLE NINTH - MISCELLANEOUS:
      -------------   -------------

      1.    In case any Shareholder or former  Shareholder shall be held to be
personally  liable  solely by reason of his being or having been a Shareholder
and not  because  of his acts or  omissions  or for  some  other  reason,  the
Shareholder or former  Shareholder  (or the  Shareholders'  heirs,  executors,
administrators or other legal  representatives or in the case of a corporation
or other entity,  its corporate or other general  successor) shall be entitled
out of the Trust estate to be held harmless from and  indemnified  against all
loss and expense  arising from such liability.  The Trust shall,  upon request
by the  Shareholder,  assume the  defense of any such claim made  against  any
Shareholder  for any act or  obligation  of the Trust and satisfy any judgment
thereon.

      2.    It is hereby  expressly  declared  that a trust is created  hereby
and not a partnership, joint stock association,  corporation, bailment, or any
other form of a legal  relationship  other than a trust,  as  contemplated  in
Massachusetts  General  Laws  Chapter  182. No  individual  Trustee  hereunder
shall have any power to bind the Trust unless so  authorized  by the Trustees,
or to personally  bind the Trust's  officers or any  Shareholder.  All persons
extending  credit  to,  doing  business  with,  contracting  with or having or
asserting any claim  against the Trust or the Trustees  shall look only to the
assets  of  the  appropriate   Series  for  payment  under  any  such  credit,
transaction,   contract  or  claim;  and  neither  the  Shareholders  nor  the
Trustees,  nor any of their agents,  whether past, present or future, shall be
personally  liable therefor;  notice of such disclaimer and agreement  thereto
shall be given in each  agreement,  obligation or  instrument  entered into or
executed  by  Trust or the  Trustees.  There is  hereby  expressly  disclaimed
Shareholder  and Trustee  liability for the acts and obligations of the Trust.
Nothing  in this  Declaration  of Trust  shall  protect a Trustee  or  officer
against any  liability  to which such  Trustee or officer  would  otherwise be
subject  by reason of willful  misfeasance,  bad faith,  gross  negligence  or
reckless  disregard  of the duties  involved  in the  conduct of the office of
Trustee or of such officer hereunder.

      3.    The  exercise  by the  Trustees  of their  powers  and  discretion
hereunder in good faith and with reasonable care under the circumstances  then
prevailing,  shall  be  binding  upon  everyone  interested.  Subject  to  the
provisions of part 2 of this Article  NINTH,  the Trustees shall not be liable
for errors of judgment or mistakes of fact or law.  Subject to the  foregoing,
(a) Trustees  shall not be  responsible or liable in any event for any neglect
or  wrongdoing  of  any  officer,   agent,  employee,   consultant,   adviser,
administrator,  distributor or principal  underwriter,  custodian or transfer,
dividend disbursing,  Shareholder  servicing or accounting agent of the Trust,
nor shall any  Trustee be  responsible  for the act or  omission  of any other
Trustee;  (b) the  Trustees  may take advice of counsel or other  experts with
respect  to  the  meaning  and  operations  of  this   Declaration  of  Trust,
applicable laws,  contracts,  obligations,  transactions or any other business
the Trust may enter  into,  and  subject to the  provisions  of part 2 of this
Article  NINTH,  shall  be  under  no  liability  for any act or  omission  in
accordance  with such advice or for failing to follow such advice;  and (c) in
discharging their duties,  the Trustees,  when acting in good faith,  shall be
entitled  to rely upon the  books of  account  of the  Trust and upon  written
reports  made  to  the  Trustees  by  any  officer   appointed  by  them,  any
independent public accountant,  and (with respect to the subject matter of the
contract  involved) any officer,  partner or  responsible  employee of a party
who has been  appointed  by the  Trustees  or with whom the Trust has  entered
into a  contract  pursuant  to  Article  SEVENTH.  The  Trustees  shall not be
required to give any bond as such, nor any surety if a bond is required.

      4.    This Trust shall continue  without  limitation of time but subject
to the provisions of sub-sections (a) and (b) of this part 4.

            Subject  to  applicable  Federal  and  State  law,  and  except as
otherwise  provided in part 5 of this Article  NINTH,  the Trustees,  with the
Majority Vote of  Shareholders  of an affected  Series or Class,  may sell and
convey  all or  substantially  all the assets of that  Series or Class  (which
sale may be subject to the retention of assets for the payment of  liabilities
and  expenses  and may be in the  form of a  statutory  merger  to the  extent
permitted by applicable  law) to another  issuer or to another Series or Class
of the Trust for a  consideration  which may be or include  securities of such
issuer or may merge or consolidate  with any other  corporation,  association,
trust, or other  organization or may sell, lease, or exchange all or a portion
of the Trust property or Trust property  allocated or belonging to such Series
or Class, upon such terms and conditions and for such  consideration  when and
as  authorized  by  such  vote.  Such  transactions  may be  effected  through
share-for-share  exchanges,  transfers or sale of assets,  shareholder in-kind
redemptions and purchases,  exchange  offers,  or any other method approved by
the  Trustees.  Upon  making  provision  for the  payment of  liabilities,  by
assumption  by such issuer or otherwise,  the Trustees  shall  distribute  the
remaining  proceeds among the holders of the outstanding  Shares of the Series
or Class,  the assets of which have been so transferred,  in proportion to the
relative net asset value of such Shares.

            (b)   Upon  completion  of  the   distribution  of  the  remaining
proceeds or the  remaining  assets as provided  in  sub-section  (a) hereof or
pursuant to part 3(d) of Article FOURTH, as applicable,  the Series the assets
of which have been so transferred  shall  terminate,  and if all the assets of
the  Trust  have  been so  transferred,  the  Trust  shall  terminate  and the
Trustees  shall be  discharged of any and all further  liabilities  and duties
hereunder  and the right,  title and interest of all parties shall be canceled
and discharged.

      5.    Subject to  applicable  Federal and state law,  the  Trustees  may
without the vote or consent of  Shareholders  cause to be  organized or assist
in  organizing  one  or  more  corporations,   trusts,  partnerships,  limited
liability companies,  associations,  or other organization,  under the laws of
any  jurisdiction,  to take over all or a portion of the Trust property or all
or a portion of the Trust  property  allocated  or belonging to such Series or
Class  or to carry on any  business  in which  the  Trust  shall  directly  or
indirectly  have any  interest,  and to sell,  convey and  transfer  the Trust
property or the Trust property  allocated or belonging to such Series or Class
to any  such  corporation,  trust,  limited  liability  company,  partnership,
association,  or organization in exchange for the shares or securities thereof
or  otherwise,  and to lend money to,  subscribe  for the shares or securities
of,  and  enter  into  any  contracts  with  any  such   corporation,   trust,
partnership,  limited liability company,  association,  or organization or any
corporation,  partnership,  limited liability company, trust, association,  or
organization  in which the Trust or such  Series or Class holds or is about to
acquire  shares or any other  interest.  Subject  to  applicable  Federal  and
state law, the Trustees may also cause a merger or  consolidation  between the
Trust or any  successor  thereto or any Series or Class  thereof  and any such
corporation,  trust, partnership,  limited liability company,  association, or
other  organization.  Nothing contained herein shall be construed as requiring
approval of shareholders  for the Trustees to organize or assist in organizing
one or more corporations,  trusts, partnerships,  limited liability companies,
associations,  or other organizations and selling,  conveying, or transferring
the Trust property or a portion of the Trust property to such  organization or
entities;  provided,  however,  that the Trustees shall provide written notice
to the affected  Shareholders  of any  transaction  whereby,  pursuant to this
part 5,  Article  NINTH,  the  Trust or any  Series  or Class  thereof  sells,
conveys,  or transfers all or a  substantial  portion of its assets to another
entity or merges or consolidates  with another entity.  Such  transactions may
be effected  through  share-for-share  exchanges,  transfer or sale of assets,
shareholder in-kind  redemptions and purchases,  exchange offers, or any other
approved by the Trustees.

      6.    The  original or a copy of this  instrument  and of each  restated
declaration  of trust or instrument  supplemental  hereto shall be kept at the
office of the Trust where it may be  inspected by any  Shareholder.  A copy of
this  instrument  and of each  supplemental  or restated  declaration of trust
shall be filed with the Secretary of the  Commonwealth  of  Massachusetts,  as
well as any other governmental  office where such filing may from time to time
be required.  Anyone  dealing with the Trust may rely on a  certificate  by an
officer of the Trust as to whether or not any such  supplemental  or  restated
declarations  of trust have been made and as to any matters in connection with
the Trust  hereunder,  and,  with the same effect as if it were the  original,
may rely on a copy  certified  by an officer of the Trust to be a copy of this
instrument or of any such  supplemental  or restated  declaration of trust. In
this instrument or in any such supplemental or restated  declaration of trust,
references to this  instrument,  and all expressions  like "herein",  "hereof"
and  "hereunder"  shall be deemed to refer to this  instrument  as  amended or
affected by any such  supplemental  or  restated  declaration  of trust.  This
instrument may be executed in any number of counterparts,  each of which shall
be deemed an original.

      7.    The Trust set forth in this  instrument is created under and is to
be governed by and  construed  and  administered  according to the laws of the
Commonwealth  of  Massachusetts.  The  Trust  shall  be of the  type  commonly
called a  Massachusetts  business trust,  and without  limiting the provisions
hereof,  the Trust may exercise all powers which are  ordinarily  exercised by
such a trust.


      8.    In the event that any person advances the organizational  expenses
of the Trust,  such  advances  shall become an obligation of the Trust subject
to such  terms and  conditions  as may be fixed by, and on a date fixed by, or
determined with criteria fixed by the Board of Trustees,  to be amortized over
a period or periods to be fixed by the Board.


      9.    Whenever  any  action is taken  under  this  Declaration  of Trust
including  action  which is required or permitted by the 1940 Act or any other
applicable  law,  such action shall be deemed to have been  properly  taken if
such action is in  accordance  with the  construction  of the 1940 Act or such
other  applicable  law then in effect as expressed  in "no action"  letters of
the staff of the  Commission or any release,  rule,  regulation or order under
the  1940  Act  or  any  decision  of  a  court  of  competent   jurisdiction,
notwithstanding  that any of the foregoing  shall later be found to be invalid
or otherwise reversed or modified by any of the foregoing.

      10.   Any action which may be taken by the Board of Trustees  under this
Declaration  of Trust or its By-Laws may be taken by the  description  thereof
in the then effective  prospectus  and/or statement of additional  information
relating  to the  Shares  under  the  Securities  Act of 1933 or in any  proxy
statement of the Trust rather than by formal resolution of the Board.


      11.   Whenever under this  Declaration  of Trust,  the Board of Trustees
is permitted or required to place a value on assets of the Trust,  such action
may be delegated by the Board,  and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940 Act.


     12. The Trustee may, without the vote or consent of the Shareholders, amend
or otherwise supplement this Declaration of Trust by executing or authorizing an
officer of the Trust to execute on their behalf a Restated  Declaration of Trust
or a Declaration of Trust  supplemental  hereto,  which  thereafter shall form a
part hereof,  provided,  however, that none of the following amendments shall be
effective  unless also  approved  by a Majority  Vote of  Shareholders:  (i) any
amendment to parts 1, 3 and 4, Article  FIFTH;  (ii) any  amendment to this part
12,  Article NINTH;  (iii) any amendment to part 1, Article NINTH;  and (iv) any
amendment to part 4(a),  Article  NINTH that would  change the voting  rights of
Shareholders  contained  therein.  Any amendment required to be submitted to the
Shareholders that, as the Trustees  determine,  shall affect the Shareholders of
any Series or Class shall,  with respect to the Series or Class so affected,  be
authorized  by vote of the  Shareholders  of that Series or Class and no vote of
Shareholders  of a Series or Class not affected by the amendment with respect to
that Series or Class shall be required.  Notwithstanding  anything  else herein,
any  amendment  to  Article  NINTH,  part  1  shall  not  limit  the  rights  to
indemnification or insurance provided therein with respect to action or omission
or indemnities or Shareholder indemnities prior to such amendment.

      13.   The  captions  used  herein  are  intended  for   convenience   of
reference  only,  and shall not modify or affect in any manner the  meaning or
interpretation  of any of the  provisions of this  Agreement.  As used herein,
the singular shall include the plural,  the masculine gender shall include the
feminine and neuter,  and the neuter  gender shall  include the  masculine and
feminine, unless the context otherwise requires.

IN WITNESS  WHEREOF,  the undersigned have executed this instrument as of this
1st day of May 1, 2003.



/s/ William L. Armstrong                      /s/ James C. Swain

- ------------------------                        ------------------------
William L. Armstrong                              James C. Swain
11 Carriage Lane                                  10040 East Happy Valley Road
Littleton, Colorado 80121                         Lot 63
                                                  Scottsdale, Arizona  85259

/s/ Robert G. Avis                            /s/ Beverly L. Hamilton
- ------------------------                        -------------------------
Robert G. Avis                                    Beverly L. Hamilton
1706 Warson Estates Drive                         69 Byron Dr.
St. Louis, Missouri 63124                         Avon, Connecticut 06001

/s/ George C. Bowen                          /s/ Robert J. Malone
- ------------------------                        --------------------------

George C. Bowen                                  Robert J. Malone
10573 Lieter Place                               334 Monroe Street
Lone Tree, Colorado 80124                        Denver, Colorado 80206

/s/ Edward Cameron                             /s/ F. William  Marshall
Jr.
- ------------------------                        --------------------------
Edward Cameron                                     F. William Marshall Jr.
Spring Valley Road                                 63 South Road
Morristown, New Jersey 07960                       Chebeague Island, Maine 04017

/s/ Jon S. Fossel                            /s/ John V. Murphy
- ------------------------                        ---------------------------
Jon S. Fossel                                    John V. Murphy
810 Jack Creek Road                              43 Jonquil Lane
Ennis, Montana 59729                             Longmeadow, Massachusetts 01106

/s/ Sam Freedman
- ------------------------
Sam Freedman
355 Adams Street
Denver, Colorado 80206


N1a/OVAF/org/OVAF(14thDOT)(022403).doc

EX-99.G

                                                        Exhibit 23(g)

           -------------------------------------------------------


                           GLOBAL CUSTODY AGREEMENT

                                   BETWEEN

                            OPPENHEIMERFUNDS, INC.
               on behalf of each investment company identified
                                as a Customer
                         in Exhibit A attached hereto
          individually and severally, and not jointly and severally


                                     AND

                             JPMORGAN CHASE BANK




                               August 16, 2002




                           GLOBAL CUSTODY AGREEMENT
                              TABLE OF CONTENTS

1.  INTENTION OF THE PARTIES;  DEFINITIONS----------------------------------------4


  1.1 Intention of the Parties----------------------------------------------------4

  1.2 Definitions-----------------------------------------------------------------4

2.  WHAT BANK IS REQUIRED TO DO---------------------------------------------------6


  2.1 Set Up Accounts-------------------------------------------------------------6

  2.2 Cash Account----------------------------------------------------------------7

  2.3 Segregation of Assets; Nominee Name-----------------------------------------7

  2.4 Settlement of Trades--------------------------------------------------------7

  2.5 Settlement Procedures; Contractual Settlement Date Accounting---------------8

  2.6 Settlement Procedures; Actual Settlement Date Accounting--------------------8

  2.7 Income Collection (Autocredit(R))---------------------------------------------8

  2.8 Certain Ministerial Acts----------------------------------------------------9

  2.9 Corporate Actions-----------------------------------------------------------9

  2.10  Proxies------------------------------------------------------------------10

  2.11  Statements---------------------------------------------------------------11

  2.12  Access to Bank's Records-------------------------------------------------11

  2.13  Maintenance of Financial Assets at Subcustodian Locations----------------12

  2.14  Tax Relief Services -----------------------------------------------------12

  2.15  Foreign Exchange Transactions--------------------------------------------12
2.16  Compliance with SEC Rule 17f-5
       --------------------------------------------------------------------------11
2.17  Compliance with SEC Rule 17f-7
       --------------------------------------------------------------------------13
2.18  Securities Entitlement Orders
       --------------------------------------------------------------------------14
2.19  Confirmations
       --------------------------------------------------------------------------14

3.  INSTRUCTIONS-----------------------------------------------------------------15


  3.1 Acting on Instructions; Unclear Instructions-------------------------------15

  3.2 Confirmation of Oral Instructions/Security Devices-------------------------15

  3.3 Instructions; Contrary to Law/Market Practice------------------------------16

  3.4     Cut-off Times----------------------------------------------------------16

4.  FEES EXPENSES AND OTHER AMOUNTS OWING TO BANK--------------------------------16


  4.1 Fees and Expenses----------------------------------------------------------16

  4.2 Overdrafts-----------------------------------------------------------------16

5.  SUBCUSTODIANS, SECURITIES DEPOSITORIES AND OTHER AGENTS----------------------17


  5.1 Appointment of Subcustodians-----------------------------------------------17

  5.2 Liability for Subcustodians------------------------------------------------17

  5.3 Use of Agents--------------------------------------------------------------17

6.  ADDITIONAL PROVISIONS RELATING TO CUSTOMER-----------------------------------18


  6.1 Representations of Customer and Bank---------------------------------------18

  6.2 Provision of Additional Information to Bank--------------------------------18

  6.3 Customer is Liable to Bank Even if it is Acting for Another Person---------18

7.  WHEN BANK IS LIABLE TO CUSTOMER----------------------------------------------18


  7.1 Standard of Care; Liability------------------------------------------------19

  7.2 Force Majeure--------------------------------------------------------------20

  7.3 Bank May Consult With Counsel----------------------------------------------20

  7.4 Bank Provides Diverse Financial Services and May Generate Profits as a
  Result-------------------------------------------------------------------------20

8.  TAXATION---------------------------------------------------------------------20


  8.1 Tax Obligations------------------------------------------------------------20

  8.2 Tax Reclaims---------------------------------------------------------------21

9.  TERMINATION------------------------------------------------------------------21


10. Miscellaneous----------------------------------------------------------------22


  10.1  Notices------------------------------------------------------------------22

  10.2  Successors and Assigns---------------------------------------------------22

  10.3  Interpretation-----------------------------------------------------------22

  10.4  Entire Agreement---------------------------------------------------------22

  10.5  Information Concerning Deposits at Bank's London Branch------------------22

  10.6  Insurance----------------------------------------------------------------23

  10.7  Governing Law and Jurisdiction-------------------------------------------23

  10.8  Severability; Waiver; and Survival---------------------------------------23

  10.9  Counterparts-------------------------------------------------------------24

  10.10 No Third Party Beneficiaries---------------------------------------------24

  10.11   Confidentiality--------------------------------------------------------23

  10.12    Limited Obligations--------------------------------------------------23

                           GLOBAL CUSTODY AGREEMENT

      This Agreement,  dated August 16, 2002, is by and between JPMORGAN CHASE
BANK ("Bank"),  with a place of business at 4 MetroTech Center, Attn: Investor
Services,  Brooklyn, New York 11245; and OppenheimerFunds,  Inc., with a place
of business at 6803 South Tucson Way, Attn:  Banking  Operations,  Centennial,
Colorado 80112 on behalf of each  investment  company  identified on Exhibit A
attached hereto (each hereinafter referred to as the "Customer")  individually
and severally, and not jointly and severally.


                   1.INTENTION OF THE PARTIES; DEFINITIONS

1.1   Intention of the Parties.
      ------------------------

      (a)   Customer  hereby  employs the Bank as the  Custodian of all assets
of  Customer  which  are  delivered  to  and  accepted  by  the  Bank  or  any
Subcustodian,  including  Securities,  Financial  Assets  and  cash,  and Bank
hereby  accepts  such  employment,  pursuant to the terms and  conditions  set
forth herein  governing  custodial,  settlement  and certain other  associated
services  offered  by Bank to  Customer.  Bank  will  be  responsible  for the
performance  of only  those  duties  that  are set  forth  in this  Agreement.
Customer  acknowledges that Bank is not providing any legal, tax or investment
advice in connection with the services hereunder.

      (b)   Investing  in  foreign  markets  may be a  risky  enterprise.  The
holding of  Financial  Assets and cash in foreign  jurisdictions  may  involve
risks of loss or other  special  considerations.  Bank will not be liable  for
any loss that results from Country Risk, as defined herein.
                                                           =

1.2   Definitions.
      -----------

      (a)   As used herein,  the following terms have the meaning  hereinafter
stated.

      "1940 Act" means the Investment Company Act of 1940, as amended.

      "Account" has the meaning set forth in Section 2.1 of this Agreement.

      "Affiliate" means an entity controlling,  controlled by, or under common
control with, Bank.

      "Affiliated Subcustodian" means a Subcustodian that is an Affiliate.

      "Applicable Law" means any statute,  whether  national,  state or local,
applicable in the United States or any other country,  the rules of the treaty
establishing  the  European  Community,  any other law,  rule,  regulation  or
interpretation of any governmental  entity, any applicable common law, and any
decree,  injunction,  judgment,  order,  ruling,  or writ of any  governmental
entity.

      "Authorized  Person"  means  any  person  who  has  been  designated  by
written  notice  from  Customer  (or  by any  agent  designated  by  Customer,
including,  without  limitation,  an  investment  manager) to act on behalf of
Customer  hereunder.  Such  persons  will  continue to be  Authorized  Persons
until such time as Bank  receives  Instructions  from  Customer (or its agent)
that any such person is no longer an Authorized Person.

      "Bank  Indemnitees"  means Bank and its nominees,  directors,  officers,
employees and agents.

      "Bank's  London Branch" means the London branch office of JPMorgan Chase
Bank.

      "Cash Account" has the meaning set forth in Section 2.1(a)(ii).

      "Corporate  Action" means any  subscription  right,  bonus issue,  stock
repurchase plan,  redemption,  exchange,  tender offer, class action notice or
similar  matter with respect to a Financial  Asset in the  Securities  Account
that require  discretionary  action by the holder,  but does not include proxy
voting.

      "Country  Risk"  means  the risk of  investing  or  holding  assets in a
particular  country or market,  including,  but not limited to, risks  arising
from  nationalization,   expropriation  or  other  governmental  actions;  the
country's   financial   infrastructure,   including   prevailing  custody  and
settlement  practices;  laws  applicable  to the  safekeeping  and recovery of
Financial  Assets and cash held in custody;  the regulation of the banking and
securities   industries,   including   changes  in  market   rules;   currency
restrictions,  devaluations or fluctuations;  and market conditions  affecting
the orderly execution of securities transactions or the value of assets.

      "Entitlement  Holder"  means  the  person  named  on  the  records  of a
Securities  Intermediary as the person having a Securities Entitlement against
the Securities Intermediary.

      "Financial  Asset"  means,  as the  context  requires,  either the asset
itself or the means by which a person's  claim to it is  evidenced,  including
but not  limited  to a  Security,  a  security  certificate,  or a  Securities
Entitlement.  "Financial Asset" does not include cash.

      "Foreign  Financial  Assets" means Financial  Assets,  including foreign
currencies,  for which the primary market is outside the United States and any
cash  and  cash   equivalents   that  are   reasonably   necessary  to  effect
transactions in those Financial Assets.

      "Institutional  Clients"  means U.S.  registered  investment  companies,
major  U.S.   commercial  banks,   insurance   companies,   pension  funds  or
substantially  similar financial  institutions which as part of their ordinary
business  operations  purchase  or  sell  Financial  Assets  and  make  use of
custodial services in the applicable jurisdiction or market.

      "Instructions"  means  instructions  which:  (i) are received by Bank in
writing or via Bank's electronic instruction system, SWIFT, telephone,  tested
telex,  facsimile  or such other  methods as are for the time being  agreed by
Customer (or an  Authorized  Person) and Bank;  and (ii) Bank believes in good
faith have been given by an Authorized  Person or are transmitted  with proper
testing or  authentication  pursuant  to terms and  conditions  which Bank may
specify.

      "Liabilities" means any liabilities,  losses,  claims,  costs,  damages,
penalties,  fines, obligations, or expenses of any kind whatsoever (including,
without  limitation,  reasonable  and  appropriate  attorneys',  accountants',
consultants' or experts' fees and disbursements).

      "Securities" means stocks, bonds, rights,  warrants and other negotiable
and   non-negotiable   instruments,   whether   issued  in   certificated   or
uncertificated  form,  that are  commonly  traded  or  dealt in on  securities
exchanges or financial  markets.  "Securities" also means other obligations of
an issuer, or shares,  participations and interests in an issuer recognized in
the country in which it is issued or dealt in as a medium for  investment  and
any other property as may be acceptable to Bank for the Securities Account.

      "Securities  Account" means each  Securities  custody  account on Bank's
records to which Financial Assets are or may be credited pursuant hereto.

        "Securities Depository" means:

        (i) when referring to a securities depository located outside the
        U.S., an `Eligible Securities Depository' which, in turn, shall have
        the same meaning  as in SEC Rule 17f-7(b)(1)(i)-(vi) as the same may
        be amended from time to time, or that has otherwise been made exempt
        pursuant to an SEC exemptive order.

        (ii) when referring to a securities depository located in the U.S.
        shall mean a securities depository as defined in SEC Rule 17f-4(a).
      .
      "Securities  Entitlement"  means the rights and property interests of an
Entitlement  Holder with  respect to a Financial  Asset as set forth in Part 5
of Article 8 of the Uniform  Commercial  Code of the State of New York, as the
same may be amended from time to time.

      "Securities  Intermediary"  means Bank,  a  Subcustodian,  a  Securities
Depository,  and any other financial  institution which in the ordinary course
of business maintains custody accounts for others and acts in that capacity.

        "Subcustodian" means the following:

        (i)  a `U.S. Bank', which shall mean a U.S. bank as defined in SEC
rule 17f-5(a)(7);

        (ii)  an `Eligible Foreign Custodian', which shall mean: (x) a
        banking institution or trust company, incorporated or organized under
        the laws of a country other than the                       United
        States, that is regulated as such by that country's government or an
        agency thereof, and (y) a majority-owned direct or indirect
        subsidiary of a U.S. bank or bank holding company which subsidiary is
        incorporated or organized under the laws of a country other than the
        United States. In addition, an Eligible Foreign Custodian shall also
        mean any other entity that shall have been so qualified by exemptive
        order, rule or other appropriate action of the SEC.

        (iii)  For purposes of clarity, it is agreed that as used in Section
        5.2(a), the term Subcustodian shall not include any Eligible Foreign
        Custodian as to which Bank has not acted as Foreign Custody Manager,
        and that Subcustodian includes Affiliated Subcustodians.

      (b)   All  terms in the  singular  will  have the  same  meaning  in the
plural  unless  the  context  otherwise  provides  and vice versa and the word
"will" shall be read to mean "shall."


                        2.WHAT BANK IS REQUIRED TO DO

2.1   Set Up Accounts.
      ---------------

      (a)   Bank  will   establish   and  maintain  the   following   accounts
("Accounts"):

            (i)   a Securities  Account in the name of Customer for  Financial
                  Assets,  which  may be  received  by or on behalf of Bank or
                  its Subcustodian  for the account of Customer,  including as
                  an Entitlement Holder; and

            (ii)  an  account in the name of  Customer  ("Cash  Account")  for
                  any and all cash in any  currency  received  by or on behalf
                  of Bank or its Subcustodian for the account of Customer.
                                             =

Notwithstanding  paragraph  (ii),  cash held in respect of those markets where
Customer  is  required  to have a cash  account in its own name held  directly
with the  relevant  Subcustodian  or a Securities  Depository  will be held in
that manner and will not be part of the Cash Account.

      (b)   At the request of Customer,  additional  Accounts may be opened in
the future, which will be subject to the terms of this Agreement.

2.2   Cash Account.
      ------------

      Except as otherwise  provided in  Instructions  acceptable to Bank,  all
cash  held in the Cash  Account  will be  deposited  during  the  period it is
credited to the Accounts in one or more deposit  accounts at Bank or at Bank's
London  Branch.  Any cash so  deposited  with  Bank's  London  Branch  will be
payable  exclusively  by  Bank's  London  Branch in the  applicable  currency,
subject to compliance with Applicable Law, including,  without limitation, any
restrictions  on  transactions  in  the  applicable  currency  imposed  by the
country of the applicable currency.

2.3   Segregation of Assets; Nominee Name.
      -----------------------------------

      (a)   Bank will identify in its records that Financial  Assets  credited
to Customer's  Securities  Account belong to Customer (except as otherwise may
be agreed by Bank and Customer).

      (b)   To the extent  permitted  by  Applicable  Law or market  practice,
Bank will  require  each  Subcustodian  to identify  in its own  records  that
Financial  Assets  credited  to  Customer's   Securities   Account  belong  to
customers  of Bank,  such  that it is  readily  apparent  that  the  Financial
Assets do not belong to Bank or the Subcustodian.

(c)   Bank is authorized, in its discretion:

            (i)   to  hold  in  bearer  form,  such  Financial  Assets  as are
                  customarily  held in bearer form or are delivered to Bank or
                  its Subcustodian in bearer form;

             (ii)       to  hold  Financial  Assets  in or  deposit  Financial
                  Assets with any  Securities  Depository,  settlement  system
                  or  dematerialized  book  entry  or  similar  systems  as to
                  which, in the case of a foreign Securities Depository,  Bank
                  has provided the analysis of custody risks  contemplated  by
                  Section  (a)(1)(i)(A)  of Rule 17f-7  under the 1940 Act and
                  not,   after   delivering  a  notice   required  by  Section
                  (a)(1)(i)(B)  of Rule  17f-7  under the 1940  Act,  received
                  Instructions from Customer to withdraw securities  therefrom
                  (a "Reported Depository"); and

(iii) to register in the name of  Customer,  Bank,  a  Subcustodian,  or their
                  respective   nominees,   such   Financial   Assets   as  are
                  customarily  held in  registered  form;  provided,  however,
                  that if it is market  practice  in a country  for  Financial
                  Assets  customarily held in registered form to be registered
                  in the name of a Reported Depository,  Bank is authorized in
                  its  discretion  to register  such  Financial  Assets in the
                  name of such Reported Depository or its nominee.

            (d)   Except  with the  specific  consent  of  Customer,  Customer
authorizes  Bank or its  Subcustodian  to hold  Financial  Assets  in  omnibus
accounts or in  Customer's  name,  as required by local market  practice,  and
will accept  delivery of Financial  Assets of the same class and  denomination
as those deposited with Bank or its Subcustodian.

2.4   Settlement of Trades.
      --------------------

      When Bank receives an Instruction  directing settlement of a transaction
in (i.e.,  purchase or sale of) Financial Assets that includes all information
reasonably  required  by Bank,  Bank will use  reasonable  care to effect such
settlement as  instructed.  Settlement  of  transactions  in Financial  Assets
will be conducted in  accordance  with  prevailing  standards of the market in
which the  transaction  occurs  for  transactions  by  Institutional  Clients.
Notwithstanding  applicable  market  standards,  the Bank  shall  not  deliver
Financial  Assets or  payment in  advance  of  receipt  or  settlement  of the
expected  consideration  unless  instructed to do so by Customer.  In the case
of  the  failure  of   Customer's   counterparty   to  deliver  the   expected
consideration   as  agreed,   Bank  will  contact  the  counterparty  to  seek
settlement,  but Bank will not be obligated to  institute  legal  proceedings,
file a proof of  claim  in any  insolvency  proceeding,  or take  any  similar
action.

2.5   Settlement  Procedures; Contractual Settlement Date Accounting.
      ---------------------------------------------------------------

      (a)   Securities  will be  transferred,  exchanged  or  delivered by the
Custodian or  Subcustodian  upon receipt by  Custodian of  Instructions  which
include all  information  required by  Custodian.  Bank will use  "contractual
settlement date  accounting" as described below with respect to the settlement
of trades in those markets where Bank generally offers contractual  settlement
date accounting and will notify Customer of those markets from time to time.

            (i)   Sales:  On the settlement  date for a sale, Bank will credit
                  the Cash  Account with the proceeds of the sale and transfer
                  the relevant  Financial Assets to an account at Bank pending
                  settlement of the trade to the extent not already delivered.

            (ii)  Purchases:  On the  settlement  date  for the  purchase  (or
                  earlier,    if   market    practice    generally   used   by
                  Institutional  Clients  requires  delivery  of the  purchase
                  price  before  the  settlement  date),  Bank will  debit the
                  Cash  Account  with  the  settlement  amount  and  credit  a
                  separate   account   at  Bank.   Bank  then  will  post  the
                  Securities  Account  as  awaiting  receipt  of the  expected
                  Financial  Assets.  Customer  will  not be  entitled  to the
                  credit in its  Securities  Account of the  Financial  Assets
                  that  are  awaiting  receipt  until  Bank or a  Subcustodian
                  actually receives them.

Bank  reserves  the  right to  restrict  in good  faith  the  availability  of
contractual  settlement date  accounting for reasons of  insufficient  cash in
Customer's  Cash  Account or local  market  constraints  that  would  prohibit
settlement.

      (b)   Bank  may (in  its  absolute  discretion)  upon  oral  or  written
notification to Customer  reverse any pending debit or credit made pursuant to
Section 2.5(a) prior to a transaction's  actual settlement,  and Bank will not
be liable for any costs or liabilities resulting from such reversal.  Customer
acknowledges  that the  procedures  described  in this  sub-section  are of an
administrative  nature,  and Bank  does not  undertake  to make  loans  and/or
Financial Assets available to Customer.

2.6   Settlement  Procedures;  Actual Settlement Date Accounting.
      ----------------------------------------------------------

      With respect to any sale or purchase  transaction  that is not posted to
the  Account on the  contractual  settlement  date as  referred  to in Section
2.5,  Bank  will  post  the  transaction  on the  date on  which  the  cash or
Financial  Assets  received as  consideration  for the transaction is actually
received by Bank.

2.7   Income Collection ; Autocredit(R).
      ---------------------------------

      (a)   Autocredit(R).  Bank will  credit all  interest  and  dividends  and
            -------------
all other  income and  payments,  including  redemption  proceeds on Financial
Assets,  whether  paid in cash or in kind,  as the  same  become  payable  and
credit the same to the Cash  Account,  net of any taxes that are  withheld  by
Bank or any third  party.  Bank may reverse  such credits upon oral or written
notification  to Customer that Bank believes  that the  corresponding  payment
will not be  received by Bank  within a  reasonable  period or such credit was
incorrect.

      (b)   Income  Collection.  Bank will use reasonable,  good faith efforts
            ------------------
to contact  appropriate  parties  to collect  unpaid  interest,  dividends  or
redemption  proceeds,  but neither Bank nor its Subcustodians  will be obliged
to file any formal  notice of default,  institute  legal  proceedings,  file a
proof of claim  in any  insolvency  proceeding,  or take any  similar  action.
With Bank's  permission,  which shall not be unreasonably  withheld,  Customer
may use the name of Bank or a  Subcustodian  when  necessary  to  comment  and
prosecute such legal  proceedings  to collect  amounts due, and Bank will, and
will cause each  Subcustodian  to,  cooperate fully with Customer in assisting
in collecting such amounts.

2.8   Certain Ministerial Acts.
      ------------------------

      (a)   Until Bank receives Instructions to the contrary, Bank will:

            (i)   present  all  Financial  Assets for which Bank has  received
                  notice  of a call  for  redemption  or that  have  otherwise
                  matured,  and all  income  and  interest  coupons  and other
                  income items that call for payment upon presentation;

            (ii)  execute in the name of  Customer  such  certificates  as may
                  be  required  to obtain  payment  in  respect  of  Financial
                  Assets; and

            (iii) exchange  interim or  temporary  documents  of title held in
                  the Securities Account for definitive documents of title.

      (b)   Bank  may  provide   information   concerning   the   Accounts  to
Subcustodians,  Securities Depositories,  counterparties, issuers of Financial
Assets,   governmental   entities,   securities   exchanges,   self-regulatory
entities,  and similar  entities to the extent  required by Applicable  Law or
as may be required by market  practice for accounts of  Institutional  Clients
in order to provide the services contemplated by this Agreement.

2.9   Corporate Actions.
      -----------------

      (a)   Subject to the  standard  of  reasonable  care of Section  7.1(a),
Bank will follow  Corporate  Actions  through receipt of notices from issuers,
from Subcustodians,  Securities Depositories and notices published in industry
publications  and reported in reporting  services.  Bank will promptly  notify
Customer of any Corporate  Action of which  information is either (i) received
by it or a Subcustodian  to the extent that Bank's central  corporate  actions
department has actual  knowledge of the Corporate Action in time to notify its
customers  in a  timely  manner;  or (ii)  published  via a formal  notice  in
publications  and reporting  services  routinely used by Bank for this purpose
in time for Bank to notify its  customers in a timely  manner.  Bank also will
use its reasonable  efforts to notify Customer of any class action  litigation
for  which  information  is  actually  received  by Bank's  central  corporate
actions department but shall not be liable for any Liabilities  arising out of
Bank's   failure  to  identify   Customer's   interest  in  any  class  action
litigation.  Bank does not commit,  however, to provide information concerning
Corporate  Actions or class action  litigation  relating to  Financial  Assets
being held at Customer's  request in a name not subject to the control of Bank
or its Subcustodian.

      (b)   If an  Authorized  Person fails to provide Bank with  Instructions
prior to the deadline  set by the  Securities  Depository  with respect to any
Corporate  Action,  neither  Bank nor its  Subcustodians  or their  respective
nominees will take any action in relation to that Corporate Action,  except as
otherwise  agreed in  writing by Bank and  Customer  or as may be set forth by
Bank as a default  action in the  notification  it provides  under Section 2.9
(a) with respect to that  Corporate  Action.  If Customer  provides  Bank with
Instructions  with respect to any  Corporate  Action after the deadline set by
the Bank but before the deadline set by the Securities Depository,  Bank shall
use  commercially  reasonable  efforts  to act on such  Instructions.  If Bank
fails to act on  Instructions  provided by Customer  prior to the deadline set
by Bank with respect to any Corporate  Action,  Bank will be liable for direct
losses incurred by Customer.

      Bank's deadline for receipt of  Instructions  from Customer with respect
to any Corporate  Action shall not precede the deadline set by the  Securities
Depository by more than a commercially  reasonable  period of time,  with such
interval between the Bank's deadline and the Securities  Depository's deadline
as agreed upon between Customer and Bank.


(c)   Bank may sell or otherwise dispose of fractional  interests in Financial
 Assets  arising out of a Corporate  Action  and, to the extent  necessary  to
 protect  Customer's  interest  in that  Corporate  Action,  credit  the  Cash
 Account with the proceeds of the sale or  disposition.  If some, but not all,
 of an outstanding  class of Financial  Asset is called for  redemption,  Bank
 may allot the amount  redeemed  among the  respective  beneficial  holders of
 such  class of  Financial  Asset  in any  basis  such  that  Customer  is not
 allocated a higher  proportion of the redeemed  Financial Asset than it would
 on a pro rata basis.


       (d)  Notices of  Corporate  Actions  and class  actions  dispatched  to
Customer may have been  obtained  from sources which Bank does not control and
may have been  translated or  summarized.  Although Bank believes such sources
to be reliable,  Bank has no duty to verify the information  contained in such
notices nor the  faithfulness  of any  translation  or summary  and  therefore
does not guarantee its accuracy, completeness or timeliness.

2.10  Proxies.
      -------

      (a)   As may be agreed upon between  Customer  and Bank,  and subject to
and upon the terms of this  sub-section,  Bank  will  monitor  information  in
accordance  with  standard   procedures  as  notified  to  Customer  and  will
promptly provide Customer with information  which it receives on matters to be
voted upon at meetings of holders of Financial Assets  ("Notifications"),  and
Bank will act in accordance with  Customer's  Instructions in relation to such
Notifications   ("the  active  proxy  voting  service").   If  information  is
received  by Bank at its proxy  voting  department  too late to permit  timely
voting by  Customer,  Bank's only  obligation  will be to  provide,  so far as
reasonably  practicable,  a Notification (or summary information  concerning a
Notification) on an "information only" basis.

      (b)   The  active  proxy  voting  service is  available  only in certain
markets,  details of which are  available  from Bank on request.  Provision of
the active proxy voting service is conditional  upon receipt by Bank of a duly
completed  enrollment  form as well as  additional  documentation  that may be
required for certain markets.

      (c)   Bank will act upon  Instructions  to vote on matters  referred  to
in a  Notification,  provided  Instructions  are received by Bank at its proxy
voting  department by the deadline  referred to in the relevant  Notification.
If  Instructions  are not  received  in a  timely  manner,  Bank  will  not be
obligated to provide further notice to Customer.

      (d)   Bank  reserves  the  right  to  provide   Notifications  or  parts
thereof  in the  language  received,  but  shall use  commercially  reasonable
efforts to provide  such  Notifications  in English in a timely  manner.  Bank
will attempt in good faith to provide  accurate  and  complete  Notifications,
whether or not translated.

      (e)   Customer  acknowledges  that  Notifications  and other information
furnished  pursuant to the active proxy voting  service  ("information")  not
                                                                          ====
the  intellectual  property of Customer.  Accordingly,  Customer will not make
any use of such  information  except  in  connection  with  the  active  proxy
voting service, and to the extent necessary to effectuate Customer's voting.

      (f)   In  markets   where  the  active  proxy  voting   service  is  not
available or where Bank has not received a duly completed  enrollment  form or
other  relevant   documentation,   Bank  will  not  provide  Notifications  to
Customer  but  will  endeavor  to act  upon  Instructions  to vote on  matters
before  meetings  of  holders  of  Financial  Assets  where  it is  reasonably
practicable  for Bank (or its  Subcustodians  or  nominees as the case may be)
to do so and where such  Instructions  are  received  in time for Bank to take
timely  action  (the  "passive  proxy  voting  service").  Bank  shall  in all
events  promptly  send  notices and proxy  information  it receives  either to
Customer or as directed by Customer.

      (g)   Customer  acknowledges that the provision of proxy voting services
(whether active or passive) may be precluded or restricted  under a variety of
circumstances.  These circumstances include, but are not limited to:

            (i)   the Financial Assets being on loan or out for registration,

            (ii)  the  pendency of conversion or another Corporate Action;

            (iii) Financial Assets being held at Customer's  request in a name
                  not subject to the control of Bank or its Subcustodian;

            (iv)  Financial  Assets  being  held  in a  margin  or  collateral
                  account at Bank or another  bank or broker,  or otherwise in
                  a manner which affects voting;

            (v)   local market  regulations or practices,  or  restrictions by
                  the issuer;  and

            (vi)  Bank  may  be  required  to  vote  all  shares  held  for  a
                  particular  issue for all of Bank's customers on a net basis
                  (i.e.  a net yes or no vote  based  on  voting  instructions
                  received  from all its  customers).  Where this is the case,
                  Bank will inform Customer by means of the Notification.

      (h)   Notwithstanding  the  fact  that  Bank  may  act  in  a  fiduciary
capacity  with  respect to Customer  under  other  agreements,  in  performing
active or passive  proxy  voting  services  Bank will be acting  solely as the
agent of Customer,  and will not exercise any discretion,  with regard to such
proxy services or vote any proxy except when directed by an Authorized Person.

2.11  Statements and Information Available On-Line.
      --------------------------------------------

      (a)   Bank will send to Customer,  or make available to Customer on-line
or otherwise at Customer's  reasonable request, at times mutually agreed upon,
formal  statements  of account  in Bank's  standard  format  for each  Account
maintained by Customer with Bank,  identifying  the Financial  Assets and cash
held  in  each  Account  (each  such  statement  a  "Statement  of  Account").
Additionally,  Bank will  send (or make  available  on-line  to)  Customer  an
advice or  notification  of any  transfers  of cash or  Financial  Assets with
respect to each  Account.  Bank will not be liable with  respect to any matter
set forth in those  portions  of any  Statement  of Account or any such advice
(or  reasonably  implied  therefrom)  to which  Customer  has not given Bank a
written  exception  or  objection  within  ninety  (90) days of receipt of the
Statement  of  Account,  provided  such  matter  is not the  result  of Bank's
negligence,  willful misconduct or bad faith.  References in this Agreement to
Statements of Account include Statements of Account in electronic form.

      (b)   Prices and other information  obtained from  non-affiliated  third
parties  which  may  be  contained  in  any  Statement  of  Account  or  other
statement  sent to Customer  have been  obtained from sources Bank believes to
be  reliable.  Bank  does  not,  however,  make any  representation  as to the
accuracy  of  such  information  or  that  the  prices  specified  necessarily
reflect the  proceeds  that would be  received  on a disposal of the  relevant
Financial Assets.

      (c)   Customer  acknowledges  that,  except for Statements of Account or
as otherwise  expressly  agreed by Bank,  records and reports  available to it
on-line may not be accurate due to valuation  differences  by reason of prices
used by Customer to value its  Financial  Assets,  delays in updating  Account
records, and other causes.

2.12  Access to Bank's Records.
      ------------------------

      Bank  will  allow  Customer's   independent   public   accountants  such
reasonable  access to the records of Bank  relating to Financial  Assets as is
required in connection with their examination of books and records  pertaining
to Customer's  affairs.  Subject to  restrictions  under  Applicable Law, Bank
also  will  obtain an  undertaking  to permit  Customer's  independent  public
accountants,   reasonable  access  to  the  records  of  any  Subcustodian  of
Securities  held in the  Securities  Account as may be required in  connection
with such examination.

2.13  Maintenance of Financial Assets at Subcustodian Locations.
      ---------------------------------------------------------

      (a)   Unless   Instructions   require  another  location  acceptable  to
Bank,  Financial  Assets will be held in the country or  jurisdiction in which
their  principal  trading market is located,  where such Financial  Assets may
be presented  for  payment,  where such  Financial  Assets were  acquired,  or
where  such  Financial  Assets  are  held  in  a  Reported  Depository.   Bank
reserves the right to refuse to accept  delivery of  Financial  Assets or cash
in  countries  and  jurisdictions  other than those  referred to in Schedule 2
to this Agreement, as in effect from time to time.

      (b)   Bank  will  not be  obliged  to  follow  an  Instruction  to  hold
Financial  Assets with,  or have them  registered  or recorded in the name of,
any  person  not  chosen by Bank or its  Subcustodian.  However,  if  Customer
does  instruct  Bank to hold  Financial  Assets  and/or  cash with or register
or  record  Financial  Assets  in the name of a person  not  chosen by Bank or
its  Subcutodian  and  Bank  agrees  to do  so,  except  in a  case  in  which
registration  or  recording  in the  name of a  person  chosen  by Bank or its
Subcustodian  would impose risks to Customer  not present if  registration  or
recordation  were in a different  name,  the  consequences  of doing so are at
Customer's  own risk and Bank  (i) will not be  liable  therefor  and (ii) may
not provide  services under this Agreement with respect to Financial  Assets s
or cash so  held,  including,  without  limitation,  services  provided  under
Sections 2.8, 2.9, 2.10, and 8.2.

2.14  Tax Relief Services.
      -------------------

      Bank will provide tax relief services as provided in Section 8.2.


2.15  Foreign Exchange Transactions.
      -----------------------------

      To facilitate the  administration  of Customer's  trading and investment
activity and pursuant to Instructions  from  CustomerBank may, but will not be
obliged  to,  enter  into spot or  forward  foreign  exchange  contracts  with
Customer,  and may also provide  foreign  exchange  contracts  and  facilities
through its  Affiliates or  Subcustodians.  Instructions,  including  standing
Instructions,  may be issued  with  respect  to such  contracts,  but Bank may
establish rules or limitations  concerning any foreign exchange  facility made
available.  In all cases where Bank,  its  Affiliates or  Subcustodians  enter
into  a  master  foreign  exchange   contract  that  covers  foreign  exchange
transactions  for the  Accounts,  the terms  and  conditions  of that  foreign
exchange  contract and, to the extent not inconsistent,  this Agreement,  will
apply to such transactions.

2.16.  Compliance with Securities and Exchange  Commission ("SEC") Rule 17f-5
       -----------------------------------------------------------------------
("Rule     17f-5").
- -------------------

      (a)  Customer's  board of directors (or  equivalent  body)  (hereinafter
`Board')  hereby  delegates  to Bank,  and,  as to those  countries  listed in
Schedule 2 hereto (and as the same may be amended on notice to  Customer  from
time to time),  Bank hereby accepts the delegation to it, of the obligation to
perform as Customer's  `Foreign  Custody  Manager' (as that term is defined in
rule 17f-5(a)(3) as promulgated  under the Investment  Company Act of 1940, as
amended  ("1940 Act"),  including for the purposes of: (i) selecting  Eligible
Foreign  Custodians (as that term is defined in rule  17f-5(a)(1),  and as the
same may be amended from time to time,  or that have  otherwise  been exempted
pursuant  to an SEC  exemptive  order) to hold  Foreign  Financial  Assets and
Cash, (ii) evaluating the contractual  arrangements with such Eligible Foreign
Custodians (as set forth in rule  17f-5(c)(2)),  (iii) monitoring such foreign
custody arrangements (as set forth in rule 17f-5(c)(3)).

      (b) In connection with the foregoing, Bank shall:

      (i) Promptly  advise  Customer of the placement of Customer's  Financial
      Assets and Cash with an Eligible  Foreign  Custodian in connection  with
      execution of this Agreement;

      (ii)  provide  written  reports   notifying   Customer's  Board  of  the
      placement of Financial Assets and Cash with particular  Eligible Foreign
      Custodians  and of any  material  change in the  arrangements  with such
      Eligible  Foreign  Custodians,  with  such  reports  to be  provided  to
      Customer's  Board  at such  times  as the  Board  deems  reasonable  and
      appropriate  based on the  circumstances  of Customer's  foreign custody
      arrangements  (and until further notice from Customer such reports shall
      be provided not less than  quarterly  with  respect to the  placement of
      Financial Assets and Cash with particular  Eligible  Foreign  Custodians
      and with  reasonable  promptness  upon the  occurrence  of any  material
      change in the arrangements with such Eligible Foreign Custodians);

      (iii)  exercise  such  reasonable   care,   prudence  and  diligence  in
      performing  as  Customer's  Foreign  Custody  Manager as a person having
      responsibility  for the safekeeping of Foreign Financial Assets and cash
      would exercise;

      (iv) in selecting an Eligible Foreign  Custodian,  first have determined
      that  Foreign  Financial  Assets and cash placed and  maintained  in the
      safekeeping  of such  Eligible  Foreign  Custodian  shall be  subject to
      reasonable care, based on the standards  applicable to custodians in the
      relevant  market,  after having  considered all factors  relevant to the
      safekeeping  of such  Foreign  Financial  Assets  and  cash,  including,
      without limitation, those factors set forth in rule 17f-5(c)(1)(i)-(iv);

      (v)  determine  that  the  written  contract  with an  Eligible  Foreign
      Custodian  requires that the Eligible  Foreign  Custodian  shall provide
      reasonable  care for  Foreign  Financial  Assets  and Cash  based on the
      standards applicable to custodians in the relevant market;

      (vi)  determine  that the  written  contract  with an  Eligible  Foreign
      Custodian    contains    the    provisions    set    forth    in    Rule
      17f-5(c)(2)(i)(A)-(F)  or, in lieu of any of all of the  provisions  set
      forth  in  Rule   17f-5(c)(2)(i)(A)-(F),   other  provisions  that  Bank
      determines will provide,  in their  entirety,  the same or level of care
      and  protection  for the Foreign  Financial  Assets as the provisions in
      Rule 17f-5(c)(2)(i)(A)-(F), in their entirety; and .

      (vii) have  established  a system to monitor the  initial and  continued
      appropriateness  of maintaining  Foreign  Financial Assets and cash with
      particular Eligible Foreign Custodians and of the governing  contractual
      arrangements; it being understood,  however, that in the event that Bank
      shall have determined that the existing  Eligible Foreign Custodian in a
      given country would no longer afford Foreign  Financial  Assets and cash
      reasonable  care and that no other  Eligible  Foreign  Custodian in that
      country  would afford  reasonable  care,  Bank shall  promptly so advise
      Customer  and shall  then act in  accordance  with the  Instructions  of
      Customer  with  respect  to  the  disposition  of the  affected  Foreign
      Financial Assets and cash.

Subject  to  (b)(i)-(vii)  above,  Bank is  hereby  authorized  to  place  and
maintain  Foreign  Financial  Assets  and  cash on  behalf  of  Customer  with
Eligible Foreign Custodians  pursuant to a written contract deemed appropriate
by Bank.


      (c) Bank  represents  to Customer  that it is a U.S.  Bank as defined in
Rule  17f-5(a)(7).   Customer   represents  to  Bank  that:  (1)  the  Foreign
Financial  Assets and cash being placed and  maintained in Bank's  custody are
subject  to the 1940 Act,  as the same may be amended  from time to time;  (2)
its Board has  determined  that it is reasonable to rely on Bank to perform as
Customer's  Foreign  Custody  in each  country in which  Customer's  Financial
Assets and cash  shall be held  hereunder  and  determined  to accept  Country
Risk.  Nothing  contained  herein shall  require Bank to make any selection or
to  engage  in  any  monitoring  on  behalf  of  Customer  that  would  entail
consideration of Country Risk.

For  purposes  hereof,  "Country  Risk" shall mean  systemic  risks of holding
      assets in a particular
country including,  but no limited to, (a) an Eligible Foreign Custodian's use
      of an Eligible
Securities  Depository as defined in Rule 17f-7 under the  Investment  Company
      Act of 1940 as
amended,  (b) such  country's  financial  infrastructure,  (c) such  country's
      prevailing custody and
settlement   practices,   (d)   nationalization,    expropriation   or   other
      governmental actions, (e)
 regulation  of the banking or  securities  industry,  (f) currency  controls,
      restrictions, devaluations
 or  fluctuations,   and  (g)  market  conditions  which  affect  the  orderly
      execution of securities
transactions or affect the value of securities.


      (d) Bank shall provide to Customer such information  relating to Country
Risk as is  specified  in  Schedule  1 hereto.  Customer  hereby  acknowledges
that:  (i) such  information is solely  designed to inform  Customer of market
conditions and procedures  and is not intended as a  recommendation  to invest
or  not  invest  in  particular  markets;  and  (ii)  Bank  has  gathered  the
information  from sources it considers  reliable,  but that Bank shall have no
responsibility for inaccuracies or incomplete information.

2.17  Compliance with SEC Rule 17f-7 ("Rule 17f-7").
      ----------------------------------------------

      (a) Bank shall have  provided for  consideration  by Customer,  prior to
the  placement  of  Customer's  Foreign  Financial  Assets  with any  Eligible
Securities  Depository  in connection  with  execution of this  Agreement,  an
analysis of the custody risks associated with maintaining  Customer's  Foreign
Financial Assets with each Eligible  Securities  Depository used by Bank as of
the date  hereof (or, in the case of an  Eligible  Securities  Depository  not
used by  Bank  as of the  date  hereof,  prior  to the  initial  placement  of
Customer's  Foreign  Financial  Assets  at  such  Depository).  The  foregoing
analysis will be provided to Customer at Bank's  Website.  In connection  with
the  foregoing,   Customer  shall  notify  Bank  of  any  Eligible  Securities
Depositories at which it does not choose to have its Foreign  Financial Assets
held.  Bank shall  monitor  the  custody  risks  associated  with  maintaining
Customer's   Foreign  Financial  Assets  at  each  such  Eligible   Securities
Depository on a continuing  basis and shall  promptly  notify  Customer or its
adviser of any material changes in such risks.

      In conducting the aforementioned  analysis,  Bank shall consider factors
relevant to custody risks, including but not limited to:

(i)   the depository's expertise and market reputation;
(ii)  the quality of the despository's services;
(iii) the depository's financial strength;
(iv)  insurance or indemnification arrangements;
(v)   the extent and quality of regulation and independent  examination of the
            depository;
(vi)  the depository's standing in published ratings;
(vii) the   depository's   internal   controls   and  other   procedures   for
            safeguarding investments; and
(viii)      any related legal proceedings.

      (b) Bank shall  exercise  reasonable  care,  prudence  and  diligence in
performing the requirements set forth in Section 2.17(a) above.

      (c)  Based  on  the  information  available  to it in  the  exercise  of
diligence,  Bank  shall  determine  the  eligibility  under rule 17f-7 of each
depository  before including it on Schedule 3 hereto and shall promptly advise
Customer  if  any  Eligible  Securities  Depository  ceases  to  be  eligible.
(Eligible  Securities  Depositories used by Bank as of the date hereof are set
forth in  Schedule  3  hereto,  and as the same may be  amended  on  notice to
Customer from time to time.)


2.18        Securities Entitlement Orders.
            -----------------------------

    Bank  shall at all times be bound by  Instructions  (except  as  otherwise
herein  provided)  as to  Securities  Entitlements  of Customer  and shall not
permit,  honor or act upon any  prior,  equal or  contemporaneous  claim to or
instructions  or orders of any kind with respect to  Financial  Assets or Cash
by or from any  other  person  or  entity  of any  kind,  and  shall  keep all
Financial  Assets  and Cash at all  times  free from all  security  interests,
charges,  claims,   mortgages,   pledges  or  other  liens,   restrictions  or
encumbrances  other  than those  arising  in  connection  with  settlement  of
transactions  pursuant to this  Agreement  and other  charges and  payments by
Bank as permitted by this Agreement.


2.19  Confirmations.
      --------------

      Bank shall send  Customer  confirmations  of  transfers  to and from the
Accounts at the end of each business day.


3.INSTRUCTIONS

3.1   Acting on Instructions; Unclear Instructions.
      --------------------------------------------

      (a)   Customer  authorizes Bank to accept and act upon any  Instructions
received  by  it  without   inquiry.   Customer   will   indemnify   the  Bank
Indemnitees  against,  and hold each of them harmless  from,  any  Liabilities
that  may  be  imposed  on,   incurred  by,  or  asserted   against  the  Bank
Indemnitees  as a result of any action or omission  taken in  accordance  with
any  Instructions  or other  directions  upon which Bank is authorized to rely
under  the  terms  of  this  Agreement,   provided  that  Bank  shall  not  be
indemnified  against  or held  harmless  from  any  liability  arising  out of
Bank's negligence, fraud or willful misconduct.

      (b)   Unless  otherwise  expressly   provided,   all  Instructions  will
continue in full force and effect until canceled or superseded.

      (c)   Bank may (in its sole  discretion  and without  affecting any part
of this Section 3.1) seek  clarification  or  confirmation  of an  Instruction
from an  Authorized  Person and may decline to act upon an  Instruction  if it
does not receive  clarification or confirmation  satisfactory to it. Bank will
not, except as provided in Section 7.1 hereof,  be liable for any loss arising
from any  delay  while it seeks  such  clarification  or  confirmation  and it
documents that it sought clarification or confirmation.

      (d)   In  executing  or  paying a payment  order  Bank may rely upon the
identifying  number (e.g.  Fedwire  routing number or account) of any party as
instructed in the payment  order.  Customer  assumes full  responsibility  for
any  inconsistency  between  the name and  identifying  number of any party in
payment orders issued to Bank in Customer's name.

3.2   Confirmation of Oral Instructions/Security Devices.
      --------------------------------------------------

      Any   Instructions   delivered  to  Bank  by  telephone   will  promptly
thereafter   be  confirmed   in  writing  by  an   Authorized   Person.   Each
confirmation is to be clearly marked  "Confirmation."  Bank will not be liable
for  having  followed  such  Instructions  notwithstanding  the  failure of an
Authorized  Person to send such  confirmation  in  writing  or the  failure of
such  confirmation  to  conform  to  the  telephone   Instructions   received,
provided  that Bank shall have  exercised  reasonable  care in following  such
Instructions.  In  the  event  of a  discrepancy  between  Instructions  and a
subsequent  confirmation,  Bank  will  immediately  notify  Customer  of  such
discrepancy.    Either   party   may   record   any   of   their    telephonic
communications.   Customer   will   comply   with  any   security   procedures
reasonably  required  by Bank from time to time with  respect to  verification
of  Instructions.  Customer  will be  responsible  for  safeguarding  any test
keys,  identification  codes or other  security  devices  that  Bank will make
available to Customer or any Authorized Person.

3.3   Instructions; Contrary to Law/Market Practice.
      ---------------------------------------------

      Bank need not act upon Instructions  which it reasonably  believes to be
contrary  to law,  regulation  or  market  practice  and will  immediately  so
notify  Customer,  but Bank will be under no duty to  investigate  whether any
Instructions comply with Applicable Law or market practice.

3.4   Cut-off Times.
      -------------

      Bank has  established  cut-off  times for receipt of some  categories of
Instruction,  which are consistent with industry  standards for the receipt of
such  instructions  and which  will be made  available  to  Customer.  If Bank
receives  an  Instruction  after  its  established  cut-off  time,  Bank  will
attempt  to act upon the  Instruction  on the day  requested  if Bank deems it
practicable  to do so  or  otherwise  as  soon  as  practicable  on  the  next
business day.

4.    FEES, EXPENSES AND OTHER AMOUNTS OWING TO BANK

4.1   Fees and Expenses.
      ----------------- -

      Customer  will pay Bank for its  services  hereunder  the fees set forth
in  Schedule A hereto or such other  amounts as may be agreed  upon in writing
from  time  to  time,   together  with  Bank's  reasonable   out-of-pocket  or
incidental   expenses,   including,   but  not  limited  to,   reasonable  and
appropriate  legal fees.  Customer  authorizes Bank to deduct amounts owing to
it from the Cash  Account,  for any  undisputed  fees or expenses from time to
time  more  than 60 days in  arrears.  Bank  may  increase  the  fees  for its
services  hereunder  by not less  than  thirty  days'  notice  in  writing  to
Customer.  Without  prejudice to Bank's other rights,  Bank reserves the right
to charge  interest  on  undisputed  overdue  amounts  from the due date until
actual  payment  at such  rate as Bank  may  reasonably  determine  but not to
exceed an annual rate of the then-current Federal funds plus 0.25%.

4.2   Overdrafts.
      ----------

      If a debit  to any  currency  in the  Cash  Account  results  in a debit
balance in that currency  (without regard to Cash Account  investments),  then
Bank may, in its  discretion,  (i) advance an amount  equal to the  overdraft,
(ii) refuse to settle in whole or in part the  transaction  causing such debit
balance,  or  (iii)  if any  such  transaction  is  posted  to the  Securities
Account,  reverse  any such  posting.  If Bank elects to make such an advance,
the  advance  will be deemed a loan to  Customer,  payable on demand,  bearing
interest  at the  applicable  rate  charged  by  Bank  from  time  to  time to
customers  similar to  Customer,  for such  overdrafts,  from the date of such
advance to the date of payment  (both  after as well as before  judgment)  and
otherwise on the terms on which Bank makes similar  overdrafts  available from
time to time.  No prior  action  or  course of  dealing  on  Bank's  part with
respect  to the  settlement  of  transactions  on  Customer's  behalf  will be
asserted by Customer  against Bank for Bank's  refusal to make advances to the
Cash Account or to settle any  transaction  for which  Customer  does not have
sufficient available funds in the applicable currency in the Cash Account.

      Custodian  may,  without  prior notice to Customer,  set off any payment
obligation  owed to it by Customer  under this Section 4.2 against  Customer's
Cash  Account,  regardless  of currency  involved.  If,  after set off against
Customer's  Cash  Account,  there  remains a debit  balance under this Section
4.2,  then,  with respect to Financial  Assets in the  Securities  Account and
without  prejudice  to Bank's  rights as a Securities  Intermediary  under New
York law (including,  but not limited to, under the Uniform  Commercial Code),
upon notice to Customer,  Bank shall be entitled to withhold  delivery of such
Financial  Assets  against  settlement  of pending  trades,  sell or otherwise
realize any such  Financial  Assets and to apply the proceeds in  satisfaction
of any such payment obligation,  provided that the foregoing is not prohibited
by Section 18 of the Investment Company Act of 1940.


          5.SUBCUSTODIANS, SECURITIES DEPOSITORIES, AND OTHER AGENTS

5.1   Appointment of Subcustodians; Use of Securities Depositories.
      ------------------------------------------------------------

      (a)   Bank is  authorized  under this  Agreement to act through and hold
Customer's  Financial  Assets  with  Subcustodians,  being at the date of this
Agreement  the  entities  listed  in  Schedule  2.  Bank  will use  reasonable
care in the selection  and continued  appointment  of such  Subcustodians.  In
addition,  Bank and each  Subcustodian may deposit  Financial Assets with, and
hold Financial  Assets in, any Reported  Depository or "other U.S.  Securities
Depository."   Customer   will  provide  Bank  with  such   documentation   or
acknowledgements  that  Bank may  reasonably  require  to hold  the  Financial
Assets in such Securities Depositories.

      (b)   Any  agreement  Bank enters into with a  Subcustodian  for holding
Bank's  customers'  assets will  provide  that such assets will not be subject
to any right,  charge,  security interest,  lien or claim of any kind in favor
of such  Subcustodian  or its  creditors  except a claim for payment for their
safe custody or administration,  or, in the case of cash deposits,  except for
liens or  rights  in favor of  creditors  of the  Subcustodian  arising  under
bankruptcy,  insolvency  or similar  law,  and that the  beneficial  ownership
thereof  will be freely  transferable  without  the  payment of money or value
other  than  for  safe  custody  or   administration.   Where  a  Subcustodian
deposits  Securities  with  a  Securities  Depository,  Bank  will  cause  the
Subcustodian  to identify on its records as belonging to Bank,  as agent,  the
Securities   shown  on  the   Subcustodian's   account   at  such   Securities
Depository.  This  Section  5.1(b) will not apply to the extent of any special
agreement or arrangement made by Customer with any particular Subcustodian.

      (c)   Bank  will  not be  liable  for  any  act or  omission  by (or the
insolvency  of) any  Securities  Depository.  In the event  Customer  incurs a
loss due to the negligence,  willful misconduct, or insolvency of a Securities
Depository,  Bank will make good faith  efforts,  in its  discretion,  to seek
recovery  from the  Securities  Depository,  but Bank will not be obligated to
institute  legal  proceedings,  file  a  proof  of  claim  in  any  insolvency
proceeding, or take any similar action.

5.2   Liability for Subcustodians.
      ---------------------------

      (a)   Subject to Section  7.1(b),  Bank will be liable for direct losses
incurred by Customer that result from:

            (i)   the failure by a Subcustodian  to use reasonable care in the
                  provision of  custodial  services by it in  accordance  with
                  the  standards   prevailing  in  the  relevant   market  for
                  Institutional   Clients   or  from  the  fraud  or   willful
                  misconduct or default of such  Subcustodian in the provision
                  of custodial services by it; or

            (ii)  the    bankruptcy   or   insolvency   of   any    Affiliated
                  Subcustodian.

      (b)   Subject to Section 7.1(b) and Bank's duty to use  reasonable  care
in the  monitoring  of a  Subcustodian's  financial  condition as reflected in
its published  financial  statements  and other publicly  available  financial
information  concerning  it, Bank will not be  responsible  for the insolvency
of any Subcustodian which is not a branch or an Affiliated Subcustodian.

      (c)   Bank   reserves   the   right   to   add,    replace   or   remove
Subcustodians.  Bank will give prompt  notice of any such  action,  which will
be advance  notice if  practicable.  Bank will identify the name,  address and
principal  place of business of any  Subcustodian  and the name and address of
the  governmental  agency or other  regulatory  authority  that  supervises or
regulates such Subcustodian.

5.3   Use of Agents.
      -------------

      (a)   Bank may provide  certain  services under this  Agreement  through
third  parties,  which may be  Affiliates.  Except to the extent  provided  in
Section 5.2 with respect to  Subcustodians,  Bank will not be responsible  for
any loss as a result of a failure by any broker or any other  third party that
it selects and retains using  reasonable  care to provide  ancillary  services
that it may not customarily  provide itself,  including,  without  limitation,
delivery  services and  providers  of  information  regarding  matters such as
pricing, proxy voting or Corporate Actions. Nevertheless,  Bank will be liable
for the performance of any such service  provider  selected by Bank that is an
Affiliate  to the same extent as Bank would have been  liable if it  performed
such services itself.

      (b)   In the case of the  sale  under  Section  2.9(c)  of a  fractional
interest (or in other cases where  Customer has requested  Bank to arrange for
execution  of a trade)  Bank  will  place  trades  with a  broker  which is an
Affiliate to the extent that Bank has  established  a program for such trading
with  such   Affiliate.   An  affiliated   broker  may  charge  its  customary
commission  (or  retain  its  customary  spread)  with  respect  to  any  such
transaction.



                 6.ADDITIONAL PROVISIONS RELATING TO CUSTOMER

6.1   Representations of Customer and Bank.
      ------------------------------------

      (a)   Customer  represents  and warrants that (i) it has full  authority
and power,  and has obtained all necessary  authorizations  and  consents,  to
deposit and  control the  Financial  Assets and cash in the  Accounts,  to use
Bank as its  custodian  in  accordance  with the terms of this  Agreement,  to
incur  indebtedness  as  contemplated  by this  Agreement,  and to enter  into
foreign exchange  transactions;  (ii) assuming  execution and delivery of this
Agreement by Bank,  this  Agreement  is  Customer's  legal,  valid and binding
obligation,  enforceable  in  accordance  with its terms and it has full power
and  authority to enter into and has taken all necessary  corporate  action to
authorize  the  execution  of this  Agreement  (iii) it has not  relied on any
oral or written  representation  made by Bank or any person on its behalf, and
acknowledges  that this  Agreement  sets out to the fullest  extent the duties
of Bank;  and (iv) it is a  resident  of the United  States  and shall  notify
Bank of any changes in residency.

      (b)   Bank  represents  and  warrants  that (i) assuming  execution  and
delivery of this  Agreement  by  Customer,  this  Agreement  is Bank's  legal,
valid and binding  obligation,  enforceable in accordance with its terms, (ii)
it has full  power and  authority  to enter  into and has taken all  necessary
corporate  action to authorize the execution of this  Agreement,  (iii) it has
not  relied on any oral or  written  representation  made by  Customer  or any
person on its behalf,  and  acknowledges  that this  Agreement sets out to the
fullest  extent the duties of  Customer;  and (iv) it is qualified to act as a
custodian for investment companies registered under the 1940 Act.

Each party may rely upon the above or the  certification  of such other  facts
as may be required to perform its obligations hereunder.

6.2   Provision of Additional Information.
      -----------------------------------

      Upon  request,  each  party  will  promptly  provide  to the other  such
information  about  itself  and its  financial  status as the other  party may
reasonably  request,  including its  organizational  documents and its current
audited and unaudited financial statements.

6.3   Customer is Liable to Bank Even if it is Acting for Another Person.
      ------------------------------------------------------------------

      If  Customer  is  acting  as an agent  for a  disclosed  or  undisclosed
principal  in respect of any  transaction,  cash,  or  Financial  Asset,  Bank
nevertheless  will treat Customer as its principal for all purposes under this
Agreement.  In this regard,  Customer will be liable to Bank as a principal in
respect of any  transactions  relating to the Account.  The foregoing will not
affect any rights Bank might have against Customer's principal.


                      7.WHEN BANK IS LIABLE TO CUSTOMER

7.1   Standard of Care; Liability.
      ---------------------------

      (a)   Bank  will  use  reasonable  care in  performing  its  obligations
under this  Agreement.  Bank will not be in violation of this  Agreement  with
respect  to  any  matter  as to  which  it has  satisfied  its  obligation  of
reasonable care.

      (b)   Bank will be liable for  Customer's  direct  damages to the extent
they result from Bank's  negligence or willful  misconduct  in performing  its
duties as set out in this  Agreement  and to the  extent  provided  in Section
5.2(a)  or  breach  of  any  warranty  or   representation   made  under  this
Agreement.  In  the  event  of  such  negligence  or  willful  misconduct  the
liability  of the Bank in  connection  with the loss or damage will not exceed
(i) the lesser of the  current  replacement  cost of any  Financial  Assets or
the  market  value of the  Financial  Assets  to  which  such  loss or  damage
relates at the time the  Customer  reasonably  should  have been aware of such
negligence or willful misconduct,  plus (ii) compensatory  interest up to that
time at the  rate  applicable  to the base  currency  of the  Customers'  Cash
Account.  Nevertheless,  under no  circumstances  will Bank be liable  for any
indirect,  incidental,  consequential or special damages  (including,  without
limitation,  lost  profits)  of any form  incurred  by any  person or  entity,
whether  or not  foreseeable  and  regardless  of the type of  action in which
such  a  claim  may  be  brought,   with  respect  to  the  Accounts,   Bank's
performance hereunder, or Bank's role as custodian.

      (c)   Customer will  indemnify the Bank  Indemnitees  against,  and hold
them harmless from,  any  Liabilities  that may be imposed on,  incurred by or
asserted  against any of the Bank Indemnitees to the extent in connection with
or arising out of (i) Bank's  performance  under this Agreement,  provided the
Bank  Indemnitees  have not  acted  with  negligence  or  engaged  in fraud or
willful  misconduct in connection with the Liabilities in question or (ii) any
action or omission taken by Bank or such Bank  Indemnitees in accordance  with
any  Instructions or other  directions of Customer on which Bank is authorized
hereunder to rely.  Nevertheless,  Customer will not be obligated to indemnify
any  Bank  Indemnitee  under  the  preceding  sentence  with  respect  to  any
Liability for which Bank is liable under Section 5.2 of this Agreement.

      (d)   Without limiting  Subsections  7.1(a),  (b) or (c), Bank will have
no  duty  or  responsibility  to:  (i)  question   Instructions  or  make  any
suggestions to Customer or an Authorized  Person regarding such  Instructions,
except as provided in Section  3.2,  provided  that the  Instructions  are not
clearly incorrect on their face; (ii) supervise or make  recommendations  with
respect to  investments  or the  retention of Financial  Assets;  (iii) advise
Customer  or an  Authorized  Person  regarding  any  default in the payment of
principal or income of any security  other than as provided in Section  2.7(b)
of this  Agreement;  (iv) except as may otherwise be required by Sections 2.16
or 2.17,  evaluate  or report to Customer or an  Authorized  Person  regarding
the financial  condition of any broker,  agent or other party to which Bank is
instructed by an  Authorized  Person to deliver  Financial  Assets or cash; or
(v)  review or  reconcile  trade  confirmations  received  from  brokers  (and
Customer  or  its  Authorized  Persons  issuing  Instructions  will  bear  any
responsibility to review such  confirmations  against  Instructions  issued to
and Statements of Account issued by Bank).

         (e) Promptly after receipt by Bank of notice of commencement of any
action, Bank will, if a claim in respect thereof is  made against Customer
under this Agreement, notify Customer of the commencement thereof; but the
omission so to notify Customer will not relieve it from any liability which
it may have to Customer otherwise than under this Agreement. In case any such
action is brought against Bank, and it notified Customer of the commencement
thereof, Customer will be entitled to participate therein and, to the extent
that Customer may wish, assume the defense thereof; provided, that in the
case of any claim that Bank deems significant, Bank shall have the right to
consent to Customer's choice of counsel in its defense of such action, such
consent not to be unreasonably withheld. After notice from Customer of
Customer's intention to assume the defense of an action, Bank shall bear the
expenses of any additional counsel obtained by Bank, and Customer shall not
be liable to Bank under this section for any legal or other expenses
subsequently incurred by Bank in connection with the defense thereof other
than reasonable costs of investigation. Bank shall in no case confess any
claim or make any compromise in any case in which Customer is asked to
indemnify Bank except with Customer's prior written consent.

7.2   Force Majeure.
      -------------

      Bank will  maintain and update from time to time  business  continuation
and disaster  recovery  procedures  with respect to its custody  business that
it determines from time to time meet  reasonable  commercial  standards.  Bank
will have no liability,  however,  for any damage,  loss, expense or liability
of any nature  that  Customer  may  suffer or incur,  caused by an act of God,
fire,  flood,  civil  or  labor  disturbance,  war,  act of  any  governmental
authority  or other  act or  threat of any  authority  (de jure or de  facto),
malfunction  of  equipment  or  software  (except  where such  malfunction  is
primarily  attributable  to Bank's  negligence in maintaining the equipment or
software),  failure of  operations  of any  external  funds  transfer  system,
inability to obtain or  interruption  of external  communications  facilities,
or any  cause  beyond  the  reasonable  control  of  Bank  (including  without
limitation, the non-availability of appropriate foreign exchange).

7.3   Bank  May Consult With Counsel.
      ------------------------------

      Bank  will be  entitled  to rely  on,  and may act upon  the  advice  of
professional  advisers  in relation  to matters of law,  regulation  or market
practice (which may be the  professional  advisers of Customer),  and will not
be liable to Customer for any action  reasonably  taken or omitted pursuant to
such advice of which it promptly notifies Customer.

7.4   Bank Provides Diverse Financial  Services and May Generate Profits as a
      ------------------------------------------------------------------------
Result.
- ------

      Customer  acknowledges  that Bank or its  Affiliates may have a material
interest  in  transactions  entered  into  by  Customer  with  respect  to the
Account  or that  circumstances  are  such  that  Bank  may  have a  potential
conflict of duty or interest.  For  example,  Bank or its  Affiliates  may act
as a market  maker in the  Financial  Assets  to  which  Instructions  relate,
provide  brokerage  services to other customers,  act as financial  adviser to
the issuer of such  Financial  Assets,  act in the same  transaction  as agent
for more  than one  customer,  have a  material  interest  in the issue of the
Financial  Assets;  or earn  profits  from any of these  activities.  Customer
further  acknowledges  that Bank or its  Affiliates  may be in  possession  of
investment-related   information   tending  to  show  that  the   Instructions
received  may not be in the best  interests  of Customer  but that Bank is not
under any duty to disclose any such information.


                                  8.TAXATION

8.1   Tax Obligations.
      ---------------

      (a)   Customer  confirms that Bank is authorized to deduct from any cash
received or credited to the Cash  Account any taxes or levies  required by any
revenue or governmental authority in respect of Customer's Accounts;  provided
that such cash shall be paid to such revenue or governmental  authority or set
aside in a separate account of Customer for such purpose.

      (b)   Customer will provide to Bank such certifications,  documentation,
and information as it may reasonably require in connection with taxation.

      (c)    Customer  will  be  responsible  for  the  payment  of all  taxes
relating to the  Financial  Assets in the  Securities  Account.  Customer will
indemnify  and hold Bank  harmless  from and against any and all  liabilities,
penalties,  interest or additions  to tax with  respect to or resulting  from,
any delay in, or  failure  by,  Bank (i) to pay,  withhold  or report any U.S.
federal,  state  or  local  taxes  or  foreign  taxes  imposed  on  Customer's
Financial  Assets,  or (ii) to report interest,  dividend or other income paid
or credited to the Cash Account, provided,  however, that Customer will not be
liable to Bank for any penalty or  additions  to tax due as a result of Bank's
failure  to pay or  withhold  tax or to  report  interest,  dividend  or other
income  paid or  credited  to the Cash  Account  solely  as a result of Bank's
negligent acts or omissions.

8.2   Tax Reclaims.
      -------------

      (a)   Subject to the  provisions of this Section,  Bank will apply for a
reduction of withholding  tax and any refund of any tax paid or tax credits in
respect of income  payments on  Financial  Assets  credited to the  Securities
Account that Bank believes may be  available.  To defray  expenses  pertaining
to nominal tax claims,  Bank may from  time-to-time set minimum  thresholds as
to a de minimus  value of tax reclaims or reduction  of  withholding  which it
will pursue in respect of income payments under this section.  Notwithstanding
any  minimum  threshold  set  by  Bank,  Bank  will  file  a  tax  reclaim  or
application for reduction of withholding if requested by Customer.

      (b)   The  provision  of a tax  reclaim  service by Bank is  conditional
upon Bank  receiving from Customer (i) a declaration of its identity and place
of  residence  and (ii)  certain  other  documentation  requested by Bank (pro
forma  copies of which are  available  from  Bank),  prior to the  receipt  of
Financial Assets in the Account or the payment of income.

      (c)   Bank will  perform  tax  reclaim  services  only with  respect  to
taxation  levied  by the  revenue  authorities  of the  countries  advised  to
Customer from time to time and Bank may, by  notification  in writing,  in its
absolute  discretion,  supplement  or amend  the  countries  in which  the tax
relief  services  are  offered.  Other  than  as  expressly  provided  in this
Section 8.2, Bank will have no  responsibility  with regard to Customer's  tax
position or status in any jurisdiction.

      (d)   Customer   confirms  that  Bank  is  authorized  to  disclose  any
information  required by any revenue authority or any governmental entity with
appropriate jurisdiction in relation to the processing of any tax reclaim.


                                   9.TERMINATION

      This Agreement  will continue until  terminated by either Bank giving to
Customer,  or  Customer  giving to Bank , a notice in writing  specifying  the
date of termination,  which date shall be not less than 60 days after the date
of giving such  notice.  If Customer  gives  notice of  termination,  Customer
shall  designate a successor  custodian or custodian to whom Bank must deliver
the Financial  Assets and cash. If Bank gives notice of termination,  Customer
shall,  within  sixty days of the  notice,  notify  Bank as to identity of the
successor  custodian or  custodians.  Upon the date of  termination  specified
in the notice,  this  Agreement  shall  terminate,  and Bank shall deliver the
Financial  Assets  and  cash to the  successor  custodian(s).  If a  successor
custodian is not  designated  by Customer in  accordance  with the  foregoing,
Bank  shall,  upon  the  date  of  termination  specified  in  the  notice  of
termination, deliver the Financial Asset and cash to Customer.

      Bank will in any event be  entitled  to deduct  any  undisputed  amounts
owing  to it  prior  to  delivery  of the  Financial  Assets  and  cash  (and,
accordingly,  Bank will be  entitled  to sell  Financial  Assets and apply the
sale proceeds in  satisfaction  of undisputed  amounts owing to it).  Customer
will  reimburse  Bank  promptly  for all  out-of-pocket  expenses it incurs in
delivering  Financial  Assets upon  termination.  Termination  will not affect
any of the  liabilities  either  party  owes to the other  arising  under this
Agreement prior to such termination.


                                 10.MISCELLANEOUS

10.1  Notices.
      -------

      Notices (other than  Instructions)  will be served by registered mail or
hand  delivery  to the  address  of the  respective  parties as set out on the
first page of this  Agreement,  unless notice of a new address is given to the
other  party in writing.  Notice will not be deemed to be given  unless it has
been received.

10.2  Successors and Assigns.
      ----------------------

        This Agreement will be binding on each of the parties' successors and
assigns, but the parties agree that neither party can assign its rights and
obligations under this Agreement without the prior written consent of the
other party, which consent will not be unreasonably withheld. In the event
that Customer substitutes another bank or trust company for Bank due to a
change in
control of Bank, Bank shall pay all of Customer's reasonable expenses
incurred in connection with the transition to the successor custodian,
including, without limitation, the expenses associated with the transfer of
securities, monies and other properties and Customer's negotiation of new
custodian contractual documentation.


10.3  Interpretation.
      --------------

      Headings  are  for  convenience  only  and are not  intended  to  affect
interpretation.  References  to sections  are to  sections  of this  Agreement
and  references to  sub-sections  and paragraphs  are to  sub-sections  of the
sections and paragraphs of the sub-sections in which they appear.

10.4  Entire Agreement.
      ----------------

      (a)   The following Rider(s) are incorporated into this Agreement:

            ___   Cash Trade Execution;

            ___   Cash Sweep;

            ___   Accounting Services;

            ___   Mutual Fund.


      (b)   This  Agreement,  including the  Schedules,  Exhibits,  and Riders
(and any  separate  agreement  which  Bank and  Customer  may enter  into with
respect  to any Cash  Account),  sets out the  entire  Agreement  between  the
parties in connection with the subject matter,  and this Agreement  supersedes
any  other  agreement,  statement,  or  representation  relating  to  custody,
whether  oral or  written.  Amendments  must be in writing  and signed by both
parties.

10.5  Information Concerning Deposits at Bank's London Branch.
      -------------------------------------------------------

      Under U.S federal  law,  deposit  accounts  that  Customer  maintains in
Bank's foreign  branches  (outside of the U.S.) are not insured by the Federal
Deposit Insurance  Corporation  ("FDIC");  in the event of Bank's liquidation,
foreign branch deposits have a lesser preference than U.S. deposits;  and such
foreign  deposits are subject to cross-border  risks.  Bank's London Branch is
a member of the  United  Kingdom  Deposit  Protection  Scheme  (the  "Scheme")
established  under  Banking Act 1987 (as amended).  This Scheme  provides that
in the event of Bank's  insolvency  payments may be made to certain  customers
of Bank's  London  Branch.  Payments  under the Scheme are limited to 90% of a
depositor's  total  cash  deposits  subject  to a maximum  payment  to any one
depositor of(pound)18,000 (or 20,000 euros if greater).  Most deposits  denominated
in sterling and other  European  Economic Area  Currencies  and euro made with
Bank within the United  Kingdom  are  covered.  Further  details of the Scheme
are available on request.

10.6  Insurance.
      ---------

      Bank will not be required to maintain  any  insurance  coverage  for the
benefit of Customer.

10.7  Governing Law and Jurisdiction.
      ------------------------------ -

      This  Agreement will be construed,  regulated,  and  administered  under
the laws of the United  States or State of New York,  as  applicable,  without
regard  to New  York's  principles  regarding  conflict  of laws.  The  United
States  District  Court for the  Southern  District  of New York will have the
sole  and  exclusive   jurisdiction   over  any  lawsuit  or  other   judicial
proceeding  relating to or arising  from this  Agreement.  If that court lacks
federal  subject  matter  jurisdiction,  the Supreme Court of the State of New
York,  New York County will have sole and  exclusive  jurisdiction.  Either of
these  courts  will  have  proper  venue  for any  such  lawsuit  or  judicial
proceeding,   and  the  parties   waive  any   objection  to  venue  or  their
convenience  as a forum.  The parties agree to submit to the  jurisdiction  of
any of  the  courts  specified  and to  accept  service  of  process  to  vest
personal  jurisdiction  over them in any of these courts.  The parties further
hereby knowingly,  voluntarily and intentionally  waive, to the fullest extent
permitted  by  Applicable  Law,  any right to a trial by jury with  respect to
any  such  lawsuit  or  judicial   proceeding  arising  or  relating  to  this
Agreement or the transactions  contemplated  hereby. To the extent that in any
jurisdiction  Customer may now or  hereafter be entitled to claim,  for itself
or its assets,  immunity  from suit,  execution,  attachment  (before or after
judgment)  or other legal  process,  Customer  shall not claim,  and it hereby
irrevocably waives, such immunity.

10.8  Severability; Waiver; and Survival.
      ----------------------------------

      (a)   If one or more  provisions  of this  Agreement  are held  invalid,
illegal  or  unenforceable  in any  respect  on the  basis  of any  particular
circumstances   or  in  any   jurisdiction,   the   validity,   legality   and
enforceability  of such provision or provisions  under other  circumstances or
in other jurisdictions and of the remaining  provisions will not in any way be
affected or impaired.

      (b)  Except as  otherwise  provided  herein,  no failure or delay on the
part of either party in exercising any power or right hereunder  operates as a
waiver,  nor  does  any  single  or  partial  exercise  of any  power or right
preclude any other or further exercise,  or the exercise of any other power or
right. No waiver by a party of any provision of this  Agreement,  or waiver of
any breach or default,  is effective unless it is in writing and signed by the
party against whom the waiver is to be enforced.

      (c)   Each  party's  rights,   protections,   and  remedies  under  this
Agreement shall survive its termination.

10.9  Counterparts.
      ------------

      This  Agreement  may be executed in several  counterparts  each of which
will be deemed to be an original  and  together  will  constitute  one and the
same agreement.

10.10 No Third Party Beneficiaries.
      ----------------------------

      A person  who is not a party to this  Agreement  shall  have no right to
enforce any term of this Agreement.

10.11   Confidentiality.
        ----------------

         Bank shall not disclose any information regarding Customer's
Securities, Securities Account, Financial Assets or cash under this Agreement
except as is reasonably necessary to provide services to Customer, as
required by law or regulation or the organizational documents of the issuer
of any Financial Asset, or otherwise with the consent of Customer. Customer
agrees to keep this Agreement confidential and, except where disclosure is
required by law or regulation, shall only disclose it (or any part of it)
with the prior written consent of Bank.

10.12   Limited Obligations.
        -------------------

         With respect to a Customer organized as a Massachusetts business
trust, a copy of such Customer's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts, the Bank
acknowledges that the obligations of or arising out of this Agreement with
respect to such Customer are not binding upon any of such Customer's
trustees, officers, employees, agents or shareholders individually, but are
binding solely upon the assets and property of the Customer in accordance
with its proportionate interest hereunder. Bank further acknowledges that the
assets and liabilities of each series are separate and distinct, and that the
obligations of or arising out of this Agreement are binding solely upon the
assets or property of the series on behalf of which the Customer has executed
this instrument. Bank also agrees that the obligations of each Customer and
series hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and agrees not to proceed against any
Customer or series for the obligations of another Customer or series.

         Customers may be added or deleted as parties to this Agreement from
time to time by amendment to Exhibit A.

                                    OPPENHEIMERFUNDS, INC.



                              By: /s/ Brian W. Wixted
                                 ------------------------------------------
                                    Title:    Senior   Vice    President   and
                                    Treasurer,  on behalf  of each  investment
                                    company   identified   as  a  Customer  in
                                    Exhibit  A  attached  hereto  individually
                                    and   severally,   and  not   jointly  and
                                    severally


                                    JPMORGAN CHASE BANK


                                    By:/s/ Stephen Crowley
                                       ---------------------------
                                Title: Vice President

                                                      EXHIBIT A
                                                      ---------

List of  Investment  Companies  that are a Party to this  Agreement  (each,  a
"Customer"):


   -----------------------------------------------------------------------
                                 Fund Name
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Champion Income Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Strategic Income Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Multiple Strategies Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account of Oppenheimer
   Strategic Bond Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer High Yield Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Integrity Funds for the account of Oppenheimer Bond Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account of  Oppenheimer
   Main Street Small Cap Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Capital  Appreciation Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Global Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account of Oppenheimer
   Global Securities Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Panorama Series Fund, Inc. for the account of Growth Portfolio
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Panorama Series Fund, Inc. for the account of Total Return Portfolio
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account of Oppenheimer
   Capital Appreciation Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Panorama Series Fund, Inc. for the account of Government Securities
   Portfolio
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Panorama Series Fund, Inc. for the account of Oppenheimer
   International Growth Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account of Oppenheimer
   Aggressive Growth Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account of Oppenheimer
   Bond Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account of Oppenheimer
   High Income Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------

   Oppenheimer Variable Account Funds for the account of Oppenheimer
   Main Street Fund

   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account Oppenheimer Money
   Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account of Oppenheimer
   Multiple Strategies Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Multi-Sector Income Trust
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Real Asset Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Developing Markets Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer International  Small Company Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer International Growth Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Main Street Small Cap Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer International Bond Fund
   -----------------------------------------------------------------------
   -----------------------------------------------------------------------
   Oppenheimer Variable Account Funds for the account of Oppenheimer
   Value Fund/VA
   -----------------------------------------------------------------------

Schedule A
- -----------

FEES
- -----

OppenheimerFunds Fee Schedule                                  August 16, 2002

                Domestic Custody Services
                                            Annual
 Market Value Fees                       Safekeeping
                                        (basis points)
- ----------------------------------------------------------
- ----------------------------------------------------------
 First $15 billion                    0.15 bp
- ----------------------------------------------------------
- ----------------------------------------------------------
 Next $10 billion                     0.10 bp
- ----------------------------------------------------------
- ----------------------------------------------------------
 Over $25 billion                     0.05 bp
- ----------------------------------------------------------

                 Global Custody Services
- ----------------------------------------------------------
                                            Annual
 Market                                  Safekeeping
                                        (basis points)
- ----------------------------------------------------------
- ----------------------------------------------------------
 Argentina                            25
- ----------------------------------------------------------
- ----------------------------------------------------------
 Australia                            3.8
- ----------------------------------------------------------
- ----------------------------------------------------------
 Austria                              4
- ----------------------------------------------------------
- ----------------------------------------------------------
 Bahrain                              45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Bangladesh                           35
- ----------------------------------------------------------
- ----------------------------------------------------------
 Belgium                              6
- ----------------------------------------------------------
- ----------------------------------------------------------
 Bermuda                              45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Botswana                             35
- ----------------------------------------------------------
- ----------------------------------------------------------
 Brazil                               10
- ----------------------------------------------------------
- ----------------------------------------------------------
 Bulgaria                             50
- ----------------------------------------------------------
- ----------------------------------------------------------
 Canada                               1.43
- ----------------------------------------------------------
- ----------------------------------------------------------
 CEDEL/Euroclear                      1.75
- ----------------------------------------------------------
- ----------------------------------------------------------
 Chile                                25
- ----------------------------------------------------------
- ----------------------------------------------------------
 China (Shanghai)                     35
- ----------------------------------------------------------
- ----------------------------------------------------------
 China (Shenzhen)                     35
- ----------------------------------------------------------
- ----------------------------------------------------------
 Colombia                             35
- ----------------------------------------------------------
- ----------------------------------------------------------
 Croatia                              45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Cyprus                               40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Czech Republic                       25
- ----------------------------------------------------------
- ----------------------------------------------------------
 Denmark                              6
- ----------------------------------------------------------
- ----------------------------------------------------------
 Ecuador                              40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Egypt                                25
- ----------------------------------------------------------
- ----------------------------------------------------------
 Estonia                              45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Euro CDs                             1.75
- ----------------------------------------------------------
- ----------------------------------------------------------
 Finland                              4
- ----------------------------------------------------------
- ----------------------------------------------------------
 France                               2.15
- ----------------------------------------------------------
- ----------------------------------------------------------
 Germany                              1.5
- ----------------------------------------------------------
- ----------------------------------------------------------
 Ghana                                40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Greece                               40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Hong Kong                            2.85
- ----------------------------------------------------------
- ----------------------------------------------------------
 Hungary                              15
- ----------------------------------------------------------
- ----------------------------------------------------------
 India                                16
- ----------------------------------------------------------
- ----------------------------------------------------------
 Indonesia                            12
- ----------------------------------------------------------
- ----------------------------------------------------------
 Ireland                              6
- ----------------------------------------------------------
- ----------------------------------------------------------
 Israel                               30
- ----------------------------------------------------------
- ----------------------------------------------------------
 Italy                                5
- ----------------------------------------------------------
- ----------------------------------------------------------
 Ivory Coast                          50
- ----------------------------------------------------------
- ----------------------------------------------------------
 Jamaica                              50
- ----------------------------------------------------------
 Japan                                1.75
- ----------------------------------------------------------
- ----------------------------------------------------------
 Jordan                               35
- ----------------------------------------------------------
- ----------------------------------------------------------
 Kenya                                40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Korea                                7
- ----------------------------------------------------------
- ----------------------------------------------------------
 Latvia                               45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Lebanon                              40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Lithuania                            45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Luxembourg                           6
- ----------------------------------------------------------
- ----------------------------------------------------------
 Malaysia                             5.4
- ----------------------------------------------------------
- ----------------------------------------------------------
 Mauritius                            35
- ----------------------------------------------------------
- ----------------------------------------------------------
 Mexico                               7
- ----------------------------------------------------------
- ----------------------------------------------------------
 Morocco                              40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Namibia                              45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Netherlands                          3.25
- ----------------------------------------------------------
- ----------------------------------------------------------
 New Zealand                          3.5
- ----------------------------------------------------------
- ----------------------------------------------------------
 Norway                               6
- ----------------------------------------------------------
- ----------------------------------------------------------
 Oman                                 45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Pakistan                             28
- ----------------------------------------------------------
- ----------------------------------------------------------
 Peru                                 28
- ----------------------------------------------------------
- ----------------------------------------------------------
 Philippines                          30
- ----------------------------------------------------------
- ----------------------------------------------------------
 Poland                               30
- ----------------------------------------------------------
- ----------------------------------------------------------
 Portugal                             20
- ----------------------------------------------------------
- ----------------------------------------------------------
 Romania                              45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Russia                               45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Singapore                            3.8
- ----------------------------------------------------------
- ----------------------------------------------------------
 Slovak Republic                      40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Slovenia                             45
- ----------------------------------------------------------
- ----------------------------------------------------------
 South Africa                         5
- ----------------------------------------------------------
- ----------------------------------------------------------
 Spain                                6
- ----------------------------------------------------------
- ----------------------------------------------------------
 Sri Lanka                            35
- ----------------------------------------------------------
- ----------------------------------------------------------
 Swaziland                            45
- ----------------------------------------------------------
- ----------------------------------------------------------
 Sweden                               6
- ----------------------------------------------------------
- ----------------------------------------------------------
 Switzerland                          2.5
- ----------------------------------------------------------
- ----------------------------------------------------------
 Taiwan                               20
- ----------------------------------------------------------
- ----------------------------------------------------------
 Thailand                             15
- ----------------------------------------------------------
- ----------------------------------------------------------
 Tunisia                              35
- ----------------------------------------------------------
- ----------------------------------------------------------
 Turkey                               30
- ----------------------------------------------------------
- ----------------------------------------------------------
 United Kingdom                       1.5
- ----------------------------------------------------------
- ----------------------------------------------------------
 Uruguay                              40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Venezuela                            25
- ----------------------------------------------------------
- ----------------------------------------------------------
 Zambia                               40
- ----------------------------------------------------------
- ----------------------------------------------------------
 Zimbabwe                             40
- ----------------------------------------------------------

Note:  The minimum Russian asset based fee per relationship is $100,000.

                              Out of Pocket Fees
The OppenheimerFunds will reimburse JPMorgan for reasonable out-of-pocket
expenses incurred on its behalf.

              Earnings Credits for Balances on Domestic Accounts
Earnings credits will be reflected on the monthly custody bills as an offset
to fees.  The rates applied will be the Fed Funds Rate less 10 basis points.
The earnings credits are earned at the Fund level and are carried forward on
a monthly basis throughout a one-year period.

                   Overdraft Balances on Domestic Accounts
Overdraft amounts will be reflected on the monthly custody bills at the Fund
level.  The rates applied will be the Fed Funds Rate plus 50 basis points.

OppenheimerFunds, Inc.                          JPMorgan Chase Bank
on behalf of each investment
company named in Exhibit A

/s/ Brian W. Wixted                             /s/Stephen Crowley
- -------------------------------                 ----------------------------
Signature                                       Signature


/s/ Brian W. Wixted                             /s/Stephen Crowley
- -------------------------------                 ----------------------------
Print Name                                      Print Name

Senior Vice President and Treasurer             Vice President
- -------------------------------                 ----------------------------
Title                                           Title

Schedule 1
- ----------

Information Regarding Country Risk
- ----------------------------------


      1. To aid Customer in its  determinations  regarding  Country Risk, Bank
shall furnish  annually and upon the initial  placing of Financial  Assets and
cash into a country the following information (check items applicable):

      A     Opinions of local counsel concerning:

_X_   i.    Whether  applicable foreign law would restrict the access afforded
            Customer's  independent  public  accountants  to books and records
            kept by an eligible foreign custodian located in that country.

_X__  ii.   Whether applicable  foreign law would restrict  Customer's ability
            to  recover  its  Financial  Assets  and cash in the  event of the
            bankruptcy  of an  Eligible  Foreign  Custodian  located  in  that
            country.

_X__  iii.  Whether applicable  foreign law would restrict  Customer's ability
            to recover  Financial Assets that are lost while under the control
            of an Eligible Foreign Custodian located in the country.

      B.    Written information concerning:

_X__  i.    The foreseeability of expropriation,  nationalization, freezes, or
            confiscation of Customer's Financial Assets.

_X__  ii.   Whether  difficulties  in  converting  Customer's  cash  and  cash
            equivalents to U.S. dollars are reasonably foreseeable.

      C.    A market report with respect to the following topics:

      (i)   securities   regulatory   environment,   (ii)  foreign   ownership
      restrictions,  (iii) foreign  exchange,  (iv) securities  settlement and
      registration,  (v) taxation, and (vi) depositories (including depository
      evaluation), if any.

      2. To aid  Customer  in  monitoring  Country  Risk,  Bank shall  furnish
board the following additional information:

      Market flashes,  including with respect to changes in the information in
market reports.
Schedule 2
- ----------

LIST OF COUNTRIES and SUBCUSTODIANS
- ------------------------------------


JPMORGAN INVESTOR SERVICES

AGENT AND CASH NETWORK

- -----------------------------------------------------------------------------------
COUNTRY          SUB-CUSTODIAN                    CASH CORRESPONDENT BANK
- -----------------------------------------------------------------------------------
ARGENTINA        JPMorgan Chase Bank              JPMorgan Chase Bank
                 Arenales 707, 5th Floor          Buenos Aires
                 1061 Buenos Aires

                 ARGENTINA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
AUSTRALIA        JPMorgan Chase Bank              Australia and New Zealand
                 Level 37                         Banking Group Ltd.
                 AAP Center 259, George Street    Melbourne
                 Sydney NSW 2000
                 AUSTRALIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
AUSTRIA          Bank Austria Creditanstalt AG    J.P. Morgan AG
                 Julius Tandler Platz - 3         Frankfurt
                 A-1090 Vienna
                 AUSTRIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BAHRAIN          HSBC Bank Middle East            National Bank of Bahrain
                 PO Box 57                        Manama
                 Manama, 304
                 BAHRAIN
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BANGLADESH       Standard Chartered Bank          Standard Chartered Bank
                 18-20 Motijheel C.A              Dhaka
                 Box 536
                 Dhaka-1000
                 BANGLADESH
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BELGIUM          Fortis Bank N.V.                 J.P. Morgan AG
                 3 Montagne Du Parc               Frankfurt
                 1000 Brussels
                 BELGIUM
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BERMUDA          The Bank of Bermuda Limited      The Bank of Bermuda Limited
                 6 Front Street                   Hamilton
                 Hamilton HMDX
                 BERMUDA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BOTSWANA         Barclays Bank of Botswana        Barclays Bank of Botswana
                 Limited                          Limited
                 Barclays House, Khama Crescent   Gaborone
                 Gaborone
                 BOTSWANA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BRAZIL           Citibank, N.A.                   Citibank, N.A..
                 Avenida Paulista, 1111           Sao Paulo
                 Sao Paulo, SP 01311-920
                 BRAZIL
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BULGARIA         ING Bank N.V.                    ING Bank N.V.
                 Sofia Branch                     Sofia
                 12 Emil Bersinski Street
                 Ivan Vazov Region
                 1408 Sofia
                 BULGARIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CANADA           Royal Bank of Canada             Royal Bank of Canada
                 200 Bay Street, Suite 1500       Toronto
                 15th Floor
                 Royal Bank Plaza, North Tower
                 Toronto Ontario M5J 2J5
                 CANADA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CHILE            Citibank, N.A.                   Citibank, N.A
                 Avda. Andres Bello 2687          Santiago.
                 3rd and 5th Floors
                 Santiago
                 CHILE
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CHINA - SHANGHAI The Hongkong and Shanghai        Citibank, N.A.
                 Banking                          New York
                 Corporation Limited
                 34/F, Shanghai Senmao
                 International Building
                 101 Yin Cheng East Road
                 Pudong
                 Shanghai 200120
                 THE PEOPLE'S REPUBLIC OF CHINA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CHINA - SHENZHEN The Hongkong and Shanghai        JPMorgan Chase Bank
                 Banking                          Hong Kong
                 Corporation Limited
                 1st Floor
                 Century Plaza Hotel
                 No.1 Chun Feng Lu
                 Shenzhen
                 THE PEOPLE'S REPUBLIC OF CHINA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
COLOMBIA         Cititrust Colombia S.A.          Cititrust Colombia S.A.
                 Sociedad Fiduciaria              Sociedad Fiduciaria
                 Carrera 9a No 99-02              Santa Fe de Bogota
                 First Floor
                 Santa Fe de Bogota, D.C.
                 COLOMBIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CROATIA          Privredna banka Zagreb d.d.      Privredna banka Zagreb d.d.
                 Savska c.28                      Zagreb
                 10000 Zagreb
                 CROATIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CYPRUS           The Cyprus Popular Bank Ltd.     The Cyprus Popular Bank Ltd.
                 154 Limassol Avenue              Nicosia
                 P.O. Box 22032
                 CY-1598 Nicosia
                 CYPRUS
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CZECH REPUBLIC   Ceskoslovenska obchodni banka,   Ceskoslovenska obchodni banka,
                 a.s.                             a.s.
                 Na Porici 24                     Prague
                 110 00 Prague 1
                 CZECH REPUBLIC
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
DENMARK          Danske Bank A/S                  Nordea Bank Danmark A/S
                 2-12 Holmens Kanal               Copenhagen
                 DK 1092 Copenhagen K
                 DENMARK
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ECUADOR          Citibank, N.A.                   Citibank, N.A.
                 Av. Republica de El Salvador y   Quito
                 Naciones Unidas (Esquina)
                 Quito
                 ECUADOR
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
EGYPT            Citibank, N.A.                   Citibank, N.A.
                 4 Ahmed Pasha Street             Cairo
                 Garden City
                 Cairo
                 EGYPT
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ESTONIA          Hansabank                        Esti Uhispank
                 Liivalaia 8                      Tallinn
                 EE0001 Tallinn
                 ESTONIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
FINLAND          Nordea Bank Finland Plc          J.P. Morgan AG
                 2598 Custody Services            Frankfurt
                 Aleksis Kiven Katu 3-5
                 FIN-00020 MERITA, Helsinki
                 FINLAND
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
FRANCE           BNP Paribas Securities Services  J.P. Morgan AG
                 S.A.                             Frankfurt
                 Ref 256
                 BP 141
                 3, Rue D'Antin
                 75078 Paris
                 Cedex 02
                 FRANCE
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
GERMANY          Dresdner Bank AG                 J.P. Morgan AG
                 Juergen-Ponto-Platz 1            Frankfurt
                 60284 Frankfurt/Main
                 GERMANY
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
GHANA            Barclays Bank of Ghana Limited   Barclays Bank of Ghana Limited
                 Barclays House, High Street      Accra
                 Accra
                 GHANA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
GREECE           HSBC Bank plc                    J.P. Morgan AG
                 Messogion 109-111                Frankfurt
                 11526 Athens
                 GREECE
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
HONG KONG        The Hongkong and Shanghai        JPMorgan Chase Bank
                 Banking                          Hong Kong
                 Corporation Limited
                 36th Floor, Sun Hung Kai Centre
                 30 Harbour Road
                 Wan Chai
                 HONG KONG
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
HUNGARY          Citibank Rt.                     ING Bank Rt.
                 Szabadsag ter 7-9                Budapest
                 H-1051 Budapest V
                 HUNGARY
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ICELAND          Islandsbanki-FBA                 Islandsbanki-FBA
                 Kirkjusandur 2                   Reykjavik
                 155 Reykjavik
                 ICELAND
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
INDIA            Standard Chartered Bank          Standard Chartered Bank
                 Phoenix Centre, Phoenix Mills    Mumbai
                 Compound
                 Senapati Bapat Marg, Lower
                 Parel
                 Mumbai 400 013
                 INDIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
INDONESIA        The Hongkong and Shanghai        The Hongkong and Shanghai
                 Banking                          Banking
                 Corporation Limited              Corporation Limited
                 World Trade Center 4th Floor     Jakarta
                 Jalan Jendral Sudirman Kav.
                 29-31
                 Jakarta 12920
                 INDONESIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
IRELAND          Bank of Ireland                  J.P. Morgan AG
                 International Financial          Frankfurt
                 Services Centre
                 1 Harbourmaster Place
                 Dublin 1
                 IRELAND
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                 Allied Irish Banks, p.l.c.       J.P. Morgan AG
                 P.O. Box 518                     Frankfurt
                 International Financial
                 Services Centre
                 Dublin 1
                 IRELAND
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ISRAEL           Bank Leumi le-Israel B.M         Bank Leumi le-Israel B.M.
                 35, Yehuda Halevi Street         Tel Aviv
                 61000 Tel Aviv
                 ISRAEL
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ITALY            BNP Paribas Securities Services  J.P. Morgan AG
                 S.A.                             Frankfurt
                 2 Piazza San Fedele
                 20121 Milan
                 ITALY
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
IVORY COAST      Societe Generale de Banques en   Societe Generale
                 Cote d'Ivoire                    Paris
                 5 et 7, Avenue J. Anoma - 01
                 B.P. 1355
                 Abidjan 01
                 IVORY COAST
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
JAMAICA          CIBC Trust and Merchant Bank     CIBC Trust and Merchant Bank
                 Jamaica Limited                  Jamaica Limited
                 23-27 Knutsford Blvd.            Kingston
                 Kingston 10
                 JAMAICA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
JAPAN            Mizuho Corporate Bank, Limited   JPMorgan Chase Bank
                 6-7 Nihonbashi-Kabutocho         Tokyo
                 Chuo-Ku
                 Tokyo 103
                 JAPAN
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
JORDAN           Arab Bank Plc                    Arab Bank Plc
                 P O Box 950544-5                 Amman
                 Amman
                 Shmeisani
                 JORDAN
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
KAZAKHSTAN       ABN AMRO Bank Kazakhstan         ABN AMRO Bank Kazakhstan
                 45, Khadzhi Mukana Street        Almaty
                 480099 Almaty
                 KAZAKHSTAN
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
KENYA            Barclays Bank of Kenya Limited   Barclays Bank of Kenya Limited
                 c/o Barclaytrust Investment      Nairobi
                 Services & Limited
                 Mezzanine 3, Barclays Plaza,
                 Loita Street
                 Nairobi
                 KENYA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
LATVIA           Hansabanka                       Hansabanka
                 Kalku iela 26                    Riga
                 Riga, LV 1050
                 LATVIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
LEBANON          HSBC Bank Middle East            JPMorgan Chase Bank
                 Ras-Beirut Branch                New York
                 P.O. Box 11-1380
                 Abdel Aziz
                 Ras-Beirut
                 LEBANON
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
LITHUANIA        Vilniaus Bankas AB               Vilniaus Bankas AB
                 12 Gedimino pr.                  Vilnius
                 LT 2600 Vilnius
                 LITHUANIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
LUXEMBOURG       Banque Generale du Luxembourg    J.P. Morgan AG
                 S.A.                             Frankfurt
                 50 Avenue J.F. Kennedy
                 L-2951
                 LUXEMBOURG
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MALAYSIA         HSBC Bank Malaysia Berhad        HSBC Bank Malaysia Berhad
                 2 Leboh Ampang                   Kuala Lumpur
                 50100 Kuala Lumpur
                 MALAYSIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MAURITIUS        The Hongkong and Shanghai        The Hongkong and Shanghai
                 Banking                          Banking
                 Corporation Limited              Corporation Limited
                 5/F Les Cascades Building        Port Louis
                 Edith Cavell Street
                 Port Louis
                 MAURITIUS
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MEXICO           Banco J.P. Morgan, S.A.          Banco J.P. Morgan, S.A.
                 Torre Optima                     Mexico, D.F
                 Paseo de las Palmas #405 Piso
                 15
                 Lomas de Chapultepec
                 11000 Mexico, D. F.
                 MEXICO
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MOROCCO          Banque Commerciale du Maroc      Banque Commerciale du Maroc
                 S.A.                             S.A.
                 2 Boulevard Moulay Youssef       Casablanca
                 Casablanca 20000
                 MOROCCO
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
NAMIBIA          Standard Bank Namibia Limited    Standard Bank of Namibia Limited
                 Mutual Platz                     Windhoek
                 Cnr. Stroebel and Post Streets
                 P.O.Box 3327
                 Windhoek
                 NAMIBIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
NETHERLANDS      ABN AMRO Bank N.V.               J.P. Morgan AG
                 Kemelstede 2                     Frankfurt
                 P. O. Box 3200
                 4800 De Breda
                 NETHERLANDS
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
NEW ZEALAND      National Nominees Limited        National Bank of New Zealand
                 Level 2 BNZ Tower                Wellington
                 125 Queen Street
                 Auckland
                 NEW ZEALAND
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
*NIGERIA*        Stanbic Bank Nigeria Limited     The Standard Bank of South
                 188 Awolowo Road                 Africa Limited
                 P.O. Box 54746                   Johannesburg
                 Falomo, Ikoyi
                 Lagos
                 NIGERIA
- -----------------------------------------------------------------------------------
*RESTRICTED SERVICE ONLY.  PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER
INFORMATION.*
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
NORWAY           Den norske Bank ASA              Den norske Bank ASA
                 Stranden 21                      Oslo
                 PO Box 1171 Sentrum
                 N-0107 Oslo
                 NORWAY
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
OMAN             HSBC Bank Middle East            Oman Arab Bank
                 Bait Al Falaj Main Office        Muscat
                 Ruwi, Muscat PC 112
                 OMAN
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PAKISTAN         Standard Chartered Bank          Standard Chartered Bank
                 Box 4896                         Karachi
                 Ismail Ibrahim Chundrigar Road
                 Karachi 74000
                 PAKISTAN
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PERU             Citibank, N.A.                   Banco de Credito del Peru
                 Camino Real 457                  Lima
                 Torre Real - 5th Floor
                 San Isidro, Lima 27
                 PERU
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PHILIPPINES      The Hongkong and Shanghai        The Hongkong and Shanghai
                 Banking                          Banking
                 Corporation Limited              Corporation Limited
                 30/F Discovery Suites            Manila
                 25 ADB Avenue
                 Ortigas Center
                 Pasig City, Manila
                 PHILIPPINES
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
POLAND           Bank Handlowy w. Warszawie S.A.  Bank Rozwoju Eksportu S.A.
                 ul. Senatorska 16                Warsaw
                 00-923 Warsaw 55
                 POLAND
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PORTUGAL         Banco Espirito Santo, S.A        J.P. Morgan AG
                 7th floor                        Frankfurt
                 Rua Castilho, 26
                 1250-069 Lisbon
                 PORTUGAL
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ROMANIA          ING Bank N.V.                    ING Bank N.V.
                 13-15 Kiseleff Blvd              Bucharest
                 Bucharest 1
                 ROMANIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
*RUSSIA*         J.P. Morgan Bank International   JPMorgan Chase Bank
                 (Limited Liability Company)      New York
                 Building 2/1, 8th floor          A/C JPMorgan Chase Bank London
                 Paveletskaya Square              (USD NOSTRO Account)
                 113054 Moscow
                 RUSSIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
*RESTRICTED SERVICE ONLY.  PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER
INFORMATION.*
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SINGAPORE        Standard Chartered Bank          Oversea-Chinese Banking
                 3/F, 6 Battery Road              Corporation
                 049909                           Singapore
                 SINGAPORE
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SLOVAK REPUBLIC  Ceskoslovenska obchodni banka,   Vseobecno Uverova Banka S.A.
                 a.s.                             Bratislava
                 pobocka zahranicnej banky v SR
                 Michalska 18
                 815 63 Bratislava
                 SLOVAK REPUBLIC
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SLOVENIA         Bank Austria Creditanstalt d.d.  Bank Austria Creditanstalt d.d.
                 Ljubljana                        Ljubljana
                 Wolfova 1                        Ljubljana
                 SI-1000 Ljubljana
                 SLOVENIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SOUTH AFRICA     The Standard Bank of South       The Standard Bank of South
                 Africa Limited                   Africa Limited
                 Standard Bank Centre             Johannesburg
                 1st Floor
                 5 Simmonds Street
                 Johannesburg 2001
                 SOUTH AFRICA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SOUTH KOREA      The Hongkong and Shanghai        The Hongkong and Shanghai
                 Banking                          Banking
                 Corporation Limited              Corporation Limited
                 5/F HSBC Building                Seoul
                 #25, Bongrae-dong 1-ga
                 Seoul
                 SOUTH KOREA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SPAIN            J.P. Morgan Bank, S.A.           J.P. Morgan AG
                 Paseo de la Castellana, 51       Frankfurt
                 28046 Madrid
                 SPAIN
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SRI LANKA        The Hongkong and Shanghai        The Hongkong and Shanghai
                 Banking                          Banking
                 Corporation Limited              Corporation Limited
                 24 Sir Baron Jayatillaka         Colombo
                 Mawatha
                 Colombo 1
                 SRI LANKA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SWEDEN           Skandinaviska Enskilda Banken    Svenska Handelsbanken
                 Sergels Torg 2                   Stockholm
                 SE-106 40 Stockholm
                 SWEDEN
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SWITZERLAND      UBS AG                           UBS AG
                 45 Bahnhofstrasse                Zurich
                 8021 Zurich
                 SWITZERLAND
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
TAIWAN           JPMorgan Chase Bank              JPMorgan Chase Bank
                 14th Floor                       Taipei
                 2, Tun Hwa S. Road Sec. 1
                 Taipei
                 TAIWAN
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
THAILAND         Standard Chartered Bank          Standard Chartered Bank
                 14th Floor, Zone B               Bangkok
                 Sathorn Nakorn Tower
                 100 North Sathorn Road Bangrak
                 Bangkok 10500
                 THAILAND
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
TUNISIA          Banque Internationale Arabe de   Banque Internationale Arabe de
                 Tunisie, S.A.                    Tunisie, S.A.
                 70-72 Avenue Habib Bourguiba     Tunis
                 P.O. Box 520
                 1080 Tunis Cedex
                 TUNISIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
TURKEY           JPMorgan Chase Bank              JPMorgan Chase Bank
                 Emirhan Cad. No: 145             Istanbul
                 Atakule, A Blok Kat:11
                 80700-Dikilitas/Besiktas
                 Istanbul
                 TURKEY
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
*UKRAINE*        ING Bank Ukraine                 ING Bank Ukraine
                 28 Kominterna Street             Kiev
                 5th Floor
                 Kiev, 252032
                 UKRAINE
- -----------------------------------------------------------------------------------
*RESTRICTED SERVICE ONLY.  PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER
INFORMATION.*
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
U.A.E.           HSBC Bank Middle East            The National Bank of Abu Dhabi
                 P.O. Box 66                      Abu Dhabi
                 Dubai
                 UNITED ARAB EMIRATES
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
U.K.             JPMorgan Chase Bank              National Westminster Bank
                 Crosby Court                     London
                 Ground Floor
                 38 Bishopsgate
                 London EC2N 4AJ
                 UNITED KINGDOM
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
URUGUAY          BankBoston, N.A.                 BankBoston, N.A
                 Zabala 1463                      Montevideo.
                 Montevideo
                 URUGUAY
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
U.S.A.           JPMorgan Chase Bank              JPMorgan Chase Bank
                 4 New York Plaza                 New York
                 New York
                 NY 10004
                 U.S.A.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
VENEZUELA        Citibank, N.A.                   Citibank, N.A.
                 Carmelitas a Altagracia          Caracas
                 Edificio Citibank
                 Caracas 1010
                 VENEZUELA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
VIETNAM          The Hongkong and Shanghai        The Hongkong and Shanghai
                 Banking                          Banking
                 Corporation Limited              Corporation Limited
                 75 Pham Hong Thai, District 1    Ho Chi Minh City
                 Ho Chi Minh City
                 VIETNAM
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ZAMBIA           Barclays Bank of Zambia Limited  Barclays Bank of Zambia Limited
                 Kafue House, Cairo Road          Lusaka
                 Lusaka
                 ZAMBIA
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ZIMBABWE         Barclays Bank of Zimbabwe        Barclays Bank of Zimbabwe
                 Limited                          Limited
                 2nd Floor, 3 Anchor House        Harare
                 Jason Mayo Avenue
                 Harare
                 ZIMBABWE
- -----------------------------------------------------------------------------------

Schedule 3
- ----------

ELIGIBLE SECURITIES DEPOSITORIES
- --------------------------------

JPMORGAN INVESTOR SERVICES

SECURITIES DEPOSITORIES

- -----------------------------------------------------------------------------------
COUNTRY           DEPOSITORY                       INSTRUMENTS
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ARGENTINA         CVSA                             Equity, Corporate Debt,
                  (Caja de Valores S.A.)           Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CRYL                             Government Debt
                  (Central de Registration y
                  Liquidacion de Instrumentos de
                  Endeudamiento Publico)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
AUSTRALIA         Austraclear Limited              Corporate Debt, Money Market,
                                                   Government Debt and
                                                   Semi-Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CHESS                            Equity
                  (Clearing House Electronic
                  Sub-register System)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
AUSTRIA           OeKB                             Equity, Corporate Debt,
                  (Oesterreichische Kontrollbank   Government Debt
                  AG)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BELGIUM           CIK                              Equity, Corporate Debt
                  (Caisse Interprofessionnelle de
                  Depots et de Virements de
                  Titres S.A.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  NBB                              Corporate Debt, Government Debt
                  (National Bank of Belgium)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BRAZIL            CBLC                             Equity
                  (Companhia Brasileira de
                  Liquidacao e Custodia)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CETIP                            Corporate Debt
                  (Central de Custodia e
                  Liquidacao Financiera de
                  Titulos Privados)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  SELIC                            Government Debt
                  (Sistema Especial de Liquidacao
                  e Custodia)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
BULGARIA          BNB                              Government Debt
                  (Bulgaria National Bank)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CDAD                             Equity, Corporate Debt
                  (Central Depository A.D.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CANADA            CDS                              Equity, Corporate, Government
                  (The Canadian Depository for     Debt
                  Securities Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CHILE             DCV                              Equity, Corporate Debt,
                  (Deposito Central de Valores     Government Debt
                  S.A.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CHINA, SHANGHAI   CSDCC, Shanghai Branch           Equity
                  (China Securities Depository
                  and Clearing Corporation
                  Limited, Shanghai Branch)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CHINA, SHENZHEN   CSDCC, Shenzhen Branch           Equity
                  (China Securities Depository
                  and Clearing Corporation Ltd,
                  Shenzhen Branch)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
COLOMBIA          DCV                              Government Debt
                  (Deposito Central de Valores)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  DECEVAL                          Equity, Corporate Debt,
                  (Deposito Centralizado de        Government Debt
                  Valores de Colombia S.A.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CROATIA           SDA                              Equity, Government Debt
                  (Central Depository Agency Inc.
                  - Stredisnja depozitarna
                  agencija d.d.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  MOF                              Short-term debt issued by the
                  (Ministry of Finance of the      Ministry of Finance.
                  Republic of Croatia)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CNB                              Short-term debt issued by the
                  (Croatian National Bank)         National Bank of Croatia.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
CZECH REPUBLIC    SCP                              Equity, Corporate Debt,
                  (Stredisko cennych papiru -      Government Debt
                  Ceska republica)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CNB                              Government Debt
                  (Czech National Bank)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
DENMARK           VP                               Equity, Corporate Debt,
                  (Vaerdipapircentralen A/S)       Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
EGYPT             MCSD                             Equity, Corporate Debt
                  (Misr for Clearing, Settlement
                  and Depository)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ESTONIA           ECDS                             Equity, Corporate Debt,
                  (Estonian Central Depository     Government Debt
                  for Securities Limited - Eesti
                  Vaatpaberite Keskdepositoorium)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
EUROMARKET        DCC                              Euro-CDs
                  (The Depository and Clearing
                  Centre)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CBL                              Internationally Traded Debt,
                  (Clearstream Banking, S.A.)      Equity
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  Euroclear Bank                   Internationally Traded Debt,
                                                   Equity
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
FINLAND           APK                              Equity, Corporate Debt,
                  (Finnish Central Securities      Government Debt
                  Depository Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
FRANCE            Euroclear France                 Equity, Corporate Debt,
                                                   Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
GERMANY           CBF                              Equity, Corporate Debt,
                  (Clearstream Banking AG)         Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
GREECE            CSD                              Equity, Corporate Debt
                  (Central Securities Depository
                  S.A.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  BoG                              Government Debt
                  (Bank of Greece)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
HONG KONG         HKSCC                            Equity
                  (Hong Kong Securities Clearing
                  Company Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CMU                              Corporate Debt, Government Debt
                  (Central Moneymarkets Unit)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
HUNGARY           KELER                            Equity, Corporate Debt,
                  (Central Clearing House and      Government Debt
                  Depository (Budapest) Ltd. -
                  Kozponti Elszamolohaz es
                  Ertektar (Budapest) Rt.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ICELAND           ISD                              Equity, Corporate Debt,
                  (The Islandic Securities         Government Debt
                  Depository)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
INDIA             NSDL                             Equity, Corporate Debt,
                  (National Securities Depository  Government Debt
                  Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CDSL                             Equity
                  (Central Depository Services
                  (India) Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  RBI                              Government Debt
                  (Reserve Bank of India)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
INDONESIA         KSEI                             Equity, Corporate Debt
                  (PT Kustodian Sentral Efek
                  Indonesia)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
IRELAND           CREST                            Equity, Corporate Debt
                  (CRESTCo Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ISRAEL            TECH                             Equity, Corporate Debt,
                  (Tel Aviv Stock Exchange         Government Debt
                  Clearing House Ltd.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ITALY             Monte Titoli S.p.A.              Equity, Corporate Debt,
                                                   Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
IVORY COAST       DC/BR                            Equity
                  (Le Depositaire Central /
                  Banque de Reglement)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
JAMAICA           JCSD                             Equity, Corporate Debt,
                  (Jamaica Central Securities      Government Debt
                  Depository)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
JAPAN             JASDEC                           Equity, Convertible Debt
                  (Japan Securities Depository
                  Center, Incorporated)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  BoJ                              Registered Government Debt
                  (Bank of Japan)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
KAZAHKSTAN        CSD                              Equity
                  (Central Securities Depository
                  CJSC)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
KENYA             CBCD                             Government Debt
                  (Central Bank Central
                  Depository)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
LATVIA            LCD                              Equity, Corporate Debt,
                  (Latvian Central Depository)     Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
LEBANON           Midclear S.A.L.                  Equity
                  (Custodian and Clearing Center
                  of Financial Instruments for
                  Lebanon and the Middle East
                  S.A.L.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
LITHUANIA         CSDL                             Equity, Corporate Debt,
                  (Central Securities Depository   Government Debt
                  of Lithuania)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
LUXEMBOURG        CBL                              Equity
                  (Clearstream Banking S.A.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MALAYSIA          MCD                              Equity, Corporate Debt
                  (Malaysian Central Depository
                  Sdn. Bhd.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  BNM                              Government Debt
                  (Bank Negara Malaysia)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MAURITIUS         CDS                              Equity, Corporate Debt
                  (Central Depository and
                  Settlement Company Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MEXICO            INDEVAL                          Equity, Corporate Debt,
                  (S.D. INDEVAL S.A. de C.V.)      Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
MOROCCO           Maroclear                        Equity, Corporate Debt,
                                                   Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
NETHERLANDS       NECIGEF                          Equity, Corporate Debt,
                  (Nederlands Centraal Insituut    Government Debt
                  voor Giraal Effectenverkeer
                  B.V.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
NEW ZEALAND       NZCSD                            Equity, Corporate Debt,
                  (New Zealand Central Securities  Government Debt
                  Depository)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
NIGERIA           CSCS                             Equity, Corporate Debt,
                  (Central Securities Clearing     Government Debt
                  System Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
NORWAY            VPS                              Equity, Corporate Debt,
                  (Verdipapirsentralen)            Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
OMAN              MDSRC                            Equity, Corporate Debt
                  (The Muscat Depository and
                  Securities Registration
                  Company, S.A.O.C.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PAKISTAN          CDC                              Equity, Corporate Debt
                  (Central Depository Company of
                  Pakistan Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  SBP                              Government Debt
                  (State Bank of Pakistan)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PERU              CAVALI                           Equity, Corporate Debt,
                  (CAVALI ICLV S.A.)               Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PHILIPPINES       PCD                              Equity
                  (Philippine Central Depository,
                  Inc.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  ROSS                             Government Debt
                  (Bangko Sentral ng Pilipinas /
                  Register of Scripless
                  Securities)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
POLAND            NDS                              Equity, Long-Term Government
                  (National Depository for         Debt
                  Securities S.A.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CRT                              Short-Term Government Debt
                  (Central Registry of
                  Treasury-Bills)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PORTUGAL          INTERBOLSA                       Equity, Corporate Debt,
                  (Sociedade Gestora de Sistemas   Government Debt
                  de Liquidacao e de Sistemas
                  Centralizados de Valores
                  Mobiliarios, S.A.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ROMANIA           SNCDD                            Equity
                  (National Company for Clearing,
                  Settlement and Depository for
                  Securities)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  BSE                              Equity
                  (Bucharest Stock Exchange)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
RUSSIA            VTB                              Equity, Corporate Debt,
                  (Vneshtorgbank)                  Government Debt (Ministry of
                                                   Finance Bonds)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  NDC                              Equity, Corporate Debt,
                  (National Depository Centre)     Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SINGAPORE         CDP                              Equity, Corporate Debt
                  (The Central Depository (Pte)
                  Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  MAS                              Government Debt
                  (Monetary Authority of
                  Singapore)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SLOVAK REPUBLIC   SCP                              Equity, Corporate Debt,
                  (Stredisko cennych papierov SR,  Government Debt
                  a.s.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  NBS                              Government Debt
                  (National Bank of Slovakia)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SLOVENIA          KDD                              Equity, Corporate Debt,
                  (Centralna klirinsko depotna     Government Debt
                  druzba d.d.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SOUTH AFRICA      CD                               Corporate Debt, Government Debt
                  (The Central Depository Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  STRATE                           Equity
                  (Share Transactions Totally
                  Electronic)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SOUTH KOREA       KSD                              Equity, Corporate Debt,
                  (Korea Securities Depository)    Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SPAIN             SCLV                             Equity, Corporate Debt
                  (Servicio de Compensacion y
                  Liquidacion de Valores, S.A.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  Bank of Spain                    Corporate Debt, Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SRI LANKA         CDS                              Equity, Corporate Debt
                  (Central Depository System
                  (Private) Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SWEDEN            VPC                              Equity, Corporate Debt,
                  (Vardepapperscentralen AB)       Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
SWITZERLAND       SIS                              Equity, Corporate Debt,
                  (SIS SegaInterSettle AG)         Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
TAIWAN            TSCD                             Equity, Government Debt
                  (Taiwan Securities Central
                  Depository Co., Ltd.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
THAILAND          TSD                              Equity, Corporate Debt,
                  (Thailand Securities Depository  Government Debt
                  Company Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
TUNISIA           STICODEVAM                       Equity, Corporate Debt,
                  (Societe Tunisienne              Government Debt
                  Interprofessionnelle pour la
                  Compensation et le Depot des
                  Valeurs Mobilieres)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
TURKEY            TAKASBANK                        Equity, Corporate Debt,
                  (IMKB Takas ve Saklama Bankasi   Government Debt
                  A.S.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
UNITED ARAB       DFM                              Equity, Corporate Debt,
EMIRATES          (Dubai Financial Market          Government Debt
                  Clearing House)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
UNITED KINGDOM    CREST                            Equity, Corporate Debt,
                  (CRESTCo Limited)                Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CMO                              Sterling & Euro CDs,
                  (Central Moneymarkets Office)    Commercial Paper
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
UNITED STATES     DTC                              Equity, Corporate Debt
                  (Depository Trust Company)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  FED                              Government Debt, Mortgage Back
                  (The Federal Reserve Book-Entry  Debt
                  System)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
VENEZUELA         BCV                              Government Debt
                  (Banco Central de Venezuela)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  CVV                              Equity, Corporate Debt, Money
                  (Caja Venezolana de Valores,     Market
                  S.A.)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
VIETNAM           SCC                              Equity, Corporate Debt,
                  (Securities Custody Centre)      Government Debt
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
ZAMBIA            CSD                              Equity, Government Debt
                  (LuSE Central Shares Depository
                  Limited)
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                  BoZ                              Government Debt
                  (Bank of Zambia)
- -----------------------------------------------------------------------------------